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Domestic Alcohol Beverage Business Strategies for 2004

January 2004

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Contents

■ Review of 2003・Industry Overview (Impact of happo-shu tax hike and cool summer)

・Overview of Kirin

■ Plan for 2004・Basic Strategies for Domestic Alcohol Beverage Business

・Product Strategies (Category, Brand)

・Marketing Strategies

■ 2004 Market Outlook and Kirin’s Sales Targets・Market Outlook

・Kirin’s Sales Targets

■ Appendix・Sales Results for 2003, Targets for 2004 (Industry, Kirin by Brands)

・Breakdown by Container Type and Distribution Channel

・Individual Brand Strategies

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Review of 2003

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■ Beer + Happo-shuWorst drop in sales (-6% approx.) since the tax imposition announcement in 1992

　・Happo-shu Sales fall (-1% approx.) for the first time, reflecting the tax hike

⇒ Happo-shu exceeds beer sales in the household market for the first time, shifting to the prrincipal evening drink at home

　・Beer Seventh consecutive year of declining sales (-9% approx.)

◆ Canned chu-hi　Concentration on Hyoketsu, along with happo-shu tax hike sustains growth (+10% approx.)

Review of 2003 (Industry)Review of 2003 (Industry)Industry Conditions *Industry results are Kirin’s estimates

●Prolonged slump in personal consumption, slowdown in happo-shu growth owing to tax hike, unusually cool summer

●Growth in the chu-hi market and continued breakdown of categories

Estimate at the beginning of the year: Approximately -80,000 KL

　　

　 Actual: approximately –180,000 KL

　

※※ Estimated Impact of HappoEstimated Impact of Happo--shu Tax Hikeshu Tax Hike　　　　　

※Factors contributing to decrease (Kirin’s assumption)

● Cutback in consumption　

● Shift to chu-hi and other low-alcohol beverages

● Shift to beer and shochu

　　No estimate at the beginning of the year　　

　　　　Actual: approximately –55,000 KL

※※ Estimated Impact of an Unusually Cool SummerEstimated Impact of an Unusually Cool Summer　　　　　

※ Drop in demand for beer and happo-shu due to an unusually cool summer (Kirin’s assumption) in July and August

Happo-shu : Beer market composition

53% ：47%※ Jan.—Nov.

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Review of 2003 (Kirin)Review of 2003 (Kirin)

Establish an earnings platform unaffected by changes in operating conditions

■ Low-Alcohol Beverages Happo-shu tax hike and drop in beer sales were offset by Hyoketsu sales (-4.8%)

■ Beer + Happo-shu Decline in line with industry performance (-7.6%)

　　・Happo-shu Exceeded industry average, but tax hike held back growth (-0.9%)

　　・Beer Decline in line with industry performance (-12.7%)

◆ Canned Chu-hi Led the market through dominance of Hyoketsu brand (+42.2%)

・Allocated resources to strategic growth markets (efficient use of marketing expenses), and normalized trade in the industry

・Established a third earnings pillar in the alcohol business through increased profit from Hyoketsu　　　　

・ Widened lineup with value-added products that create new markets and unique products utilizing the chilled distribution network

・ Although overall sales fell below target due to happo-shu tax hike and an unusually cool summer, strategic targets to 1) expand share in chain retailers market, 2) meet sales targets for Hyoketsu and wine were essentially achieved

・ Beer sales fell below industry average, as measures to strengthen happo-shu exceeded those for beer 　　　　

Achieve sales targets by offering high-value-added products

Quantitative EvaluationQuantitative Evaluation

Qualitative EvaluationQualitative Evaluation

Priority on revitalizing the beer category, an integral part of the Kirin brand

Initial Targets

Initial Targets

※ Kirin sales base

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Plan for 2004

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Basic Strategies for Domestic Alcohol Beverage Business

Conceptual ReformConceptual Reform● Emphasize customer-oriented focus to achieve an added-value competitive stance

