February 22, 2018 / 10:39 AM / 5 months ago

Japan brewery Kirin adopts healthier path in search for growth

TOKYO, Feb 22 (Reuters) - Kirin Holdings Co Ltd aims to expand in health food and beverages, its chief executive said, as the Japanese brewery adopts a different strategy from rivals which have spent big on breweries abroad to offset a drop in domestic beer consumption.

Japan’s second-biggest beer maker earns almost 40 percent of profit from beer and other alcoholic drinks sold at home. But with industry data showing a 13th consecutive fall in domestic beer shipments last year, Kirin and peers like Asahi Group Holdings Ltd have been seeking growth elsewhere.

“I wish we could just focus on the beer business. That’s something we fully understand,” Yoshinori Isozaki said in an interview. “But we cannot achieve sustainable growth from that business alone.”

The comments reflect challenges in the beer industry both in Japan and globally, as ageing populations and changing consumer tastes in increasingly health-conscious developed economies limit growth prospects for makers of alcoholic drinks.

In response, Asahi - which has long derived a sizeable chunk of revenue from Japan’s biggest-selling “Super Dry” beer - has spent $11 billion over the past two years to buy beer brands across Europe from Anheuser-Busch InBev NV.

Preventing Kirin from similarly expanding is the lack of potential beer targets currently up for sale, Isozaki said.

Kirin last year was among potential contenders to buy a $4.84 billion majority stake in Vietnam’s biggest brewer, Saigon Beer Alcohol Beverage Corp (Sabeco). Isozaki said Kirin ultimately considered the price too expensive to justify.

He said Kirin now aims to build its health food and drink business into one of its growth drivers, particularly as growing health awareness is turning consumers in developed economies toward beverages with fewer calories than beer, for instance.

At present, Kirin makes health products such as pro-biotic drinks, yoghurts and supplements.

“We will do bolt-on acquisitions in health if necessary to buy time,” he said. He declined to elaborate beyond saying Kirin was working on “various ideas” to expand in the area.

Isozaki, 64, was raised on his parents’ mandarin orange farm before joining Kirin in 1977. He became CEO in 2015 and has since overseen a drastic overhaul of Kirin’s business portfolio.

His biggest move was last year’s sale of Kirin’s money-losing Brazilian beer business - bought for $3.9 billion in 2011 - to Heineken NV for $1.09 billion.

For Isozaki, managing a beer conglomerate is like tending the family orange farm, where he still helps out twice a month: prune sick branches first, and only then planting seedlings.

“If we don’t take care of each tree, we will lose all,” he said.

Reporting by Taiga Uranaka and Ritsuko Shimizu Additional reporting by Sam Nussey Editing by Christopher Cushing

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