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KIRIN GROUP VISION 2015 Kirin Group’s Long-Term Business Framework

KIRIN GROUP VISION 2015 Kirin Group’s Long-Term Business Framework

Toward a quantum leap in growth

A new Group management approach under a holding company structure Maximizing corporate value by creating a ‘Group premium’

May 2006May 2006

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ContentsContents

◆ Kirin Group Vision 2015 (KV2015)・ 10 years of progress for the Kirin Group・ KV2015: Background・ KV2015: Overview・ KV2015: Vision and planned Group structure・ KV2015: Targets

◆ Strengthening Kirin’s business foundation and pursuing long-term growth・ Strengthening business foundations to achieve a quantum leap in growth・ Three strategies to achieve a quantum leap in growth

◆ Key focuses for achieving our planned structure・ Building on our technical expertise and customer intimacy ・ Enhancing the KIRIN brand value

◆ Establishing a management structure to achieve growth・ Introducing a holding company structure・ Making Kirin Beverage Corporation a wholly owned subsidiary

◆ Financial Strategy◆ Reference Material

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Kirin Group Vision 2015(KV2015)

Kirin Group Vision 2015Kirin Group Vision 2015(KV2015)(KV2015)

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10 10 years of progress for the Kirin Groupyears of progress for the Kirin Group

Steady transformation into a comprehensive alcohol beverages companyIntroduced happo-shu in 1998, chu-hi in 2001, and new genre product in 2005⇒　We have quickly taken and then maintained the top position in each of these

categories⇒　From being a company centered around traditional brands, we have developed

into a comprehensive alcohol beverages company that creates new marketsthrough added-value marketing and the pursuit of customer satisfaction

Growth in the soft drinks businessWe have launched a range of major hit products through our sophisticated product development and marketing capabilities

Now one of the industry’s Top 3 companies

Broader overseas business focusing on Asia and Oceania⇒　Overseas business has grown to more than 20% of consolidated operating income

Alcohol beverages: Developed the beer business through investments into Lion Nathan (Australia), San Miguel (Philippines), Zhuhai Kirin Brewery (Zhuhai) (China) and DalianDaxue (China), contributing to consolidated results

Soft drinks: Established the Kirin brand in China through Shanghai Jin Jiang Kirin Beverage & Food as well as other JV companies, and in 2006 we will launch sales and production of soft drinks in Thailand

Pharmaceuticals: We will launch products in 6 ASEAN countries from 2006, as well continuing operations in China, South Korea, Taiwan and Hong Kong

Diversified developmentWe have grown pharmaceuticals sales and profits, moved to wholly in-house sales and progressed R&D in human antibody medicines and other areas

We are developing new businesses in functional foods

Cost structure reformTotal cost structure reforms across the company, including restructuring of four plants

(¥ billion)

0

20

40

60

80

100

120

140

1997 1999 2001 2003 20051,000

1,200

1,400

1,600

Sales Operating incomeOrdinary income Net income

Sales

income

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Kirin Group still lacks sufficient scale in the global foods sector

0 5,000 10,000 15,000 20,000

Altria Group

Nestle

Pepsico Inc

Unilev er PLC

Coca Cola Company

Kraft Foods Inc

British American Tobacco PLC

Diageo PLC

Inbev SA

Anheuser-Busch Companies Inc

Sabmiller PLC

Groupe Danone

General Mills Inc

Heineken NVCompanhia De Bebidas

DAS Americas SACadbury Schw eppes PLC

Imperial Tobacco Group PLCArcher-Daniels-Midland

CompanyFomento Economico Mex icano SA

Japan Tobacco Inc

Kellogg Company

Sara Lee Corp.

Conagra Foods Inc

Rey nolds American Inc

Altadis SA

Pepsi Bottling Group

Kirin Brew ery Company Limited

Heinz HJ Company

Campbell Soup Company

0 50,000 100,000 150,000

Altria Group

Nestle

Coca Cola Company

Pepsico Inc

Unilev er PLC

Unilev er NV

British American Tobacco PLC

Kraft Foods Inc

Diageo PLC

Japan Tobacco Inc

Anheuser-Busch Companies Inc

Sabmiller PLCCompanhia De Bebidas

DAS Americas SAGroupe Danone

Inbev SAArcher-Daniels-Midland

CompanyImperial Tobacco Group PLC

Cadbury Schw eppes PLC

Heineken NV

Pernod-Ricard

Kellogg Company

General Mills Inc

ITC Limited

Rey nolds American Inc

Kirin Brew ery Company Limited

Sara Lee Corp.

