Japan’s sober youth gives its brewers a headache

3 minute read

Female customers toast with beer at a restaurant in Tokyo, Japan, August 29, 2017. Picture taken on August 29, 2017. REUTERS/Kim Kyung-Hoon

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HONG KONG, Aug 19 (Reuters Breakingviews) - There’s always a trade-off between improving a country’s health and its national income. Japan’s tax agency, fretting about falling revenue, is trying to plump up receipts by encouraging younger people to drink more alcohol. The move underlines the headache brewers like $18 billion Asahi (2502.T) face in their home market; small wonder boss Atsushi Katsuki is eyeing North America. Yet previous overseas adventures by the beer giant and its rivals can make for sobering reading.

Katsuki told Reuters in an Aug. 18 interview that he would consider buying North American brands or working with start-ups. That makes sense. The maker of Peroni, Victoria Bitter and Asahi Super Dry saw sales at home slip 3% in 2021 while its overseas business grew 18% on a constant currency basis.

Asahi and its compatriots have long struggled with selling more to Japan’s ageing population, a challenge exacerbated by the more recent trend of young people boozing less than their parents. Average alcohol intake per adult has dropped from 100 litres per year in 1995 to 75 litres in 2020.

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That has prompted some regrettable stumbles overseas, especially by Asahi’s rival Kirin (2503.T). The company recently exited a Myanmar joint venture with a military-linked partner after the country’s generals took power in 2021. Write-offs cost it 50 billion yen ($367 million). South America left a similarly sour aftertaste. In 2017 Kirin offloaded its Brazil operations to Heineken (HEIN.AS) for $700 million, after its $3.9 billion 2011 purchase of Schincariol sank under legal wrangles and economic travails.

Asahi is no stranger to dealmaking. Its $11.3 billion purchase of Australia’s Carlton and United Breweries in 2019 is the world’s largest booze deal in the past five years, per Dealogic data. That followed a spree that brought it London’s Fuller’s for $328 million and several of SABMiller’s European brands for $7.8 billion. Digesting those is a work in progress, however, with net debt running at a heady five times EBITDA according to Eikon data.

Katsuki, who took over last year, will hopefully avoid another deal binge. As well as North America, he is keen to push into the rapidly growing non-alcoholic and low-alcohol markets offshore. That would be good for Asahi’s balance sheet, if not for Japan’s boozy tax take.

(Corrects second paragraph to note Asahi’s financial year-end is December, not March.)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


Asahi chief executive Atsushi Katsuki is considering entering the North American market, he told Reuters on Aug. 18.

The $18 billion maker of Asahi Super Dry, Peroni and Grolsch could consider buying brands or working with start-up companies, Katsuki said.

The push comes as Japan’s tax agency has launched a campaign seeking ideas on how it can tempt younger people to drink more and boost an industry hit by the pandemic, an ageing, shrinking population and a general drop in interest in alcohol among younger consumers.

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Editing by Pete Sweeney and Thomas Shum

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Jennifer joined Breakingviews after three years as Reuters’ Asia Finance and Markets Editor. Prior to that, Jenn spent 18 years at the Financial Times covering various aspects of banking, finance and markets in London and New York before her move to Hong Kong in 2012. Jennifer has a BA in History from the University of Exeter and won a Knight-Bagehot fellowship to study at Columbia University, where she earned an MSc in Journalism studying alongside the MBA class.