Kirin Holdings Co. Ltd in Beer - World June 2010 Scope of the Report Kirin Holdings - Beer © Euromonitor International Scope • 2009 figures are based on part-year estimates. • All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account. • Alcoholic Drinks coverage: Alcoholic Drinks 235 billion litres RTDs/ Wine Beer Spirits High-strength Cider/perry 27 bn litres 184 bn litres 19 bn litres Premixes 1.5 bn litres 4 bn litres Note: Figures may not add up due to rounding Disclaimer Learn More Much of the information in this briefing is of a statistical To find out more about Euromonitor International's complete nature and, while every attempt has been made to ensure range of business intelligence on industries, countries and accuracy and reliability, Euromonitor International cannot be consumers please visit www.euromonitor.com or contact your held responsible for omissions or errors local Euromonitor International office: Figures in tables and analyses are calculated from London + 44 (0)20 7251 8024 Vilnius +370 5 243 1577 unrounded data and may not sum. Analyses found in the Chicago +1 312 922 1115 Dubai +971 4 372 4363 briefings may not totally reflect the companies’ opinions, Singapore +65 6429 0590 Cape Town +27 21 552 0037 reader discretion is advised Shanghai +86 21 63726288 Santiago +56 2 915 7200 2 Kirin Holdings - Beer © Euromonitor International Strategic Evaluation Competitive Positioning Market Assessment Category and Geographic Opportunities Operations Brand Strategy Recommendations 3 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International Kirin Company Facts Kirin Kirin has looked for overseas expansion Headquarters Tokyo, Japan • Kirin has expanded its presence internationally, particularly in Asia Pacific and Australasia. Major Regional Asia Pacific, Australasia • It has acquired total control of the Australasian brewer Involvement Lion Nathan and has expanded its equity holding in the Category Pilipino brewer San Miguel. It also owns the Four Roses Beer, Wine, Spirits, Soft Drinks, Involvement distillery in the US. World Beer Volume • The company has acquired operations in Australia and 1.9% Share 2009 China in soft drinks and food. Beer Volume Growth • Kirin has stated it intentions to increase its revenues from 47.0% 2009 sources outside Japan, to counteract a declining and highly competitive domestic market. Kirin Beer Volumes 2000-2009 • Kirin also owns Coca-Cola bottler Coca-Cola Bottling 4,000 Company of Northern New England, USA. 3,500 Complete beverage portfolio in Japan • Kirin has operations in beer, soft drinks, wine and spirits 3,000 in Japan. 2,500 • It is also one of several Coca-Cola bottlers in the country. 2,000 • In 2009, Kirin announced that it was forming a joint 1,500 venture with the global spirits producer Diageo in Japan. 1,000 Volume (litres (litres mn) Volume 500 0 4 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International Financial Assessment Kirin Group FY 2009 Financials • Kirin has been hit by the strength of the yen, particularly against the Australian dollar in 2009. The ¥ (bn) (% growth y-on-y) company has substantially increased its exposure in alcoholic drinks, food and beverages since the Sales 2,278.4 (-1.1) acquisition of National Foods and gaining control of the brewer Lion Nathan. Operating Income (after 128.4 (-12.0) • Alcoholic Beverages made up the largest proportion goodwill amortisation) of sales and income in 2009 and should continue to Net Income 49.1 (-38.7) do so. EBITDA 212.8 (-19.6) Sales Breakdown by Segment, ¥ bn, Operating Income (after goodwill 2009 amortization) by Segment, 2009 Yen Other Other bn 11% Alcoholic 3% Pharmace Beverages Pharmace uticals 48% uticals 9% 23% Soft Alcoholic Drinks and Beverages Foods 69% Soft Drinks 5% and Foods 32% Note: This excludes Corporate and Eliminations deductions that in 2009 totalled ¥19.6 bn. 5 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International SWOT - Kirin Operations in Asia Wide Beverage & Food Exposure to the Small Presence in China Pacific Portfolio Japanese Market • Asia Pacific is the fastest • A wide beverage and food • The Japanese market is in • Kirin has operations and growing region for beer. portfolio in Japan and decline with an ageing equity holdings in China Kirin is well placed to Australia could limit the and declining population but these are small. The benefit from this increase impact of a poor being the major factors of dynamic Chinese market with operations and equity performance in its this decline. is set to drive the majority stakes in China and the alcoholic drinks business. of global beer growth. Philippines. Strengths Weaknesses Opportunities Threats Strength of Growth in Consolidation of the Strength of the Yen Competitive Threat Asia Pacific Beer Market • The current strength of • Asia Pacific is expected to • The increasingly • Japan‟s fiercely the Japanese yen against be the largest growing consolidated nature of the competitive market could other currencies in Asia region in absolute volume global beer market could prove an issue if Kirin Pacific and Australasia terms for beer over the limit the number and/or does not keep on gives it greater buying 2009-2014 period. Kirin push up the costs of innovating as well as its power for acquisitions. and its equity holdings are acquisitions. rivals. With other large in a good position to brewers looking for growth expand in the region in in Asia Pacific, it may also their existing and come under threat from potentially new markets. new entrants. 