* Archive page for historical reference only. This page is no longer being actively updated *

Kirin Holdings Co (Japan)

Profile subscribers click here for full profile

Best-known as one of Japan's leading brewers, Kirin has also established a strong presence throughout the rest of the Asia Pacific region, and not just in beer. Until recently, it was also the biggest dairy products and juice company in Australia. After almost 50 years as Japan's #1 brewer, Kirin had its lead stolen by rival Asahi Breweries in 2001. The two companies continue to compete fiercely in their domestic market. However, Kirin has a more established international presence, through Australian food & beverage company Lion, San Miguel of the Philippines, and more recently Schincariol of Brazil. The group established an initial presence in the broader Australian food industry in 2007 with a deal to acquire leading juice and dairy products market National Foods. The subsequent purchase of the Dairy Farmers co-operative cemented its position as Australia's foremost dairy producer.

Advertising

The group declared advertising expenses of Y62.9bn ($569m) in calendar 2016.

Competitors

See Wine Beer & Spirits Sector for other companies

Brands & Activities

Kirin is one of the two leading brewers in the closely fought Japanese market, and has been a market-maker in newer, low-priced alcoholic segments as well as soft drinks. The company has a much stronger presence than its domestic competitors in the wider Asia Pacific region as a result of what have now become controlling stakes in Lion and San Miguel, but these investments do comparatively little to promote the core Kirin Beer brand, which remains a niche product in virtually all markets outside Japan.

Kirin's main business is alcoholic beverages, and especially beer and associated "beeralike" products. Domestic beer brands are led by main brand Kirin Lager. Rather like Coca-Cola in the 1980s, Kirin altered the formulation of its main brand in the 1990s in a bid to appeal to younger drinkers. Because of the resulting outcry from existing drinkers, the old formulation was reintroduced as Kirin Classic. Other variants include draft and canned Kirin Ichiban Shibori, Kirin Latte Stout dark beer, slightly more bitter Kirin The Gold and organic Heartland Beer. Among more recent additions to the core Kirin beer portfolio is Kirin Free, introduced in 2010, which claims to be the first beer-taste beverage with absolutely zero alcohol content. The group launched live yeast beer Maroyaka Kobo in 2003, followed by chilled beers Hojun and White Ale in 2004. Kirin Tarunama is a portable draft beer system for home pouring. The group holds the local licenses for manufacturing and distributing import brands Heineken , Budweiser and Buckler. In 2009 it took over distribution of Diageo's Guinness and Smirnoff Ice from rival Sapporo, as well as the British company's premium spirits brands.

Kirin is the leading player in the "happoshu" sector of the market. "Beeralike" happoshu beverages were more or less invented by Suntory in 1994. Because they use less malt than real beer, they were taxed at a lower level, and as a result were priced well below "real" beers. Kirin seized leadership of the sector in 1998 with the introduction of Kirin Tanrei, the best-selling happoshu brand with just under 50% market share. Asahi also leapt into the sector with a series of aggressive promotions. Although the tax loophole was removed by the government in 2003, the sector remains highly competitive and quite substantial. Kirin has launched several spin-offs into the market, such as reduced sugar Tanrei Green Label, Tanrei Alpha and Gokunama. Kirin Honey Brown, with added honey, was introduced in 2003, along with dark happoshu Namakuro. The group also launched virtually alcohol-free "beer-taste" beverage, Kirin Malt Squash. Among more recent launches are Kirin Enjuku, introduced in 2007, and low-cal Kirin Zero, launched in 2008.

In 2005 the company entered another "beeralike" niche, the so-called third beer or new genre segment invented by Sapporo in 2004. Kirin's product, Nodogoshi Nama, tastes like beer but is actually made from fermented soybean protein. Backed by a substantial marketing campaign it took leadership of the third beer segment in 2006, and has retained it ever since. Other launches in this segment include Kirin Strong Seven, Kirin Sparkling Hop and most recently Sumikiri, launched in 2013. In 2015 it introduced Kirin Nodogoshi All Light, which contains no carbs, no purines and reduced calories. The Japanese market is now divided more or less equally between real beer (comprising just over 50% of volumes in 2015) on one hand and happoshu (14%) and new genre (34%) on the other.