・Customer-oriented focus: Shift from quantitative shipping competition to expanding sales opportunities, offering product line-ups and value-added products that match the needs of customers

・Marketing productivity focus : Shift from focus on quantity to focus on channel and brand -based profit management business model

Business Structure ReformBusiness Structure Reform

● Clarify business domains・Promote generational shift to happo-shu; revitalize existing beer brands; expand high-value-added beer business; develop

products such as Hyoketsu that cross categories and provide customer benefits; secure position in the wine and spirits market

● Clarify priority markets

・Shift resources toward the household chain retailers, in which direct customer contact is growing

・In on-premise market, where direct customer contact is declining, maintain and secure relationships with marketing-oriented restaurants and bars to ensure Kirin is the preferred choice of customers, while keeping profitability

● Continue development of a customer-centric new business model* to lead the industry

* Open-pricing system; supply chain management; expand number of no-rebate products; expand product lineup utilizing chilled distribution network; others

Organizational ReformOrganizational Reform

● Shift to a development and proposal oriented selling model that is successful without price competition

・Improve market research, product development, sales promotion capabilities, internet strategies

● Shift to a powerful and productive sales structure

・Streamline operations, increase personnel efficiency through sales office consolidation/closure, and review organizational structure of head office and regional headquarter

- Creating a Comprehensive Alcohol Beverage Business -

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Canned Chu-hi

2004 Product Strategies by Category

⇒ Consumption ratio of Hyoketsu grown to approximately 50% (equivalent to the leading beer brand)

⇒ Actively foster and develop new categories that create new markets, following Hyoketsu

Beer ⇒ Implement measures to revitalize core products⇒ Continue to foster and develop high-value products such as chilled-delivery beer

Happo-shu⇒ 2004: Initial step to position Tanrei as the No.1 household brand ⇒ Expand the market and reinforce Kirin’s competitive advantage by supporting

core products and developing new, innovative products

Spirits(incl. Shochu)

⇒ Give priority to securing market position (in size) for wine and shochu, and continue efforts to strengthen the earnings platform in the wine and spirits business

■　Growth field, replacing beer as the principal evening drink at home

■ Mainstay category, providing the greatest impact on corporate brand image

■ Growth in the youth market (20-30s), reaching 50% of beer consumption

■ Sustained growth in the wine and shochu category expected

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2004 2004 Product Strategies by BrandProduct Strategies by Brand

Enhance Brand Value and Develop High-Value Added Products

● Continue advertising tied with Japan’s national soccer team, nationwide campaign based on a sporting theme

● Increase exposure in chain retail stores

● Expand the number of casual restaurants and bars serving Tarunama (draft beer)

⇒ The leading category in the household marketThe leading category in the household market

⇒⇒ Generate greatest contribution to the Generate greatest contribution to the corporate brandcorporate brand

☆☆ Implement measures to further Implement measures to further differentiate differentiate Ichiban Ichiban ShiboriShibori, , promote on the basis of a promote on the basis of a ““sense of sense of qualityquality””

● Establish a strong presence of canned Classic Lager, increase exposure at chain retail stores in conjunction with Lager

● Change advertising focus

⇒ Idea of “creating relationships with beer”

● Continue the “happiness at the table” campaign in conjunction with Ichiban Shibori

● Enhance the taste of Ichiban Shibori through improved production techniques

● Renew packaging and promotion

● Foster and develop popular products that promote a sense of quality (Tarunama Beer Server, Maribana)

Happo-shuHappo-shu

BeerBeer

※ Beer drinkers, compared to Happo-shu drinkers, tend to favor a corporate brand of the beer they drink

☆☆ Enhance Enhance LagerLagerbrand valuebrand value

Pursue and deliver value specific to happo-shu and beer

☆☆ Further strengthenFurther strengthen TanreiTanreias the leading brandas the leading brand

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2004 2004 Product Strategies by BrandProduct Strategies by Brand

