Kirin looks for health food acquisitions amid drying beer market

Faced with a shortage of international takeover targets and a shrinking domestic market, Japan's second-biggest beer maker plans to adopt a strategy of expansion into health foods and functional beverages.

Like its competitors, Kirin is faced with finding new ways to achieve sustainable income amid fast-changing demographics and shifting market dynamics.

It does not help a company that earns two-fifths of its revenue from Japan's alcoholic drinks market when the country has just registered its 13th consecutive drop in domestic beer sales. At the same time, an ageing population is moving away from alcohol consumption in favour of healthier drinks.

But unlike Asahi, Japan's best-selling beer brand, which has spent US$11bn snaffling up European brewers from Anheuser-Busch InBev over the last two years, Kirin has been unable to seal overseas deals.

Leaping into the lesser-known

According to its seemingly reluctant chief executive, health foods and beverages are destined to be among Kirin's main growth drivers, especially in developed export markets. The company currently manufactures health products, including probiotic drinks, yogurts and supplements.

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

"We will do bolt-on acquisitions in health if necessary to buy time," he added.

Money to burn

Last month, Kirin announced plans to buy back as much as JPY100bn (US$930m) in stock, having failed to acquire a US$4.84bn majority stake in Vietnam's biggest brewer, Sabeco, after Isozaki deemed the price too high.

Armed with a swollen war chest from this collapsed deal and the sale of a Brazilian beer business for around US$1.1bn last year, the company now has its sights on Asian markets in particular.

"If you don't look at just beer and think about the beverages business, there's a chance to sprout and grow," the chief executive told Bloomberg.

"Looking at the long-term, we also want to focus on the area around our health business. But we don't plan to do it ourselves, and can do it through M&A."