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February 7, 2008

Kirin Group 2008 Management Policy
Becoming a leading Food and Health company in Asia and Oceania

Tokyo, February 7, 2008—Kirin Holdings Company, Limited ("Kirin") today announced its management policy for 2008, the second year of the 2007—2009 Kirin Group Medium-term Business Plan, which has been developed as the first stage in realizing the Group's long-term business framework Kirin Group Vision 2015 ("KV2015").

2007 marked Kirin's 100th year of business, and the Company shifted to a pure holding company structure as a foundation for Kirin Group's next 100 years. The year was one of active advance, with each of Kirin's businesses making steady progress and management making a number of enterprising decisions that resulted in the acquisition of Australian leading dairy and beverage producer National Foods Limited ("National Foods") and a strategic alliance with Kyowa Hakko Group ("Kyowa Hakko").

During 2008 Kirin will be aiming to build further momentum, with a growth strategy based on realizing synergies from the new alliances and continuing with measures to achieve a quantum leap in growth—by steadily improving performance within individual group companies while optimizing group synergies between them. Kirin is now operating with new partners in its drive to become a leading food and health company in Asia and Oceania, and is positioning 2008 as a year in which to pursue further active development.

Kirin Group's Medium-term Business Plan for 2007-2009 and Basic Strategy for 2008

The 2007—2009 Medium-term Business Plan
Qualitative targets

  • Position KIRIN as a brand that symbolizes trust and vitality in all Kirin's business arenas
  • Deliver the enjoyment of food and health through products and services in each operational area
  • Contribute to the continuous development of a safe and amenable society, maintaining a strong reputation as a corporate group that values its coexistence with communities

Quantitative targets

2009 target
Consolidated sales including liquor tax
¥2.15 trillion
Consolidated sales excluding liquor tax
¥1.7 trillion
Operating income
¥150 billion plus
Operating profit margin including liquor tax
7% plus
Operating profit margin excluding liquor tax
7% plus

Basic strategy

  1. Strengthen Kirin's business foundations and realize a quantum leap in growth
    1. (1)Create renewed growth in the domestic alcohol beverage business
    2. (2)Move further toward becoming a comprehensive beverages group
    3. (3)Internationalize Kirin's business
    4. (4)Develop the health food and functional food business
    5. (5)Accelerate growth in pharmaceuticals and leverage proprietary strengths to develop the agribio business
  2. Pursue a financial strategy that maximizes corporate value
  3. Adopt a new group management structure
  4. Raise KIRIN brand value and implement Kirin Group CSR

2008 Management Policy

Qualitative targets for 2008: As above for medium-term business plan

Quantitative targets for 2008

2008 target
YoY change
Consolidated sales including liquor tax
¥2.10 trillion
Operating income
¥133 billion
Ordinary income
¥124 billion
Net income
¥57 billion

Note: Kirin plans to release revised 2007-2009 medium-term business plan quantitative targets in August 2008 at the time of its interim results announcement.

Basic strategy

  1. Grow Kirin's core domestic alcohol and soft drinks businesses while pursuing a comprehensive beverages group strategy
  2. In pharmaceuticals, create a structure for growth through the alliance with Kyowa Hakko
  3. In health foods and functional foods, clearly define the business scope and use Group synergies to develop the business strategy
  4. In Asia and Oceania, pursue growth as a leading food and health company, incorporating National Foods in an international business strategy
  5. Pursue a financial strategy to maximize enterprise value
  6. Clearly define Kirin Group CSR and actively engage in CSR-related activities

Specific initiatives

1. Continue developing the domestic alcohol and soft drink businesses

Kirin Group's business foundation is its domestic alcohol business, and in order to enhance this foundation in 2008, Kirin Brewery will meet the changing demands of customers and of the business environment by pursuing three main product portfolio objectives: strengthening core brands; enhancing the low-carbonhydrate category; and boosting overall demand. At the same time, Kirin will develop new alliances and Group synergies, such as the sales collaboration with Ajinomoto Co., Inc. and joint hops procurement with Lion Nathan of Australia. Mercian will support its aim of becoming the strong No. 1 in wine and processing liquors by pursuing a value-sales approach, and in its wine product strategy will focus on four areas: domestic daily wines; domestic fine wines; imported daily wines;and imported fine wines. Working together, Kirin Brewery and Mercian will develop Kirin's business foundation and comprehensive beverages group strategy.

