Resilience strategies for complex supply chains: The Sapporo Group

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From Dr. Paolo Trucco and Dr. Alessandra Negri.

The Sapporo Group is a Japanese group operating under a holding company framework in
five different segments: Japanese Alcoholic Beverages, International Alcoholic Beverages, Food & Soft Drinks, Restaurants and Real Estate. It employs 7,858 employees and its yearly sales in 2016 amounted to about €4,508 million, with an operating income of
€169 million. Brewing beer since 1876, it currently sells beer in about 45 countries and soft drinks in around 60 national markets. Mainly based in Japan, but with facilities in other countries too, the Sapporo Group is pursuing strong growth all over the world thanks to
its wide range of distinctive products and services, characterized by carefully selected ingredients.

In March 2011, the Sapporo Group suffered a big disruption due to the Japan earthquake, with heavy consequences over an extended period of time. Two out of five core breweries in Japan were damaged, accounting for a large share of sales. The disaster destroyed or damaged buildings, equipment, logistics facilities, product inventories and other assets in Sendai and Chiba, forcing the stop of production and product shipping activities. Other plants of Sapporo Breweries Ltd. were affected too, as well as some restaurants and other group’s facilities. In addition, some Sapporo Lion Ltd. restaurants in the affected areas had to shorten opening hours due to the bad state of infrastructures and other conditions. The most negative consequences of the event were suffered by the Japanese Alcoholic Beverage segment, which reported a loss of 4% in net sales, and, since it accounted for a large share of sales, product supply and marketing activities were heavily impacted. In total, the net income decreased by 70.6%, from 7.6 to 3.2 billion JPY.

However, the group could quickly react, as the Sendai and Chiba plants completely reinstated the entire brewing process in a couple of months. Although Sapporo worked hard to ensure the stable supply of three core products (Sapporo Draft Beer Black Label, Yebisu Beer and Mugi to Hop), the impact of the event was heavy and it was forced to suspend other supplies, such as Yebisu the Black and Sapporo Lager Beer. In such a situation, the internal structure of the Sapporo Breweries’ supply chain negatively contributed to the consequences of the incident. As a matter of fact, five out of eight plants were concentrated in Japan, avoiding geographic diversification and making the company closely dependent on that area. This reduced the flexibility of the company, which could not leverage alternative breweries in different regions not affected by the earthquake.
A positive role, instead, was played by the wide portfolio of the group. Due to the earthquake, customers demand in Japan shifted from Alcoholic Beverages to Soft Drinks, making sales of mineral water and unsweetened beverages rise. Therefore, Sapporo
could leverage a different business segment, whose production facilities were in other countries, such as Germany. This allowed the company to flexibly cover losses in Alcoholic Beverages business. Other supply chain complexity drivers did not play a
significant role in the event.