The latest development in the Japanese beer market is a dramatic surge in the popularity of craft beers. Drawing on its experience in Australia, Kirin was the first brewer to push into this segment in Japan, with the introduction of Grand Kirin beer and Spring Valley, and it acquired a shareholding in independent craft brewer Yo-Ho Brewing, makers of Yona Yona Ale.

A long-established leader in the Japanese beer market, Kirin has seen its share steadily eroded by arch-rival Asahi. From the late 1950s to mid-1980s it dominated the market, with share rising as high as over 60% in the early 1980s. The launch of Asahi Super Dry prompted the beginning of a steady decline, and the rival brewer finally overtook Kirin as #1 by share in 2001. The introduction of the first beer-a-likes reinvigorated Kirin's performance, and in 2009, it claimed to have overtaken Asahi for the first time in nine years, fractionally ahead of Asahi. For the following year, though, it lost that lead again, slipping back into second place. Its overall share has steadily declined since then, falling to a multi-year low of 32.4% share by volume of the combined beer/happoshu/new genre market in 2016.

The company has also had some success with chu-hi, fruit-flavoured alcoholic drinks, very similar to Western alcopops, and aimed mainly at the young women's market. Kirin Chu-hi Hyoketsu is the leading brand in the sector, and comes in a variety of flavours including Valencia, Chardonnay, Plum and White Peach. A new brand, Yoicha, was introduced in 2004.

The group also produces a selection of sho-chu distilled grain-based spirits including Kirin Mugi Pure Blue. Although traditionally a brewer, Kirin established a joint venture with Seagram in the 1970s to distribute the latter's spirits brands in Japan, and controls domestically produced Robert Brown whisky. Following the break-up of Seagram in 2001, Kirin acquired Four Roses bourbon as well as its US distillery, and introduced its first Kirin-branded Japanese whisky in 2005, Kirin Fuji-Sanroku. For several years, the group also handled various brands including Chivas Regal and Martell on behalf of Pernod-Ricard. That arrangement was cancelled in 2009 and replaced by a new partnership with Diageo, for whom Kirin manages Johnnie Walker locally. Other drinks handled under licence include Franzia Californian boxed wines, and Lanson champagne. Kirin acquired majority control of leading Japanese winery Chateau Mercian in 2007.

Kirin has significant interests elsewhere in Asia Pacific, making it the dominant brewer in the region. During 2009 it acquired the shares it didn't already own in Lion Nathan, one of the two biggest brewers operating in Australia and New Zealand as well as a leading dairy and juice marketer. In 2007, Kirin acquired Australia's leading fruit juice and dairy products marketer, National Foods, for A$2.8bn and strengthened that purchase the following year with the addition of #2 dairy producer, Dairy Farmers, for A$884m. Following the buyout of Lion Nathan, that company and the enlarged National Foods were merged at the end of 2009 as Lion Nathan National Foods. The Nathan tag was subsequently dropped and the company now trades as simply Lion. Revenues for 2015 were A$4.7bn, comprising A$2.7bn from alcoholic beverages and A$2.0bn from dairy & soft drinks.

Also in 2009 it arranged to boost its existing holding in Philippine brewery San Miguel to 48%. In China it controls Kirin Brewery in Zuhai and Daxue in the Dalian region, producing local brands including Haizhu draft beer. Kirin launched Chu-hi Hyoketsu in Shanghai in 2005 through a joint venture with local drinks company Jin Jiang, and also began importing supplies of Kirin Ichiban. In 2015, it acquired majority control of Myanmar Brewery, the dominant brewer in that country. Combined net revenues from Kirin Brewery edged up just under 1% in 2015 to Y415m ($3.4bn).

In summer 2011, Kirin agreed to pay around $2.6bn for a majority stake in Brazilian brewer Schincariol from two of the five family shareholders. However, the deal was challenged by the remaining three shareholders, leading to a court battle. To forestall any such delay, Kirin agreed instead to buy out the remaining family members as well for a further $1.3bn, and as a result has taken full control of the Brazilian company. Renamed Brasil Kirin, it became #3 in that country's substantial beer market behind market leader AmBev and second-placed Petropolis. Brands include Nova Schin and Devassa beers, as well as bottled water, soda and juices. However performance of the business has been weak since it was acquired by Kirin, exacerbated by the sharp downturn in the Brazilian economy. The group took a large impairment against the business in 2015, resulting in a net loss for the group as a whole. Market share was 13% in 2015. As a result of further weak performance in 2016, Kirin finally threw in the towel in early 2017, agreeing to sell its Brazilian subsidiary to Heineken for just Y77bn - around $700m - around a fifth of what it originally paid for the business.

