Comment - Japan's Earthquake Won't Knock Brewers Off-Course
Japan's economy hit hard by earthquake. Photo: Toshiharu Kato/Japanese Red Cross Society
Japan's major drinks companies have been hit hard by the aftermath of the earthquake, but their core strategies remain unshaken.
Around two months on, more details are emerging of the economic damage wrought by the earthquake and tsunami that struck Japan's eastern coast on 11 March, and subsequent nuclear power crisis.
Japan's major brewers have all been affected by the disaster. In the past week, Kirin Holdings has seen its profits wiped out in the first quarter of 2011, while rival Sapporo saw its net losses double for the same period. Asahi's profits leapt for the three months, but this was solely attributable to a very easy comparative figure for the company.
All three publicly-listed brewers were forced to recognise billions of yen in charges related to the 'quake. It is not only damage to facilities: Tales of power cuts and fuel shortages continue and the brewers are concentrating production solely on their core beer brands ahead of the key summer selling season.
None of the three have yet given a clue as to the effects of the disaster on their full-year performance. Still, the signs don't look too promising.
Kirin and Sapporo said that Japan's economy has taken a sharp downturn since the 'quake struck on 11 March. In an interview published by Dow Jones today (13 May), Japan's economy minister, Kaoru Yosano, said that the disaster will likely wipe 1% off Japan's GDP growth in the year to the end of March 2012. He said that the Government may have to spend JPY10tn (US$124bn) on reconstruction alone, with tens of thousands of people still homeless.
This will probably exacerbate an existing problem for the country's drinks majors and it provides a gloomy outlook for foreign producers who count Japan as an important market.
However, the disaster is unlikely to force a wholesale change in strategy at the likes of Kirin, Asahi, Sapporo and privately-held Suntory. For several years, all of the 'big four' drinks companies have been leaking alcoholic drinks sales in Japan amid weak demand from an ageing population.
In March, in financial terms, things got a whole lot worse. But, those companies know that their only chance of meaningful sales and profits growth lies beyond the Sea of Japan.
That said, in the short-term, we might expect to see greater inward focus from these companies. Asahi has been linked with a possible move for Foster's Group's newly-demerged Australian beer business. Does the disaster in Japan take Asahi out of the game? If bidding begins immediately, then perhaps it does.
Longer-term, and without wishing to belittle the huge loss of life in the earthquake, Japanese drinks majors still know that their future lies overseas and we would expect them to continue pursuing foreign acquisitions in the not-too-distant future.
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