Insight - Kirin Holdings to focus on synergies
Kirin Holdings has launched phase two of its plan to reach JPY2.5tn (US$27bn) in annual net sales and JPY250bn in operating profits by 2015.
Synergies form a large part of the three-year strategy launched today (26 October), following a year that has seen the Japanese brewer and soft drinks maker acquire full control of Australian brewing giant Lion Nathan and a near-49% stake in Philippines-based San Miguel Brewery.
In a nutshell, Kirin's Vision 2015 document is about reducing costs and reliance on a mature Japanese market that has seen sluggish economic growth and houses a "defensive consumer mindset", while expanding in Asia-Pacific markets with higher growth potential.
The brewer aims to recoup 30% of annual net beer sales from outside of Japan by 2015. Earlier this year, it said it expected this to be 24% in 2009.
The Lion Nathan and San Miguel deals have laid down significant stepping stones for this expansion, particularly given Lion Nathan's solid growth so far in 2009.
In the new three-year strategy, the second phase in the 2015 masterplan, Kirin said: "In overseas markets, we aim to realise synergies between Lion Nathan and National Foods under the direction of Lion Nathan National Foods Pty, our new holding company in Australia, while promoting our integrated beverages group strategy in Oceania."
Synergies and cost savings are the key themes of the second phase.
"During the term of the previous medium-term business plan, intiatives were focused on expanding the scope and scale of Kirin's operations to achieve a quantum leap in growth," said Kirin.
"The new plan focuses on achieving a quantum leap in profitabiliy, and to support this we will take steps to accelerate group synergies."
Accordingly, Kirin announced that it will close two of its breweries in Japan - Tochigi and Hokuriku - next year, with beer production and research facilities expected to transfer to other breweries. The firm has also begun a "comprehensive review" of its sales setup in Japan and said it is considering creating a separate company "to handle all sales functions".
Kirin signed a distribution joint venture deal with Diageo in Japan this year, bringing together all its alcoholic drinks distribution under one roof.
In domestic soft drinks, Kirin indicated that it will pursue even more rigorous cost savings.
"The market in Japan is becoming highly mature, and competition is expected to intensify even further," said the group. "We will focus resources on core brands while taking a value sales approach, aiming to create brands with strong customer loyalty."
The wild card still in the pack is the merger talks between Kirin Holdings and rival drinks producer Suntory Holdings, which have yet to reach a conclusion.
Nor has Kirin ruled out further forays abroad. "We intend to secure a sound financial position by reducing interest-bearing debt, while retaining the flexibility to make strategic investments for growth," it said.
Net sales, minus excise tax, are expected to hit JPY1.93tn for the 12 months of 2009, with operating profits of JPY125bn.
Sales and operating profits are anticipated to rise to JPY2.13tn and JPY188bn by the end of 2012, according to the three-year plan.
The wave of major consolidation activity in the beer market over 2008 was followed by weakening volume growth in 2009 as the economic downturn put a dampener on bullish tactics. With the global beer l...
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