Comment - Kirin: aiming to go west again

By | 30 July 2002

Kirin is not having an easy ride in Japan, its domestic market. Sales in the country are declining whereas Asia as a whole continues to grow rapidly.

Having been overtaken by archrival Asahi on the home front it is China that now holds most promise.

Kirin Brewery, Japan's second largest beer producer, is looking westward for growth opportunities as the Japanese market becomes increasingly difficult to compete in. Despite revising its group net profits forecast upwards to Y10 billion, its shares remain close to its 16 year all-time low.

In Japan, an ageing population and a depressed economy are adversely affecting consumption of beer. In addition, the popularity of packaged cocktail drinks is increasingly taking 'share of throat' from the beer market. Japanese breweries also face a tax increase on low-malt beers, which is likely to stifle future growth in that market. As if market conditions were not bad enough, the top beer makers, Asahi and Kirin, are plunging into a price war in a fight over market share.

All in all the Japanese market looks increasingly gloomy for manufacturers and Kirin is keen to explore opportunities abroad. In March 2002, Kirin made its most significant acquisition when it bought San Miguel and effectively 90% of the Philippine beer market. Now China is increasingly moving onto the firm's agenda.

Kirin sees China as the driver of growth in five to ten years. The company predicts that China will become its biggest production base in five years.

As the Chinese market becomes increasingly open to foreign investment Kirin will eye this market with much anticipation, not least because at present beer consumption is about a quarter of that in Japan. However, it will undoubtedly face strong competition from other players, notably from the US and Europe, that also appreciate the very attractive potential to expand in China.

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