Kirin's profile in more established Western markets is considerably smaller, restricted mainly to Japanese restaurants and specialist retailers. Anheuser-Busch manufactures Kirin beer under license in the US; in the UK it is manufactured and distributed in small quantities by Wells & Young's. In Oct 2016, Kirin dipped a toe directly into the US market for the first time, acquiring a 25% stake in craft beer pioneer Brooklyn Brewery. The business will continue to be run by founder-owners and brothers Eric and Robin Ottaway.

The group has a sizeable soft drinks business in Japan, Kirin Beverage, with brands including the tea-based Nama-cha and Gogo-no-Kocha (or "afternoon tea") ranges, orange-flavoured Kiriri, fortified energy drink Amino Supli and canned coffee Kirin Fire. Kirin owns the local licence for Tropicana, and controls Coca-Cola bottling plants in Japan and in the US (Coca-Cola Bottling Co of Northern New England). In 2002 the group formed a joint venture with Danone and Mitsubishi Corporation to market Volvic mineral water in Japan. It also markets locally produced Kirin Alkali-Ion-no-Mizu ionized alkaline mineral water, and 2006 launch Kirin Nuda sparkling water. The group has also experimented with different types of functional soft drinks, for example, 2012 launch Kirin Mets Cola, which inhibits the absorption of fats from food. The Mets brand has been expanded into other non-cola flavours. Kirin Beverage is now the 4th largest soft drinks marketer in Japan, with volumes of 217m cases, and net revenues of Y372bn ($3.0bn).

There are also international soft drinks operations. In 2011, the group established a joint venture with Chinese drinks company CRE to market soft drinks in that market. Kirin also has a wide variety of non-beverage interests. The group has majority control of Koiwai Dairy Products, which makes a range of yoghurts, milk drinks and cheeses incorporating uniquely Japanese ingredients, while sister company Nagano makes various tomato-based ketchups and other sauces.

Kirin has a substantial pharmaceutical and biotechnology division, which has a long-term licensing agreement with US company Amgen. In 2007, the group agreed to merge the business with the separate publicly quoted pharmaceutical company, Kyowa Hakko. Kirin ended up with majority control of the enlarged business, now known as Kyowa Hakko Kirin. Revenues were Y356bn ($2.9bn) in 2015.

Kirin FoodTech makes seasoning and spices, and there is also a joint venture with Yakult, Kirin Yakult NextStage Company, which develops functional foods such as dietary supplements. The group also has a wide range of agricultural, restaurant, transportation and real estate interests. Kirin is a major supporter of sporting events in Japan, lead sponsor of the national football and Olympic teams.

Financials

For calendar 2015, net revenues (after excise) were Y1,891bn ($15.6bn). A Y110bn ($910m) writeoff against operations in Brazil resulted in a Y47bn ($388m) net loss, the group's first since 1949. Japanese beverages accounted for 54% of revenues, overseas beverage for 28% and pharmaceuticals for 16%. Around 65% of sales were generated in Japan in 2015, and 20% in the rest of the Asia Pacific region. Kirin is linked through inter-company shareholdings and shared history to the Mitsubishi keiretsu or trading group.

In 2009, Kirin announced that it was in preliminary talks to merge with its domestic drinks rival Suntory to create a new giant in alcoholic beverages. Those talks were eventually abandoned without agreement in 2010.

Management

Yoshinori Isozaki was appointed as group president & CEO in 2015. Akihiro Ito is EVP & CFO. Other senior officers include Hiroshi Ogawa (Senior EVP & chief administrative officer), Takayuki Fuse (CEO, Kirin Brewery Company), Kiyoshi Yokoyama (CEO, Mercian) and Hideki Horiguchi (CEO, Kirin Beverage). Seiichi Hashimoto is senior executive officer, marketing & corporate brand management.