Kirin Beverage, as Kirin's core soft drinks business, is targeting the No. 2 position in the domestic market by focusing its initiatives in three areas: enhancing the Kirin brand portfolio, including opportunities identified in chilled beverages and high added value products; strengthening market expansion capabilities, such as by working with volume retailers and achieving increased exposure in vending machines; and pursuing effective area marketing, through group alliances.

Kirin will continue to develop its comprehensive beverage strategy in pursuit of group synergies. Key initiatives include joint materials procurement, shared manufacturing facilities, and integration of volume-store merchandizing and on-premise merchandizing through Kirin Merchandizing Company, Limited, and the drive for synergies will also include efforts to increase the network of on-premise customers, secure additional vending machine placement, and other such activities.

2. Strengthen and expand the pharmaceuticals business foundation

As Kirin Group develops its business scope in the areas of food and health by building on its expertise in fermentation and biotechnology, the pharmaceuticals business is being positioned to play a central role in developing medicines that contribute to health. Kirin Pharma is focusing its activities in the areas of kidney diseases, cancer (including blood cancers) and infectious diseases, while developing human antibody and cell medicine. The focus in 2008 will be to expand operations in the areas of renal disease and dialysis by strengthening sales of NESP, a long-acting erythropoiesis stimulating agent,, while launching REGPARA®, a new type of medicine for secondary hyperparathyroidism. Kirin Pharma will be working to enhance its product pipeline, and in addition to developing antibody medicine and cell medicine will be accelerating the formulation of specific initiatives to be undertaken through the alliance with Terumo Corporation.

Moreover, through the merger with Kyowa Hakko in October, Kirin aims to become global specialty pharmaceutical company based in Japan which contributes to health and well-being of people by utilizing the state-of-art biotechnology focused on antibody as a core.

3. Integrate Group's strengths and expertise to develop health food and functional food business

Kirin has defined the scope of the health food and functional food business as "all foods that customers consume for the benefit of their health", and has positioned the business as an area to be engaged in as a group-wide initiative. At Kirin, the 'food' element of the Group's commitment to undertaking business in the areas of food and health is viewed as the development of added value foods that make use of Kirin Group's expertise in fermentation and biotechnology, and is applicable to businesses in each of Kirin Group's areas—including alcohol beverages, soft drinks, foods, and seasonings. And amongst of those areas, Kirin widely positions health food and functional food business as the one which meets needs of, and proposes products to health-conscious customers. The health food and functional food business is therefore being approached through group-wide alliances between companies that handle food materials—including soft drinks, dairy products, functional foods, and seasonings businesses.

Kirin views the development of added value products that meet the needs of health-conscious consumers as an important area for R&D, and will prioritize the allocation of resources for initiatives through cooperation with Kirin Beverage Group (which includes Koiwhai Dairy Products and other companies) and group companies such as Nagano Tomato Co., Ltd., Kirin Yakult NextStage Co., Ltd., and Kirin Food-Tech Company, Limited. Kirin is also investigating food-related business integration with Kyowa Hakko in areas of shared activity outside of pharmaceuticals, with the aim of enhancing Kirin Group's capabilities.

At the end of 2007, Kirin acquired all outstanding shares in National Foods Limited, Australia's leading dairy product and beverage producer, and this company will be a key operating business in Kirin's aim to develop its health food and functional food business.

(4) Drive forward Kirin's international business strategies

Kirin aims to generate 30% of its sales from overseas by 2015, and in working toward this will seek to increase the presence of the Kirin Group in the business arena of food and health, particularly in Asia and Oceania. In alcohol beverages, Kirin will enhance its strategic business alliances with Lion Nathan (Australia) and San Miguel (the Philippines), and in China will strive to develop business more efficiently in Kirin's three target regions of China (the Yangtze River Delta, the Pearl River Delta, and the three northeast provinces).Kirin Brewery (Zhuhai) Co., Ltd. which has recently set up a new plant, with maximum production capacity of 200,000kl will along with other locations serve as the operations base, with Kirin (China) Investment Co., Ltd., based in Shanghai, as the holding company responsible for the Group's operations in the region.Kirin also positions formulation and advancement of the Group's strategies on alcohol beverages, soft drinks and food businesses in China, including its comprehensive beverages strategy, as a role of Kirin (China) Investment Co., Ltd., and intends to strengthen its functions.