☆ Shochu

● Continue efforts to establish Pure Blue in on-premise market

● Accelerate penetration into the household market (TV advertising)

● Increase sales of everyday wines ⇒ Advertising to generate increased awareness and sales for Franzia, the world’s leading wine brand

● Foster wine for celebrations and special events

Canned Chu-hiCanned Chu-hi

Wine & SpiritsWine & Spirits

● Expand lineup

● Launch Valencia Sparkling (Premium Fruits series)

● Continue sampling to expand the category and brands

● Develop new category products

☆ Wine

☆Spirits

● Improve the standing of Chivas Regal, the leading import spirit, in the premium whisky category

● Reestablish the Four Roses brand image

☆Generate volume sales and establish Hyoketsu as the dominant brand for canned chu-hi

⇒⇒ Principal category for the Principal category for the younger generationyounger generation

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2004 2004 Marketing StrategiesMarketing Strategies

Achieve targets through a robust sales structure attuned to changes in business conditions, and through marketing capabilities that rise above cost competitiveness

① Introduce profit management system ⇒ Manage sales, expenses, profit and loss on a daily basis (by brand, company and organization)

① Clarify business domains and concentrate resources on priority areas⇒ Promote sales activities on growing retailers in each category

　② Cooperate with KCS* to create sales floor that convey product value to customers ⇒ Expand in-store activity to more stores * Kirin Communication Stage Co., Ltd.

　③ Promote solutions -based marketing and increase level of product quality and services at stores to rise above price competition

　① Maintain prioritized activities and profitability standards ⇒ Maintain and expand a preferred restaurant and bar network ② Increase coverage of focused brands at preferred restaurants and bars

⇒ Increase number of restaurants and bars offering wine and spirits　③ Promote communication (branding) through preferred restaurants and bars

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① Convey corporate value through corporate behavior, products and existing assets (factories and other)② Promote joint activities that foster win-win relationships with local companies and organizations

Collaborate with Regional CommunitiesCollaborate with Regional Communities

① Promote environmental protection measures in marketing divisions by reducing the number of 6-packs, and use of compact vehicles② Share awareness of compliance (laws, regulations, company rules and ethics) and coexistence with society

Implement Social ResponsibilityImplement Social Responsibility

① Create trading system mutually beneficial to wholesalers, stores (retailers and restaurants) and manufacturers ② Complement and abide by the independent guidelines for fair trade (with on-premise market, etc.)

Establish Innovative Trading EnvironmentEstablish Innovative Trading Environment

Reinforce Point of PurchaseReinforce Point of Purchase

Improve ProductivityImprove Productivity

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2004 Market Outlook

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2004 2004 Market OutlookMarket Outlook

Market Outlook

?Low-AlcoholBeverages　　　　　　　　

?Beer, Happo-shu

　・Beer

Slight increase

?Canned Chu-hi +12%

　※ Kirin estimate

　・Happo-shu

+1%

-4%+8%

　※ Compared to 2003

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2004 2004 Kirin Sales TargetsKirin Sales Targets

Category Industry Forecast

Low-Alcohol Beverages Slight increase 2.650 m kl +4.5%

Beer and Happo-shu +1% approx. 2.370 m kl +2.2%

・Beer -4% approx. 1.161 m kl -6.6%

・Happo-shu +8% approx. 1.209 m kl +12.5%

Canned Chu-hi +12% approx. 0.240 m kl +26.2%

Wine and spirits (incl. tax) Continued decline 34 billion yen +5.3%

Kirin

　　　※ Industry forecast: Kirin estimate

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Appendix・Sales Results for 2003, Targets for 2004・Breakdown by Container Type and Distribution Channel・Individual Brand Strategies

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Sales Results for 2003, Targets for 2004Sales Results for 2003, Targets for 2004

※ Beer & Happo-shu 1 case = 12.66l (633ml x 20 bottles), Chu-hi 1 case = 6l (250ml x 24cans), Beer-Taste Beverages 1 case = 8.4l (350ml x 24 cans)

■Industry Total Change (%) Change (%)Beer and Happo-shu Total -6 approx. +1 approx.

