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And Cash Flows OUTCOME OUTCOME Health and well-being Community Engagement The Environment A Responsible Alcohol Producer Corporate Governance Corporate Governance Overview Management Structure Management, Leadership & Advisory Remuneration System for Executive Officers Compliance Kirin Group Tax Policy Risk Management ICT accelerating value creation June 5, 2023 The Kirin Group accelerates group-wide digital transformation (DX) by using ICT technology and continuously creates new value with the aim of sustainable growth. Accelerating group-wide DX and continuously creating new value “Information and Communication Technology (ICT) accelerating value creation” is an organizational capability to help us realize new innovations in the Long-Term Management Vision Kirin Group Vision 2027 (KV2027), and we are working on business reform in every area throughout our group by revising business processes using digital technology and implementing other activities. Realizing sustainable growth by continuously promoting DX In recent years, due to the acceleration of the trend to apply evolving digital ICT technology to business, new technology-based services are continuously being released. The spread of digital technology has dramatically changed people’s values, so there is a risk that we will not be able to provide the value that our consumers require if we continue to conduct business processes based on conventional ways of thinking, methods, and technology. At the same time, consumer touch points have expanded through digital technology. We recognize that through a deep understanding of the changes in the markets and the diversification of market preferences, the possibility of providing consumers with high satisfaction products and services is expanding. We believe that DX promotion is essential in an increasingly uncertain world in order to reduce business continuity risks and realize sustainable growth, so the Kirin Group has been promoting the utilization of ICT. To carry out permanent business transformation in a dramatically changing society, we will continue to commit to DX in all businesses and divisions throughout the group. Organizational capabilities to promote DX Our group aims to create a work environment that allows front-line employees in businesses and divisions to identify business issues, use digital ICT technology for planning and designing solutions, and autonomously promote DX. For that reason, we are striving to build an organizational structure and secure and develop the talent that will be responsible for leading it, cultivating planning and conceptualization skills to envision what the issues should be, and focusing on proactively promoting DX on the frontlines rather than by digital ICT departments. As for our organizational structure, in 2021 we established the Group DX Promotion Committee, in which the employees in charge of DX promotion at each operating company and their divisions participate. Through this committee, front-line employees have started playing a lead role in DX promotion, such as by expanding the initiatives of the Kirin Group to each group company and division, in aim of solving issues and sharing information across operating companies. In addition, in 2022 we established sectional committees focusing on our group’s important business domains to work on solving issues in each area across the group, including sales, direct to consumer (D2C) business, marketing, and supply chain management (SCM). The sectional committees will accelerate DX initiatives of each domain by sharing and discussing issues that our group companies have difficulty solving alone, with the participation of the employees in charge of DX initiatives for each domain at the operating companies. As an initiative to secure human resources, we newly established a digital ICT course for new recruits in April 2021. We continue to hire mid-career employees and new recruits and to secure the necessary professional human resources for DX promotion. Meanwhile, as for internal human resource development, we have been hosting the Kirin DX Dojo, a unique DX human resource development program for our group employees, since July 2021. Group employees can choose from three course levels (white belt, black belt, or expert) and aim to pass a certification exam after finishing the course. This provides a way for employees to develop their skills autonomously and steadily. As of the end of 2022, the number of white belts was approximately 1,200 and that of black belts was approximately 600. Employees were progressing faster than we had expected. When the course launched in 2022, there was only room for 400 participants, but we received more than double that number of applications, so we increased the program’s capacity. Shared awareness that our group’s DX promotion is not an initiative in only limited areas of digital ICT divisions is spreading throughout the group. Going forward, we will grow the number of human resources who can plan and design DX promotion on the front lines, with the cooperation of the above-mentioned mid-career hires and new recruits, and strive to provide support, such as by offering opportunities for program participants to play an active role by using the knowledge they gained from the program. Value creation through autonomous DX promotion Our group aims for value creation through “business process transformation,” “value enhancement of existing businesses,” and “acceleration and development of new businesses.” In regard to business process transformation, we are pursuing productivity improvement throughout the entire value chain, using digital solutions and data across divisions and domains, including the optimization of production and logistics systems through efficient AI-based product development and