Heinz HJ Company

Campbell Soup Company

Altadis SA

Associated British Foods PLC

KV2015: BackgroundKV2015: Background

Top 30 by recent market valueTop 30 by net sales

(FY 2005 results)Top 30 by EBITDA(FY 2005 results)　

Leading global food sector companiesLeading global food sector companies Listed company onlyData: Datastream, Worldscope ($ million)

As of April 23, 20060 25,000 50,000 75,000

Nestle

Altria Group

Unilev er PLC

Japan Tobacco IncArcher-Daniels-Midland

CompanyKraft Foods Inc

Pepsico Inc

Ty son Foods Inc

Bunge Limited

Coca Cola Company

Sara Lee Corp.

British American Tobacco PLC

Groupe Danone

Anheuser-Busch Companies Inc

Conagra Foods Inc

Inbev SA

Altadis SA

Heineken NV

Pepsi Bottling Group

Cadbury Schw eppes PLC

General Mills Inc

Sabmiller PLC

Dean Foods Corp. New

Kirin Brew ery Company Limited

Kellogg Company

Ajinomoto Company Inc

Associated British Foods PLC

Fomento Economico Mex icano SA

Smithfield Foods Inc

Diageo PLC

ｈ

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Trends in the industry

KV2015: BackgroundKV2015: Background

We have established strategies for over the next 10 years

The operating environment is changing at a speed greater than predicted

Declining birth rate and aging population

Increased competition amongst playersDiversification of consumer

needs

internationalization

Structural changes to the marketand distribution

Growth along the current pattern of Growth along the current pattern of business will be limitedbusiness will be limited

Shrinking domestic beer market

Restructuring and integration of major overseas beer manufacturers

Increased competition in domestic soft drinks market

Blurring of boundaries between alcohol beverages and soft drinks markets as well as diversification of consumer needs

Changes in the Kirin Group operating environment

We have to change the environment ourselvesWe have to change the environment ourselvesA more A more aggressive aggressive stance is necessarystance is necessary

Generate future growth in the core domestic alcohol business

Develop our portfolio through growth in areas such as soft drinks and pharmaceuticals

a quantum leap in growth

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KV2015: OverviewKV2015: Overview

Quantum growth

Enhance KIRIN brand value

A trusted corporate group

Standard Group attitude 3C

The Kirin Group in 2015Implement 3 strategies to achieve

growth

Implement strategies to become an integrated beverages Group

Internationalize the Group

Build the health and functional food business as a new business pillar　

Consolidated targets

Sales¥3.0 trillion (inc. alcohol tax)　　¥2.5 trillion (excl. alcohol tax)

Operating income ratio:Over 10% (against sales excl. alcohol tax)Overseas sales ratio:Approx. 30% (sales excl. alcohol tax, operating income)

Increased cost competitiveness

Reorganization into low cost business model

Continuous improvement:: Kaizen

Establish Group management structure

Change of corporate structure

Strengthen and adjust Group head office functions

Strengthen foundations

Further growth in the domestic alcohol business A corporate Group based on its strengths

Technical expertise

Customer intimacy

Group management structure

Improve organizational climate

People-focused management

Strengthen management　

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KV2015: Vision and planned Group structureKV2015: Vision and planned Group structure

We will create various bonds close to customers and give them the sense of well being that comes from food and health.