・Beer -9 approx. -4 approx.

・Happo-shu -1 approx. +8 approx.

Canned Chu-hi +10 approx. +12 approx.

Beer-Taste Beverages +270 approx. +10 approx.

■Kirin 2003 Results Change (%) 2004 Targets Change (%)Low-Alcohol Beverages Total 20,030 -4.8 20,930 4.5Beer and Happo-shu 18,320 -7.6 18,720 2.2・Beer 9,820 -12.7 9,170 -6.6・Happo-shu 8,490 -0.9 9,550 12.5Hyoketsu 3,170 42.2 4,000 26.2

☆Lager Brand Total 5,060 -13.2 4,620 -8.7・Lager 4,130 -18.2 3,400 -17.7・Classic Lager 830 13.7 1,180 42.2☆Ichiban Shibori 4,420 -12.0 4,180 -5.4☆Tanrei Brand Total 7,560 2.7 8,130 7.5・Tanrei (Nama) 5,620 -7.1 6,000 6.8・Green Label 1,620 23.7 1,810 11.7・Alpha 320 320 0.0☆Gokunama & Namakuro 710 -10.1 710 0.0

Beer-Taste Beverages 140 600.0 240 71.4

Wine & Spirits Sales ¥32.3 billion 7.3 ¥34.0 billion 5.3

※ Industry totals are for the four major companies: Kirin estimate　 ※ Unit: 10,000 cases

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Fiscal Year Industry Avg. Kirin Lager Ichiban Shibori Happo-shu2000 26 26 51 20 －

Bottle 2001 22 24 53 18 12002 20 21 53 16 1

2003 Forecast 18 18 51 15 12004 est. 17 16 47 13 12005 est. 16 16 － － －2006 est. 15 15 － － －

2000 58 61 36 55 100Can 2001 61 62 35 50 96

2002 63 65 34 47 962003 Foercast 65 67 37 44 97

2004 est. 66 70 43 43 972005 est. 66 70 － － －2005 est. 67 70 － － －

2000 16 13 13 25 －Draft 2001 17 14 12 32 3

(Other) 2002 17 14 12 37 32003 Forecast 17 15 12 41 2

2004 est. 17 14 10 44 32005 est. 18 14 － － －2006 est. 18 15 － － －

2001 2002 2003 Forecast 2004 est. 2005 est. 2006 est.

Chain Retailers 55(50) 58(53) 69(66) 71(68) 73(69) 74(71)・Supermarkets 18(15) 20(17) 22(21) 24(23) 26(24) 28(26)・Convenience stores 11(10) 12(12) 18(17) 18(17) 19(17) 19(18)・Discount stores 26(25) 26(24) 29(28) 29(28) 28(27) 27(27)

Household 19(22) 16(20)

On-Premise 21(23) 21(22)Other 6(5) 5(5)

31(34) 29(32) 27(31) 26(29)

Breakdown by Container and Distribution ChannelBreakdown by Container and Distribution Channel

※Figures in parentheses are Kirin estimates of industry data

Beer and Happo-shu : Proportion by Containers (%)

Beer and Happo-shu : Proportion by Distribution Channels (%)

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Initiatives

■ Sales target: 60 million cases * (+6.8%) = 760,000 kl

Basic Strategies① Enhance brand power Revitalize brand power through support of Japan’s national soccer team　② Enhance perceptible quality image Enhance quality image perceived among chain retailers and on-premise markets　③ Develop nationwide dominance in household market Spread regions where Tanrei is the top brand in household market

Kirin Kirin Tanrei Tanrei ((NamaNama))

Launch promotional products (Instant winner packs, etc.)