Background

Kirin Brewery Company is descended from Japan's first ever brewery. In the 1860s, Japan took the decision to reopen trade with the rest of the world after 200 years of virtual isolation, The country was literally flooded with outsiders seeking to do business. However beer, the staple beverage of westerners, was virtually unknown in Japan. In 1870, William Copeland, a Norwegian-born American, established the Spring Valley Brewery in the trading port of Yokohama to quench the thirst of foreign traders. he was the first entrepreneur who attempted to satisfy this sudden demand on a large-scale basis. But the business was very unpopular with residents, who complained bitterly about the smell, not just from the brewing hops, but also the large quantities of human manure that were used to fertilize the brewery's wheat crop. Worse still, Spring Valley's beer proved to be of poor quality, especially compared to that produced by other breweries set up soon afterwards in the towns of Hokkaido and Osaka.

Copeland gave up in 1885, selling Spring Valley's premises to a group of British and American businessmen. They renamed it The Japan Brewery Company and installed an experienced German brewer to supervise operations. But it still took longer than anticipated to produce an acceptable beer, and a year later the company sought further capital, primarily from Japanese investors. One of these was Yanosuke Iwasaki, younger son of the family behind the fast expanding Mitsubishi trading company. The brewery's efforts finally paid off, and its first beer was introduced in 1888 under the name Kirin, after the mythical Asian creature, part unicorn, part dragon, which still features on the company's packaging.

In the early years of the 20th century, control of the fast-expanding Mitsubishi trading company passed to Hisaya Iwasaki, nephew of Yanosuke. He consolidated many of the family's previous investments, and acquired a controlling shareholding in the Japan Brewery Company, changing its name to that of its increasingly popular beer. Many Japanese were developing a passion for this foreign drink, which was cheaper than traditional sake. However Kirin remained some distance behind the market leader in Japan's beer industry, Dai Nippon Breweries, which had been formed in 1906 by the merger of Kirin's main rivals in Hokkaido and Osaka. The company's position was made even more precarious when its main brewery was destroyed in the great Kanto earthquake of 1923.

Instead Kirin set about acquiring a string of smaller competitors to regain its position. During World War II, beer consumption was severely restricted by the government, but boomed again in the post-war period, especially among Americans stationed in the country. There was also a substantial boost to the business when Dai Nippon was split in two by American regulators, forming what are now the Asahi and Sapporo breweries. This catapulted Kirin into the #1 position for the first time. The company took full advantage of this new status, ramping up its output considerably. In 1954, Kirin Lager officially became Japan's most popular beer, and it retained that position for almost another half-century. In 1960, the company launched Kirin in cans for the first time, and by 1966, Kirin accounted for half of all beer consumed in Japan.

In 1970 the company began to diversify, establishing soft drinks arm Kirin Beverage, as well as a joint venture with Seagram to distribute its spirits brands in Japan. International expansion followed. Kirin acquired Australian malting business Barrett Burston in 1976. In 1987 it acquired soft drinks bottling operations in the US and assigned North American licensing rights for Kirin to Molson. In 1989, it acquired the Hong Kong arm of San Miguel of the Philippines in 1989. European rights were sold in 1992, and in 1996 Kirin was introduced to north-eastern China in partnership with the Snowflake Brewing Company. A year later the group transferred its US license to Anheuser-Busch.

Back home, Kirin was in danger of becoming a victim of its own success. By the late 1970s, Kirin beer had come to dominate the domestic industry, with market share peaking at almost 65% in 1980, having more than doubled since the 1950s. Its reputation as Japan's favourite beer was firmly established but increasingly fragile. A younger generation of Japanese thought of Kirin as their father's and grandfather's tipple and developed a growing preference for the fresher image of arch-rival Asahi, which scored a huge success with their introduction of Asahi Super Dry in 1985. In the space of just five years, Asahi shaved more than 15% off Kirin's market, and the latter's share continued to fall over the course of the 1990s. As a result, Kirin attempted to bolster its position in 1998 with the launch of Tanrei, the first big-name competitor in the previously underdeveloped happoshu segment. It proved successful, stabilising Kirin's share and encouraging other brewers also to jump into this market. However the success of Tanrei only hastened the erosion of Kirin Lager's position, and in 2001 Asahi overtook Kirin as the country's biggest brewer by revenues.

* Archive page for historical reference only. This page is no longer being actively updated *

Last full revision 20th January 2017


All rights reserved © Mind Advertising Ltd 1998-2022