6 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International Kirin Vision 2015 Strategy Plan Overview • Kirin has developed a strategy – Vision 2015 - for the company as a whole, based around three core strategies against three group consolidated targets. • This strategy has been implemented to increase Kirin‟s revenues and profits and to protect it from declining markets and intense competition in its domestic Japanese market. Core Strategies Consolidated Targets: Three targets for entire Implement Kirin group to achieve by 2015 strategies to become an integrated beverage group. Build the health and Overseas functional food sales ratio of business as Achieve ¥3 approximately a new trillion in 30% (sales business sales pillar. excluding Operating (including alcohol tax Internationalise income alcohol tax). and operating the group ratio of ¥2.5 trillion income) over 10% in sales (excluding alcohol tax) 7 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International Driving Growth Through Acquisition Recent Acquisitions • Kirin has acquired several assets and equity stakes since 2006 in several sectors including alcoholic drinks, packaged food and soft drinks in several markets in Asia Pacific and Australasia. These acquisition are to mitigate the declines in its domestic Japanese market and lay foundations for future growth. Non-Alcoholic Drinks Acquisitions • Kyowa Hakko Group – Kirin has acquired a 50.1% stake in Japanese pharmaceutical group in a strategic alliance. Kirin and Kyowa Hakko then merge both companies‟ pharmaceutical companies under the Kyowa Hakko Kirin Group. • Kirin has acquired National Foods from San Miguel Corporation for US$2.52 billion in December 2007. National Foods is a large Australian producer of diary foods and beverages. • Kirin has increased its stake in Shanghai Jinjiang Kirin Beverage & Food, a soft drinks company based in China, from 57.6% to 93%. Alcoholic Drinks Acquisitions • In 2006, Kirin acquired a 50.12% stake in Japanese wine company Mercian Corporation. Mercian is a leading wine and RTDs company and will look after Kirin‟s Japanese wine portfolio, while Kirin will manage Mercian‟s RTDs and shochu operations. • Kirin acquired the Two Dogs RTD brand in Japan from Pernod Ricard Australia in 2006. Kirin had been importing the Two Dogs brand since 1996. • Kirin acquired a 25% stake in brewer Hangzhou Qiandaohu, for US$38.1 million. • Kirin acquired a 49% stake in San Miguel Brewery from parent company San Miguel Corporation for US$1.19 in January 2009. San Miguel is the leading brewer in the Philippines, with a near 90% market share. San Miguel Brewery then acquired its international brewing arm from parent company San Miguel Corporation in December 2009, for US$300 million. The operation has six breweries in China, Hong Kong, Indonesia, Vietnam and Thailand. Kirin swapped a stake in San Miguel's parent company, San Miguel Corporation, for an increased stake in the brewing operation. It is also in the process of acquiring San Miguel‟s spirits business. The parent company San Miguel Corporation still has control of San Miguel Brewery and is currently in the process of divesting several operating units to fund the acquisition and development of new business in power generation, mining and heavy industry, Kirin has deepened its exposure to San Miguel Brewery in the last tranche of divestments. 8 Strategic Evaluation Kirin Holdings - Beer © Euromonitor International Lion Nathan Acquisition • In October 2009, Kirin acquired total control of Lion Nathan, the number two Australasian brewer, for US$2.6 billion. Kirin already held a substantial 46% equity stake in the brewer, which was acquired in 1998. Lion Nathan had operations in Australia, where it was the second ranked brewer with a 41% market share in 2008, and was New Zealand‟s leading brewer, with 52%. Lion Nathan also has a small fine wines, spirits and RTDs business operating in Australasia, including a joint venture with Bacardi for the distribution of its spirits portfolio in Australia. • The acquisition added nearly 940 million litres, equal to a 50 basis points increase in Kirin‟s global market share in beer. At Australasian level this give Kirin a 41.1% market share in 2009 in beer. • In addition, in January 2008, Lion Nathan (then 46% owned by Kirin) purchased J. Boag & Son, a Tasmanian brewer, for US$302.8 million, from San Miguel Corporation, further extending it presence in Australia.