Kirin Group and Yakult Group to jointly establish Kirin Yakult NextStage as part of alliance

New initiative supports development of next-generation health foods and functional foods business

Tokyo, September 14, 2006—Kirin Brewery Company, Limited ("Kirin Brewery") and Yakult Honsha Co. Ltd. ("Yakult Honsha") today announced that they had jointly established Kirin Yakult NextStage Company, Limited ("KYNS") to develop next-generation health foods and functional foods1 business. KYNS will begin operations on October 1, capitalized 55% by Kirin Brewery and 45% by Yakult Honsha, and on October 2 will launch nationwide sales of BBcube, a product that supports healthy intestinal bacteria balance and is beneficial for bowel habits and the first product jointly developed under the alliance.
In addition, on January 1, 2007, Kirin Well-foods Co., Ltd. ("Kirin Well-foods") the Group company through which Kirin Brewery is currently pursuing health food operations, will undergo a company separation, with its main business and assets being transferred to KYNS.

In June 2005 Kirin Group and Yakult Group signed a memorandum of agreement to form a business alliance, and began preparations for its formation. Believing that combining their strong R&D capabilities and customer relations excellence will enable business development that creates new value based on the theme of "food and health", the groups have now jointly established the new company, and aim to provide products and services that meet customers' needs and combine safety, good taste and functionality.

As noted above, on January 1, 2007 Kirin Well-foods' main business will be transferred to KYNS. Control over part of Yakult Honsha's health food business will also be transferred to KYNS; a broad range of staff will be recruited, from Kirin Well-foods in particular, as well as from Yakult Honsha and Kirin Beverage Corporation; and a system will be developed for consistent operation of the company's business from product development and manufacturing through to marketing and sales. KYNS will expand its product line-up by leveraging the R&D capabilities of Kirin Brewery, Yakult Honsha and Kirin Beverage, aiming to quickly establish its operating base.

In its long-term operating framework, KIRIN GROUP VISION 2015 ("KV 2015"), Kirin Group positions the health food and functional food business as its fourth core Group business pillar after alcohol beverages, soft drinks and pharmaceuticals. As the key company for developing this fourth core business, KYNS will play a part in the growth of the overall Group.

Since its foundation, Yakult Group has aimed to contribute to people's health and creating enjoyment in the lives of people all over the world, mainly through its drinks containing lactic acid bacteria and probiotic products such as fermented milks. Through the establishment of KYNS, it seeks to strengthen its involvement in the health food and functional food business domain and increase its Group value.

The first offering of the new alliance, the new product BBcube, has been jointly developed by Kirin Brewery and Yakult Honsha to bring together the two groups' respective strengths in food ingredient technology. The combination of Yakult's viable bacteria, Bifidus2, and Kirin Brewery's high-quality dietary fiber, BYC3, will serve to support customers' healthy daily lifestyles. Sales will be conducted using Kirin Well-food's mail-order sales channel and Yakult Group's proprietary "Yakult Lady" and "Yakult Beauty" door-to-door sales systems, and will target women in their 30s and 40s.

The health food and functional food market is expected to grow further as consumers become more health conscious and society ages, with the market expected to approximately double by 2010.

Both groups will use the establishment of KYNS to accelerate their business alliance, and intend to increasingly share production and logistics capabilities and enhance cooperation in vending machine business. Aiming to create new value in "food and health," Kirin Brewery and Yakult Honsha intend to assist their customers in living healthy and enjoyable lives.

1 Refers to standard processed foods that have had particular ingredients fortified to appeal as functional foods, and to various types of health-promoting foods.
2 Bifidus works mainly in the large intestine, breaking up sugar in the stomach to create lactic acid and acetic acid. Large quantities of Bifidus are present in infants' stomachs, preventing the proliferation of harmful bacteria, but the quantity tends to decrease in adults as they age.
3 Dietary fiber produced from the brewer's yeast cell wall. Has superior swelling force compared to other dietary fibers such as wheat bran and cellulose, and after absorbing water its volume expands approximately 10-fold. Moving gently around the bowel, it becomes a source of nutrition for good bacteria, and supports Bifidus.

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