Revitalize brand through promoting Tanrei with energetic image of Japan’s national

soccer team

⇒　“Kirin Tanrei (Nama); Energetic and Active”① Advertising campaign featuring Japan national soccer

team memberShunsuke Nakamura

② Enhance product image (create sizzling excitement by juxtaposing images of Japan’s national soccer team)

③ Heavy promotion as the best-selling happo-shu brand

④ Sales promotion utilizing Shunsuke Nakamura

Active promotion featuring Japan’s national soccer team; enhance perceptible image

of quality* 1 case = 12.66 l (633 ml x 20 bottles)

Products

Advertising

Promotion

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Initiatives

Launch promotional products (Instant winner packs, etc.)

Create unique Green Label brand image emphasizing a feeling of contentment① Promote health benefits: 70% reduction in sugar content

② Continue to appeal the contentment image with the key color green

③ Utilize unique advertising, striking music and characters

Generate product exposure, maximize tasting opportunities for customers① Promote green color imagery and develop eye-catching sales promotion tools

② Establish promotional periods emphasizing such themes as “healthier alcohol drinks”

③ Encourage leisure and sports facilities to offer Tanrei Green Label

Products

Advertising

Promotion

Tanrei Tanrei Green LabelGreen Label

■ Sales target: 18.1 million cases * (+11.7%) = 229,000 kl

Basic Strategies　　

① Emphasize health benefits Expound 70% less sugar content

② Emphasize chord benefits Create unique brand image

③ Maximize opportunities for tasting Exposure & experience

* 1 case = 12.66 l (633 ml x 20 bottles)

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Initiatives

Reinforce the brand’s uniqueness

Attract target consumers by appealing the product’s unique feature - fewer purine bodies① Develop effective media campaign to appeal to targets

② Ensure concentrative communications during promotional periods (examine advertising strategies)

③ Convey product value through better publicity

① Focused coverage during promotional periods

② Targeted sampling (introduce 250 ml cans for samples)

Tanrei Tanrei AlphaAlpha

■ Sales target: 3.2 million cases * (+0.0%) = 40,000 kl

Basic Strategies

① Emphasize health benefits　　

② Approach target consumers

*1 case = 12.66 l (633 ml x 20 bottles)

Product

Advertising

Promotion

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Initiatives

■ Sales target: 7.1 million cases * (+0.0%) = 90,000 kl

Basic Strategies①　Expand coverage and visibility at convenience stores through specialized sales promotions②　Reinforce Gokunama by tying sales promotions into advertising③　Secure a position second to Tanrei at convenience stores④　Maintain established standard position of Namakuro.

① Secure sales volume and visibility in convenience stores, tying in with individual measures

② Recover position as the standard at convenience stores　　　　

① Implement advertising linked with sales promotions at convenience stores for Gokunama

② Continue to develop media mix other than TV commercials

Increase coverage through individual measures for convenience store chains

Gokunama Gokunama & & NamakuroNamakuro

* 1 case = 12.66 l (633 ml x 20 bottles)

Product

Advertising

Promotion

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Initiatives

New can design using different materials to enhance perception of high quality

A straightforward campaign to promote Lager as a beer that brings people together

① Promote all beer brands under the theme “happiness at the table”

② Implement measures for Classic Lager market penetration

(continue sampling of canned beer, expand the network of bars and restaurants serving bottled beer)

Kirin Kirin LagerLager & & Classic LagerClassic Lager

■ Sales target: Brand total 46.2 million cases * (-8.7%) = 585,000 kl

Basic Strategies　① Enhance perceptible quality among chain retailers by increasing exposure of Kirin Lager and

Classic Lager cans, and establish a market for Classic Lager

② Initiate measures to convince consumers of the true essence of Lager ⇒ Revitalize brand with a new series of advertisement and related initiatives

　　* Theme of new advertising = “Happiness at the table”

・Lager 34.0 million cases (-17.7%)

・Classic 11.8 million cases (+42.2%)

* 1 case = 12.66 l (633 ml x 20 bottles)

Product

Advertising

Promotion

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Initiatives

Comprehensive renewal of Ichiban Shibori, including improved taste as a result of a new manufacturing method, along with new packaging and advertising.