We will closely link our Fermentation and Bio, Manufacturing, and Research and Marketing technical expertise and pursue distinctive value, and the highest product quality

We aim to be the leading company in Asia and Oceania focusing on three businesses—Alcohol Beverages, Soft Drinks and Pharmaceuticals

Group Vision

Quantum growth

Enhance KIRIN brand value

A trusted corporate group

Standard group attitude 3C

The Kirin Group in 2015

We will further develop the trust that we have so far built up, proactively fulfill our social responsibilities, starting with environmental conservation, and contribute to the sustained development of a peaceful and hospitable society

3 strategies to achieve growthStrengthen collaborative alliances between the alcohol business and the soft drinks business and establish strong revenue platformsSecure growth bases in Asian marketsEstablish a new core business in the food and health field

Taking the 3Cs of Challenge, Commitment and Collaboration as a basic policy, we will use each individual’s talent as the source of our competitive edge

We will strive to enhance Kirin’s brand value as a trusted and progressive brand

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KV2015: TargetsKV2015: TargetsTargets 2006 (forecasts) 2015

Including alcohol tax 1.6 3Sales

2.5

Operating income ratio

Sales excl. alcohol tax 19％ Approx. 30％Overseas ratio

Over 10％

Approx. 30％

Excluding alcohol tax 1.2

Cf. sales excl. alcohol tax 9％

Operating income 27％

(¥ trillion)

*Net sales by segment will be confirmed in the next medium-term plan

0

500

1,000

1,500

2,000

2,500

3,000

1997 1999 2001 2003 2005 20150

50

100

150

200

250

300

Net sales (left axis)

Operating income (right axis)

(¥ billion)

Line of quantum growthLine of quantum growth

Current growth line

Kirin Vision 2015 (KV2015)

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Strengthening Kirin’s business foundation and pursuing long-term growth

Strengthening KirinStrengthening Kirin’’s business foundation s business foundation and pursuing longand pursuing long--term growthterm growth

・Strengthen business foundations to achieve a quantum leap in growthGenerate further growth in the domestic alcohol business

・Three strategies to achieve a quantum leap in growthPromote strategies as an integrated beverage groupPromote internationalizationEstablish the health food and functional food business

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Strengthening business foundations for quantum growthStrengthening business foundations for quantum growth

Accelerate positive trends to stimulate growthAccelerate Kirin’s positive trend regarding growth in volumes of beer + happo-shu + new genreContinue open pricing, collaborative strategies in production, distribution and sales, other measures to enhance group structure

Develop a progressive, comprehensive alcohol beverages strategyLeverage Kirin’s technical expertise and customer relationship excellence to develop appealing products and sales strategiesDevelop new categories that create new demand in a changing market

Add new value in ways that make customers happyUtilize the newly created SCM1 division of the domestic alcohol business internal company to pursue added value in every link of the value chain2

and reform cost structureFocus on Kirin’s development and proposal-based business

Continue to lead the alcohol industryOptimize the trading environment and drive efforts to revitalize the industry

Creating renewed growth in Kirin’s core domestic alcohol business

1. Become an integrated beverage group

2. Pursue further internationalization

3. Establish health food and functional food business

Strengthen foundations by achieving growth in Kirin’s core domestic

alcohol business

Three growth strategies

1： SCM: Supply chain management：integrated control of entire product process, from raw materials procurement through to distribution and sale. 2: Value chain: The process by which value is added to a product from conception through to production and sales

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Strategies for quantum growth: 1Strategies for quantum growth: 1

Expansion of joint procurement

Optimize Group synergies under the KIRIN brand by pursuing a comprehensive, integrated Group strategy for the entire alcohol and soft drink beverages market

Strengthen collaboration throughout the business value chain—including management, personnel and R&D—to create value and appeal to customers

Pursue further integration as a comprehensive beverage group* Integration in this context refers to comprehensive interlinking on a sophisticated level rather than simply combining separate units.

Optimize Group synergies

New product & category development; technical and other synergies through collaborative R&D approach

Brand management alliances; joint international operations; joint new business development; outside alliances

Overall management

R&D

ServicesProcurement Sales &MarketingDistribution

Expansion of joint distribution

Integration of Group marketing research, joint channel development

Collaboration at customer contact points, shared communication strategies

Production

Integration of joint production

Strengthen collaboration throughout the business value chain

Human resource linksPersonnel

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Strategies for quantum growth: 2Strategies for quantum growth: 2

Become a leading company in Asia and Oceania

Base further economic expansion on the East Asian Economic Group, including China and ASEAN countries

Pursue further synergies through alliances with Group partners, while also forming outside alliances to create a unique business model and secure a superior competitive position

Further localize businesses, recognize regional differences in cultures and customer needs to develop attractive products and services, and contribute to customers’ lifestyles in the area of food and health

