Kirin Looks Abroad as Profit Goes Flat

Japan’s largest brewer, Kirin Brewery Co., is looking to the United States and Europe to put the fizz back in flat profits.

Acquisitions or joint ventures involving foreign companies are the key to a 12-year strategy Kirin hopes will transform it from a domestic brewer into a multinational, corporate planning manager Osamu Hasegawa said.

Kirin must now look overseas because the domestic beer market is all but saturated, he said. “To some extent we must do some acquisitions, or tie-ups, with foreign companies.”

Kirin has long been the leader in Japan’s domestic beer market, and is the world’s fourth-largest beer producer after Anheuser-Busch Cos., Philip Morris Co.’s Miller Brewing Co. and the Netherlands’ Heineken NV.

But Kirin’s performance has slipped recently. Net profit declined to $224 million (29.01 billion yen) in the irregular 11-month financial year ended Dec. 31, 1988, from $263 million (34.06 billion yen) in 1987. Profit is forecast at $231.7 million (30 billion yen) in the full 1989 year, the company said last month.

Kirin’s market share has also fallen, to about 50.6% currentlyfrom around 57% in 1987, after the company lost ground in a marketing war that saw Japanese drinkers shunning traditional beers in favor of new, high-alcoholic brews.

“As reorganization (of the international beer market) progresses, mergers and acquisitions will increase,” Hasegawa said, adding that Kirin plans to sell 10% of its beer overseas by the year 2001, compared to less than 1% currently.

“The way to achieve that will not be exports (from Japan) but rather tie-ups or buyouts of other enterprises . . . in Asia, America or Europe,” he said.

Kirin is targeting the buoyant U.S. market through exports from Canada, where Molson Cos. brews and bottles Kirin beer under a licensing deal struck last year.

“We are right now considering whether we can tie up with a local company in Europe and Asia, but there are no plans yet,” Hasegawa said.

Over the next three years, Kirin plans to invest $2.32 billion (300 billion yen), more than double the amount for the past three years, a spokeswoman said, with much of it geared toward the diversification drive.

Under Kirin’s long-term plan, beer would account for about 40% of its sales in 2001, down from a current 62%.