Tokyo — Asahi Group Holdings, Japan’s largest brewery that acquired almost $11bn in European beer assets, is considering more overseas deals.
"The domestic market is turning out stable cash flow, but we want overseas markets to be our growth engine," the company’s president, Akiyoshi Koji, said on Tuesday.
The company will also decide on options for its minority stake in China’s Tsingtao Brewery in 2017, said Koji. "Ownership without control doesn’t make much sense," he said, referring to the company’s 20% stake in Tsingtao.
Japanese makers of consumer goods such as beer and cigarettes are scrambling to expand overseas as the domestic population shrinks and becomes more elderly.
Asahi is also contending with intensifying competition in its home market, from rival Kirin Holdings and craft beer makers.
Asahi was considering overseas acquisitions as it planned to increase revenue outside of Japan to 33%, up from 24% after its latest purchases were completed, Koji said. The company had targets it was considering, but it might not have the cash to do another large deal before 2020, he added.
Any further deals would come as it digests almost $11bn in deals in 2016 of two groups of SABMiller’s European beer brands, which included the popular Czech beer Pilsner Urquell. SABMiller was taken over by Anheuser-Busch InBev.
Those deals will advance Asahi as Europe’s third-biggest brewer once the latest agreement closes in the first half of 2017. The brewer’s shares have gained 1.1% in 2017. The stock fell 2.9% in 2016, compared with the 1.9% drop in Japan’s benchmark Topix index.
The brewer, whose Super Dry brand is Japan’s best-selling beer, would raise funds for the European deals through corporate bonds or bank loans, Koji said. The company did not plan to issue new shares, he said.
Financing for last year’s deals could push Asahi’s debt to equity ratio above historical levels, said ratings agency R&I, which in December put Asahi on a watch list for a possible downgrade.
Asahi’s expansion plans extend outside of Europe. The Tokyo-based brewer is one of several companies that have registered to buy a stake in Vietnam’s biggest beer maker, Saigon Beer Alcohol Beverage Corporation (Sabeco), according to Sabeco’s CEO. Koji declined to comment on Sabeco.
The Japanese beer market has shrunk for 12 consecutive years. Shipments of beer and near-beer substitutes from the country’s five big brewers fell 2.4% in 2016. Asahi accounted for 39% of the market, while Kirin Holdings had 32%, according to the companies.
"It makes sense to expand outside of Japan, demographics make that the priority here," said Bloomberg Intelligence analyst Duncan Fox.
While Asahi may want to retain a stake in Tsingtao due to future growth in China, it could opt to sell one high-growth asset for another as "there are other Asian assets potentially available, not least in Vietnam", he said.
Bloomberg
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