In soft drinks, Kirin intends to harness the Group's strong production technologies and hit product Gogono-Kocha Milk Tea to expand its business, with a focus on China. In Vietnam, which is increasingly in the spotlight as a growth market, Kirin is proceeding with preparations for the establishment of Vina Acecook Kirin Beverage Co., Ltd., a joint venture between Kirin Beverage Corporation and Ace Cook Co., Ltd..

National Foods Limited aims to expand its business in Asia and Oceania, and is proceeding with strengthening its business base in the business arena of 'food and health', including the health foods and functional foods business. It is exploring ways to generate procurement synergies with Lion Nathan. Kirin Food-Tech Company, Limited plans to start production this spring at a new plant in Indonesia for production of the Ribotide brand of nucleotide umami seasonings through its PT Kirin Miwon Foods joint venture. After production commences, it will pursue business in Asia and Oceania and globally, with Singapore positioned as its distribution hub. Furthermore, by establishing and starting sales in July at a new sales company in China (Kirin Food-Tech Shanghai Co.,Ltd.), Kirin intends to increase the scale of its seasonings and food ingredients business.

In pharmaceuticals, Kirin is exploring the possibility of expanding its business in ASEAN countries following Thailand and Singapore, and aims to enhance its development pipeline in the United States. In agribio, Kirin is strengthening its business base in collaboration with Group companies throughout the world, focusing particularly on the seedling business for floriculture and potatoes.

(5) Pursue a financial strategy that maximizes corporate value

Kirin aims to maximize corporate value, and will continue to adopt a financial strategy that places a firm emphasis on shareholders and enables a quantum leap in growth. The Company's policy with regard to returns to shareholders is based on providing stable dividends. From 2007 Kirin adopted a new payout ratio framework of '30% plus' on a consolidated basis, and Kirin aims to increase dividend payments in line with improvements in Kirin's actual profit levels. From 2008 on, Kirin will strive to increase dividend levels, after taking into account the impact of goodwill and so forth as a result of business investment undertaken to achieve a quantum leap in growth. In addition, Kirin will continue to review its asset holdings with the aim of streamlining its total assets, while basing consideration of treasury share purchases on careful consideration of Kirin's financial position.

Kirin aims to improve capital efficiency, principally using interest-bearing debt to fund business investments required to achieve a quantum leap in growth.

(6) CSR at Kirin Group

Kirin sees its corporate social responsibility as pursuing initiatives to maintain the trust of society. In CSR, key tasks include ensuring even stricter compliance and promoting risk management as the basis of internal control, and strengthening quality control systems with the objective of ensuring the delivery of safe and secure food products. As a manufacturer of alcohol beverages, Kirin's initiatives also include raising awareness with regard to responsible drinking and the prevention of problems associated with alcohol. Kirin aims to maintain workplaces where all employees can work with vitality, by developing Kirin-style affirmative action that takes into account human resource diversity, particularly with respect to the situation of women through the activities of Kirin Women's Network.

Kirin positions environmental initiatives, support for sports and revitalization of food culture as initiatives in which it can contribute to resolving social problems using the Group's strengths, and is actively promoting two-way communication with customers in these areas. With regard to the environment, Kirin aims to continue to pursue CO2 reduction initiatives and activities to protect water resources through forest preservation. Kirin is proceeding with research on energy use and bioethanol using the Group's strengths in fermentation and biotechnology, and contributing to prevention of global warming. Sports support will focus on supporting Japan's National Soccer Team, and will also include support for the Japanese athletes participating in the Beijing Olympics. In food culture revitalization, initiatives will be led by the Kirin Institute of Food & Lifestyle, and will include information dissemination and value proposals with the objective of achieving a rich food culture, based particularly on the theme of fermentation, and using expertise, surveys and research unique to Kirin Group in the business arena of food and health.

Kirin will continue social contribution activities such as those of the United Nations University Kirin Project, and plans to offer an original soccer program for providing emotional education, conveying the importance of food and so forth, and a participation-style program for teaching about the wonders of fermentation and biotechnology.

Kirin Group will constantly seek to nurture close bonds with its customers and offer the happiness of food and health, based on its marketing slogan oishisa wo egao ni taste that makes you smile.