China: Japan’s Kirin Brewery Company, Limited (“Kirin”) announced on January 5, 2005 it will establish a new 100%-owned holding company to manage the development of its alcohol beverage operations throughout China. Permission to establish the company—Kirin (China) Investment Co., Ltd.—was received from the Shanghai municipal authorities on December 23, 2004, and establishment is planned for late January 2005.

Kirin views the Chinese market as a key element of its drive to become the leading brewing company in Asia and Oceania, and has been developing operations in China through Group companies in three primary regions: Northeast China, the Yangtze River Delta, and the Pearl River Delta. The new holding company will be responsible for the overall control of these Group companies, and will also establish a new sales division to promote Kirin brand products in Shanghai. As such, the new company will spearhead the development of Kirin’s alcohol beverage business in China.

The beer market in China has been expanding steadily in the midst of China’s strong economic growth, and in 2003 it became the world’s largest market both by production volume and consumption volume1. Intense competition has arisen with the investment of foreign capital into this market, and faster business development has become necessary. Kirin’s basic approach in China is to pursue operations in the three areas mentioned above, taking into account the distinct regional characteristics of each area while exercising overall control of Group companies through the new holding company structure.

In Northeast China, Kirin’s operations are centered on its affiliate Dalian Daxue Brewery Co., Ltd. (Pulandian, Dalian City, Liaoning Province) with business initiatives aimed at expanding sales of the local brand Daxue while also producing and marketing Kirin brands.

In the Yangtze River Delta region, Kirin’s operations will be centered on the new holding company. As described, the holding company will supervise the Group companies in each region with strategic planning for the whole of China and consideration of alliances with or capital participation in leading local companies, along with controlling overall production and marketing activities at these companies. The company will also sell Kirin products in the Shanghai market.
1 2003 Beer Consumption in the World's Major Markets: Kirin Research Institute of Drinking and Lifestyle

In the Pearl River Delta region, Kirin’s operations have been centered on the Zhuhai Kirin President Brewery Co., Ltd. (Zhuhai City, Guangdong Province), selling local brands such as Haizhu Draft and producing and marketing Kirin brands. From early January 2005 in Guangzhou City and environs the company will begin selling Kirin Chun Zhen Wei Beer, a draft beer produced using only the first wort (the best portion of extracts from selected ingredients). Kirin aims to strengthen its sales structure and expand operations in this region, and is establishing a new office in Guangzhou City.

The Kirin Group intends to continue to actively develop its operations in the Chinese market, maximizing Group synergies through the holding company structure. As realignment in the beer industry continues worldwide, Kirin is pursuing initiatives aimed at strengthening its business base and increasing earnings in Asia and Oceania.

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