Further internationalization

Target Derive approx. 30% of net sales and operating profit from markets outside Japan by 2015

Expanded target area

East Asian Economic Group

2015

Sale breakdown (excluding liquor tax)2006

Domestic

Overseas

Overseas

Domestic

19％

Approx. 30％

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Strategies for quantum growth: 3Strategies for quantum growth: 3

Grow health foods and functional food business as the next core business to form a link to the alcohol and soft drinks business and pharmaceuticals business

Strive for business growth with Kirin Well-foods positioned as a core business

Leverage our advanced fermentation and bio technologies to develop distinctive food materials

Utilize the strengths of both Yakult and Kirin for joint business development

Develop health food and functional food as an additional core business area

Research and marketing expertise

High quality manufacturing

technology

Advanced fermentation and bio technology

Concept and design

Raw materialsProduction

and engineering

Distinctive strengthsDistinctive strengths

Health food and functionalfood business

Soft drinks business

Alcohol beverages business

Pharmaceuticals businessR&DR&D

Good-tasting, health raw materialsSeasoning raw materials

Functional raw materials Raw materials that aid in prevention of diseases and promote health

Raw materialsRaw materials

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Key focuses for achieving our planned structure

Key focuses for achieving our Key focuses for achieving our planned structureplanned structure・ Building on our technical expertise and customer 　　　

intimacy・ Enhancing the KIRIN brand value

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Build on our technical expertise and customer intimacyBuild on our technical expertise and customer intimacy

Kirin’s technical expertise… 　　 Cutting-edge capabilities in fermentation and biotechnology, expertise in manufacturing

and the pursuit of quality, and the research and marketing ability to accurately reflect customer needs in products and services Kirin’s customer intimacy…

　The ability to incorporate two-way communication with customers in all Kirin’s businesses, researching customer sentiment and building relationships where customers feel constant trust for Kirin

As we continue to pursue a customer-oriented, quality-driven approach, we will position technical expertise and customer intimacy as our twin strengths, and work to consolidate them both while increasing the interplay between them

Kirin Group Strengths

Customer intimacy

Technical expertiseCreate customer value Create value that only

Kirin Group can create

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Enhancing the KIRIN brand valueEnhancing the KIRIN brand value

As well as receiving endorsement of the “KIRIN” brand as a brand of trust, a brand at the forefront of innovation,Kirin intends to further enhance the value of the brand as the unifying force within the Group

We will promote management that clarifies the role of each Group business in enhancing corporate value, and that enhances KIRIN brand value as well as contributing financially

As the 2007 centenary approaches, we will clarify our brand identity, and rewrite our management principles, Group slogan and other aspects of our corporate policy

Promote Group management from the viewpoint of contributing to the KIRIN brand value

Portfolio management by profits and brand contribution Portfolio management by profits and brand contribution

Brand axisProfitablilty

(fianancial) axis

HighLow

High

Low

Contribution to profits

Contribution to KIRIN brand value

Alcohol

Soft drinks

Pharma

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Establishing a management structure to achieve growth

Establishing a management structure Establishing a management structure to achieve growthto achieve growth

・Introduction of a holding company structure・Making Kirin Beverage Corporation a wholly owned subsidiary

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Establishing a Group management structureEstablishing a Group management structureKey management structure elements required to strengthen our business foundation and achieve a quantum leap in growth:

1). Flexible and strategic allocation of resources 2). Constant pursuit of internal synergies

3). Independent and dynamic business approach

Holding company initiatives

Three input patterns for growthGrowth through

maximizing internal synergies

Collaboration between holding company and operating companies

Operating company initiatives

Autonomous growth through independent and

dynamic operation

Growth though flexible and strategic

allocation of resources

We must adopt a management style that clearly defines the roles We must adopt a management style that clearly defines the roles and and responsibilities of the holding company and the Group operating responsibilities of the holding company and the Group operating companiescompanies

Holding company

Makes decisions on the most appropriate allocation of resources for the Group, discovers and fosters new business, promotes opportunities for synergies between businesses

Operating companies

Clarify authorities and responsibilities, pursue rapid decision-making and independent growth through proximity to markets, and seek growth through flexible allocation of resources and investments