① Renew communication methods

② Emphasize the sense of quality that is behind the appeal of beer, and promote the sense of well-being and satisfaction that comes from beer

* Promote the Tarunama Beer Server as one aspect of Ichiban Shibori

① Take advantage of a prime opportunity for product renewal with promotions emphasizingthe greater value of improved Ichiban Shibori

② Continue to advance sales promotion plans for all beer productsbased on the theme “happiness at the table”

Kirin Kirin Ichiban Ichiban Shibori Shibori ((NamaNama))

■ Sales target: Brand total 41.8 million cases (-5.4%) = 529,000 kl

Basic StrategiesTake advantage of an opportunity for product renewal by enhancing perception of high quality through improvements in product content, advertising and sales promotions

* 1 case = 12.66 l (633 ml x 20 bottles)

Product

Advertising

Promotion

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Initiatives

Emphasize the unique features of Maroyaka Kobo and Latte Stout to make them the preferred choice in the premium beer category

☆☆☆☆ Maroyaka Kobo: Continue with the series of TV commercials launched in the fall of 2003, increase market awareness and rouse taste trials. Promote the aspect of live yeast in the beer, and convey its authenticity to distinguish it from competitors’ products.

☆☆☆☆ Latte Stout: Run TV commercials and conduct trials. Increase product exposure particularly in supermarkets at its release

①①①① Appeal product value at storefront of retail stores

②②②② Implement measures to increase coverage and exposure at retail stores

　　　　■■■■ Sales target: Maroyaka Kobo 5,000 kl, Latte Stout - test sales

　　　　Basic Strategies

Invigorate the chilled beer category and expand markets

　　　　　　　　Chilled Beer (Chilled Beer (Maroyaka Maroyaka KoboKobo, , Latte StoutLatte Stout))

Product

Advertising

Promotion

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Initiatives

Launch Valencia Sparkling, the third release in the Premium Fruits series

① Introduce advertising for new flavors and conduct new flavor trials

② Introduce creative advertising to enhance the freshness of the brand by emphasizing refreshing, cool and contemporary appeal of the Hyoketsu series

● Increase the number of chu-hi/Hyoketsu consumers, consistently implement measures to expand coverage, especially in chain retailers channels, and enhance perception of high-quality

① Continue program of widespread sampling (continuing from 2003, offer samples to 5 million consumers)

② Expand coverage at chain retailers, and implement measures to promote bulk purchases, particularly with lemon and grapefruits flavors

Kirin Kirin ChuChu--hi Hyoketsuhi Hyoketsu

■ Sales target: 40 million cases* (+26.2%) = 240,000 kl

Basic Strategies　Lead the market expansion and further cement a dominant position with an attractive and innovative lineup of products unique to Hyoketsu

* 1 case = 6 l (250 ml x 24 cans)

Product

Advertising

Promotion

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Initiatives

■ Sales target: 1.9 million cases* (+107.9%) = 15,800 kl

Basic Strategies① Promote trials and expand category by projecting the benefits of beer taste beverages② Build a strong position in the household market through initiatives for each channel

① Increase exposure and promote bulk purchases② Pursue trade with newly licensed stores③ Project new drinking styles

① Implement a straightforward campaign depicting ideal situations for Malt Squash, and conduct trials② Raise awareness of the category and the brand through a media mix centered on TV commercials③ Develop new marketing methods to appeal to the female consumer

① Increase coverage, mainly through sampling tailored to different channels and companies② Promote product features such as an alcohol content of 0.5%, low calorie and dietary fiber at the point of

purchase

Malt SquashMalt Squash

* 1 case = 8.4 l (350 ml x 24 cans)

Product

Advertising

Promotion

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This material is intended for informational purposes only and is not a solicitation or offer to buy or sell

securities or related financial instruments.