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Publication Date : 31-12-2013
Faced with a shrinking domestic market due to the chronically low birthrate and the graying of society, Japanese beer companies are strengthening their operations in Australia and other parts of the Oceanic region.
With the population growing in Australia and elsewhere, the Oceanic market is expected to expand. Japanese companies already hold top shares in the markets for beer and other beverages there, and now aim to quickly improve their profitability.
Japanese beer is dry and goes down smoothly, said a 39-year-old employee at a liquor store in a Sydney office district. It also has a refreshing aftertaste, he said, adding that he often buys it himself.
Asahi Breweries, Ltd.’s Super Dry and other imported Japanese beers are relatively expensive but are popular among businessmen, he said.
Japan’s breweries have not just sold their products in the Oceania region, but since about 2009 have also purchased local companies such as beer and soft drink firms in order to compete. Kirin Holdings Co. and Asahi Group Holdings, Ltd. have made particular efforts in this regard, investing hundreds of billions of yen.
As a result, Kirin now holds the top share - about 50 per cent - in the beer markets of both Australia and New Zealand. Japanese companies also hold top slots in Australia’s nonalcoholic beverage market with Asahi second, Kirin third and Suntory Holdings Ltd. fourth.
Kirin’s business in Oceania accounts for 20 per cent of its overall sales and Asahi’s accounts for 10 per cent, providing vital support for the foundations of their operations.
The domestic market for Japanese beer is expected to shrink this year for the ninth consecutive year. In contrast, Australia’s population is increasing, and its markets for beer and other beverages are expected to grow. In addition to its stable economy and public safety, Australia is also attractive due to its proximity to Asia, another area where Japanese beer companies have been making particular efforts.
Eye on profit margins
The key issue from now on will be producing profits commensurate with the enormous sums of money invested in purchasing local firms. Nonalcoholic beverage busineses are struggling under strong pressure from two large supermarket chains to discount their products.
In 2012, Kirin’s sales from alcoholic beverages in Oceania were almost the same as its sales from other beverages. However, in terms of operating profits, which reflect the earnings of its main business, nonalcoholic beverages achieved only one-seventh the operating profits of alcoholic drinks.
As a result, Kirin has worked to concentrate its production facilities and is jointly developing new products with its local subsidiary, Lion. “We want to apply the expertise we’ve developed in Japan to product development and quality control,” said Takayuki Miyamoto, a director of Lion.
Asahi aims to invest a maximum of 20 billion yen (US$190 million) over the next three years to make its distribution system more efficient and improve its production capabilities.
New beverage markets emerging worldwide
Major Japanese producers of alcoholic and nonalcoholic beverages are increasing the pace of their expansion overseas. In addition to Oceania, they are aiming at newly emerging countries in Asia, Africa and other countries, where there are many young people and consumption is expected to grow.
Kirin Holdings Co. plans to begin as early as next spring production of its Ichiban Shibori beer at Schincariol, the Brazilian beer giant it purchased in 2011. The company now goes by the name Brasil Kirin. Brazil has the third-largest consumption of beer in the world, and demand is expected to increase when the soccer World Cup is held there in 2016.
Asia is also a highly attractive market for large beer companies, as it accounts for one-third of the volume of beer consumed worldwide. China and Vietnam are seeing double-digit annual growth, and Sapporo Holdings Ltd. plans to increase its local production facilities.
In the realm of nonalcoholic beverages, Suntory Beverage & Food Ltd. announced in September that it would acquire sales networks in such countries as Nigeria and Malaysia, and purchase the soft-drink operations of British pharmaceutical giant GlaxoSmithKline Plc for more than 200 billion yen ($1.90 billion), an enormous investment clearly made with an eye on the future.