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Introducing a holding company structureIntroducing a holding company structure

Making Kirin Beverage Corporation a wholly-owned subsidiary 　Introduce a holding company structure (July 2007)

The domestic alcohol beverages and pharmaceuticals business and a shared Group back offices services company will be separated as subsidiary companiesBusinesses such as the domestic alcohol beverages, soft drinks and pharmaceuticals business will be established as parallel

subsidiary companies

Kirin B

everage

Current status

Kirin B

everage

Kirin Brewery

Parallel positioning

Domestic alcohol C

Group headquarters

Company Company separationseparationConversion

to wholly-owned

subsidiary

International alcohol C Pharma C

Following conversion to wholly-owned subsidiary

Kirin Brewery

Domestic alcohol C

Group headquarters

International alcohol C Pharma C

July 2007Kirin Holdings (provisional name)

Transfer of Operational

control

Group headquarters

Separation of sharedGroup

back office operations

Kirin Pharm

a(provisional nam

e)

Kirin B

usiness Experts(provisional nam

e)

Other operatingcom

panies

Other com

panies

Kirin B

rewery

(provisional name)

Kirin B

everage

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Value of converting Kirin Beverage into a whollyValue of converting Kirin Beverage into a wholly--owned subsidiaryowned subsidiary

Raise corporate value

グループシナジーの拡大

資本効率の向上

KBC

Increase Group synergy measuresPromote integrated beverage group strategiesin Japan and overseas

Making Kirin Beverage a wholly-owned subsidiary will provide critical strategic options for raising corporate growth

Towards a quantum leap in growth...

Increase Group synergies

Raise capital efficiency through efficientinvestment operationsRaise ROE

Raise capital efficiency

Retain returns from growth businesses in the GroupRaise consolidated profit levels and EPS

Raise Group profitabilityFull allocation of assets into softdrinks business

Accelerate growth of Kirin Beverage

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Financial StrategyFinancial StrategyFinancial Strategy

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Financial strategy Financial strategy –– improving capital efficiency and increasing returns to shareholimproving capital efficiency and increasing returns to shareholdersders

Business investment

No.1priority in cash flow application

Concentrate the allocation of resources into the domestic and overseas soft drinks, overseas alcohol and pharmaceuticals businesses, which are key elements of our plan for a quantum leap in growth

Funding

Free up capital through liquidation of securities, real estate, etc.

Borrow as necessary to fund investments that exceed internal reserves, while maintaining sound finances

Consider consolidated dividend payout ratio

Dividend policy

Providing shareholders with a stable return on investments is our second priority after business investments

We are aiming to steadily increase dividends by raising profit levels

Share buyback

Option for shareholder returns, second to

dividendsFurther acquisition of shares will be considered in relation to the share

price and market situation

Flexible funding

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Reference MaterialReference MaterialReference Material

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2007 Medium-term management plan and 2015 (KV2015) orientation

2004 medium-term plan

2004-2006

KG21Action plan2001-2003

NK211998-2000

KG21（1999）Management strategy leading into new century (towards 2005)

2010Medium-term plan2010-2012

2013Medium-term plan2013-2015

KV2015: LongKV2015: Long--Term Business FrameworkTerm Business Framework

20072007MediumMedium--term planterm plan

20072007--20092009

Entered the happo-shu category

Invested in Lion Nathan

Reorganized domestic plants

Active share buybacks

The first action plan looking towards 2015Targeting early achievement of business structure to support KV2015

NK21 (1998－2000) KG21 action plan (2001－2003)

Integrated alcohol business promotion

Invested in San Miguel

Acquired Takeda Foods’ seasonings division

Reformed cost structure

2004-2006 Medium-term management plan

Extending lead in domestic growth categories

Investing in Dalian Daxue and converting of Zhuhai into wholly-owned subsidiary, additional capital injection to San MiguelCommencing full in-house sales of pharmaceuticals and independent diversification of other businesses

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Outline of Kirin Holdings group businessesOutline of Kirin Holdings group businessesShifting to a new Group holding company structure, with the conversion of Kirin Beverage into a wholly owned subsidiary and separation of the domestic alcohol and pharmaceuticals businesses along with a shared Group services company

New holding company structure planned for July 2007

Kirin Holdings（provisional name)

Operating com

panies

Domestic Alcohol

Note: Only includes main consolidated companiesNew company name is still undecided as of May 2006

Soft Drinks

Overseas Alcohol

Pharma-ceuticals

Health foods and Functional

foodsAgribio

Foods, services,

etc.

