Although Japan defines liquor as any beverage containing over 1% alcohol, not all such liquors are used for drinking. Liquor is commonly used for culinary purposes in everyday life. The use of leftover sake, mirin (sweet cooking sake) and other liquors to bring out the flavor of a particular ingredient has become an integral part of Japanese cooking.

Our processing liquors operations focus on potential demand for alcohol used in food preparation and processing.

Alcohol can add fragrances and flavors, eliminate unpleasant smells, enhance gloss and sheen, and improve shelf life. In recent years, processed food manufacturers have come to realize that effective use of processing liquors can enable the development of distinctive products with added value. As a reflection of this, the use of such liquors has increased steadily. We provide a broad range of industrial-use processing liquors to various types of businesses. These products include wine, sake, goseishu, mirin, liqueurs, brandy, spritzers, fermented seasonings, alcohol-based sanitary products and wine extract.

Processing liquors manufacturers are not only required to provide customers with highquality products at reasonable prices, they must also use innovative approaches to increase the number of potential applications for alcohol. Through the efforts of technicians in our research centers and plants, we strive hard to develop products tailored to customer needs. We also provide technical support services to customers throughout Japan.

Consumers are becoming increasingly concerned about food safety. For this reason, alcohol has gained recognition as a valuable natural seasoning. We expect to achieve substantial growth in this area by making new proposals to foodstuffs manufacturers, the food service industry and producers of boxed lunches and other ready-to-eat meals. We will work to cultivate new demand in these expanding fields by building an organization with sections specializing in particular industries and by accelerating efforts to develop and propose new products to customers.

In spring 2005, we sought to further enhance our processing liquors operations by opening the Processing Liquors Company Nihonbashi Office. Through this step, we integrated our business and sales divisions as well as some research functions. The office includes a customer center with a testing kitchen and a presentation room. We will use such facilities to propose new recipes and dishes to customers and offer more effective advice on the use of alcohol to process foods.

In September 2006, we brought on line the Mercian Nikko Plant to manufacture processing liquors, which we relocated from the Nagareyama Plant. We believe the plant will bolster our competitive advantages in this area.

Established as an exclusive facility for processing liquors and foodstuffs, the Mercian Nikko Plant has introduced a Hazard Analysis and Critical Control Points (HACCP) program to ensure the safety of its products, and boasts sufficient flexibility to accommodate a diverse range of products and respond to customer needs. The plant site is approximately twice as large as the site of our existing plant in Chiba Prefecture and has an annual production capacity of 70,000 kiloliters.

Water is one of the most crucial resources used at the Mercian Nikko Plant. The plant uses superior-quality subsoil water, found in abundance in the Nikko mountain range. In keeping with its beautiful natural environment, the plant has established a production system designed to ensure the safety and security, as well as minimize the plant‘s environmental impact and its use of energy, thereby responding to the expectations of our customers.