simulations. As for the value enhancement of existing businesses, by utilizing consumer data and the latest technology, deepening consumer understanding, and digitizing the development processes and consumer contact points of existing products and services, we are creating new added value. For the acceleration and development of new businesses, we aim to launch new services using digital technology across the Food & Beverages, Pharmaceuticals, and Health Science domains without being bound by our conventional business model. Through these initiatives, as an example, front-line employees are currently starting to create ideas for enhancing and streamlining business operations, so the development of organizational structure and human resources for DX promotion is steadily in progress. We hope to gain competitively advantageous organizational capabilities for our group and to create new value through the accumulation of small successes that lead to problem solutions for our employees and organization and through a more proactive promotion of DX. We will work on business transformation in every domain of our group toward the realization of KV2027. Examples of our initiatives: Kirin Brewery started the MJ Project to promote DX in the SCM domain In October 2022 Kirin Brewery, with the cooperation of BrainPad Inc., started the three-year MJ (Supply and Demand Process Innovation) Project to accelerate DX in its SCM business operation processes. As the first step, the company launched its material supply and demand management application, which was jointly developed with BrainPad, in December 2022. Due to rapid changes in the market environment, consumer preferences and values are diversifying. In response to this situation, we need to diversify our products and deal with increasing restrictions in production, logistics, and more. In such an environment, we must rapidly respond to changes in the market and build a stronger supply system to ensure the stable delivery of our products to customers in the future. For this reason, in April 2022 our company newly established the SCM Department with the goal of achieving both a stable product supply and cost optimization. The SCM Department is responsible for preparing production plans and material (cans, paperboard, etc.) procurement plans based on demand forecasts following our previous sales records and the recent market trends. Our supply and demand operations are characterized by current demand and demand forecasts of the next several months so we can prepare for production and procure the necessary raw materials. However, with the ongoing product diversification in the current sales environment, we not only have difficulty forecasting demand, but we also need to prepare an optimal plan that takes into account the capacity and restrictions of production, storage, and delivery. As a result, the complexity of business operations is increasing and our existing system can’t handle all of them, so we are currently handling and adjusting many daily operations manually. The situation is not only increasing workload but also creating a lot of operations that can only be performed by employees with a certain level of experience. Therefore, we concluded that if this went on, we would have difficulty maintaining supply and demand operations and there would be business continuity risks for the future. To deal with the situation, we started the MJ (Supply and Demand Process Innovation) Project in October 2022. By expanding the range of automated operations of the existing supply and demand operations system, we are planning to improve the efficiency of operations previously handled manually by employees and aiming to realize more stable, sustainable supply and demand operations. Members of digital ICT divisions are participating in this project, which was launched mainly by front-line employees, to promote and support the project. Through the promotion of this project, we will establish a solid business operation system that will continue to provide a steady product supply for the future to reduce business continuity risks. At the same time, we also aim to improve the job satisfaction of employees in charge of supply and demand operations by eliminating the individualization of work and promoting labor-saving, breaking away from the situation in which time is spent on manual operations, and shifting the focus to higher added-value operations. We started using materio, our self-developed material supply and demand management application, in January 2023. This application can automatically calculate optimal order quantities for materials based on desired inventory levels and sheduled delivery dates, taking into account production timing and lot size. Additionally, the application visualizes inventory changes after order placements and supports the final decision-making process of employees. We anticipate that this will reduce the amount of material supply and demand management operations that was performed by humans by 75% annually, saving a total of over 1,400 hours of work time. Replacement: Replacing destination plants from suppliers Transportation: Transportation and delivery between Kirin Brewery’s plants We consider this material supply and demand management application as a small success, and we will reform operations to produce more effective results. In addition to automation through the system, we will also eliminate issues and restrictions of the supply chain, creating greater social and economic value. Related Information Message from Top Management Long-term Management Vision and Medium-Term Business Plan Value Creation Story KIRIN Home Tap (Japanese only) Integrated Report Share Please do not forward or share information about alcoholic beverages with anyone under the legal drinking age. 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