Shared group

services

Kirin B

usiness Experts

(provisional name)

Spin-off

Other business com

panies

Kirin Green and Flow

er Co., Ltd.

Kirin B

rewery

(provisional name)

Spin-off

Kirin Beverage

Wholly owned

subsidiary

Kirin P

harma

(provisional name)

Spin-off

Kirin W

ell-foods Co., Ltd.

Lion Nathan Ltd.

Kirin (C

hina) Investment C

o. Ltd.

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Process for introducing the holding company structureProcess for introducing the holding company structure

1) Planned date for corporate divesture:

　　February 2007 Approval by the Board of Director of the Business Divesture Agreement

　　March 2007 General meeting of Kirin Brewery shareholders　　　　　　　　　　　　　　　　(approval of the Business Divesture Agreement)　　July 1, 2007 　Effective date of the divesture

2) Target businesses and methodology for divesture　　Kirin Brewery will, as the divesting company, implement the divesture of

business to three domestic wholly owned subsidiaries, which will succeed to the domestic alcohol business, pharmaceuticals business, and shared group services. Following the divesture, Kirin Brewery will become a holding company and change its name to Kirin Holdings (provisional name)

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Strategy to convert Kirin Beverage into a wholly owned subsidiarStrategy to convert Kirin Beverage into a wholly owned subsidiaryy

■ Process for conversion into a wholly owned subsidiary1) Acquire Kirin Beverage shares through a tender offer2) Apply for the approval of a business restructuring plan under the Law on Special Measures for

Industrial Revitalization

3) Following approval of the plan, according to legal requirements*, effect an exchange of shares for cash consideration

　　＊Article 12-9 of the Law on Special Measures for Industrial Revitalization prior to the revision under Article 449 of the same Law, which remains effective by virtue of the provisions of Article 450, Paragraph 7 of the Law Concerning Developments of Related Laws in Enforcement of the Company Law .

■The Law on Special Measures for Industrial RevitalizationEstablish a business revitalization plan for a period of under three years for a corporation accredited by the relevant authorities that fulfills the following four requirements of laws supporting policies on special items such as the corporations law and tax structure　

1. Raising of productivity; 2. Financial revitalization; 3. Business reorganization; 4. Employment considerations

■ Benefits of accreditation1) Flexible merger compensation　⇒　Possible to exchange shares for cash consideration

2) Special treatment regarding informal structural reforms

　　⇒ Permission from the shareholders’ meeting of Kirin Beverage is not necessary if Kirin Brewery retains 2/3 of equity (9/10 under the corporate law) of Kirin Beverage

3) Reduce registration and license tax at time of corporate divesture

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Overview of the Tender offerOverview of the Tender offer

1) Period of tender offer　　35 days from May 12, 2006 to June 15, 2006

2) Purchase price　　¥3,350 per share

3) Basis of calculation of share price 　　The evaluation of the value of Kirin Beverage shares was carried out

by a third-party appraiser, Nomura Securities, who took into consideration a wide range of elements relating to Kirin Beverage shares, such as current market price, status of finances and assets, and potential future earnings.

　　The purchase price represents an approximately 17.2% premium to the average share closing price of Kirin Beverage on the First Section of the Tokyo Stock Exchange during the three months up to and including May 10, 2006.

4) Number of shares scheduled for purchase　　 22,344,488 shares (40.62% of all shares in issuance)　　

Kirin will purchase all shares offered for sale by shareholders

5) Change in number of shares held due to the Tender Offer　　Number of shares prior to the Tender Offer: 32,657,480 shares　(59.37% shareholding) 　　Number of shares subsequent to the Tender Offer*: 55,001,968 shares　(100% shareholding)　　* Number of shares dependent on successful purchase of planned amount　　Number of outstanding shares of Kirin Beverage : 55,002,370 shares (including 402 treasury

shares held by Kirin Beverage)

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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.