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E-Malt.com News article: 4253

Japan: Japan's top three brewers, Asahi Breweries Ltd, Kirin Brewery Co Ltd and Sapporo Holdings Inc, all reported record profits in 2004 and pledged to sustain gains in 2005, benefiting from fresh strategies to deal with the continued decline in demand for conventional beer. According to industry data, shipments of conventional beer fell 1.6 % to 306.55 million cases last year, the eighth straight annual decline. One case holds 20 633-milliliter bottles. The same data showed that shipments of 'happoshu' or beer-like low malt alcohol, the second-category product, dropped 8.1 % to 185.25 million cases, the second consecutive year of decline, according to a statement of AFX-ASIA.

Asahi Breweries, Japan's largest brewer, said it posted a record net profit of 30.6 billion yen for 2004 and a record operating profit of 101.3 bln yen on revenue of 1.44 trln yen, as the nation's top beer brand Super Dry benefited from the hot weather conditions last year. “Sales of our mainstay Super Dry beer increased for the first time in four years,” said Yoshihiro Goto, senior managing director of Asahi Breweries. At Asahi Breweries, the combined sales of its beer and happoshu fell by 100,000 cases to 204.0 million cases in 2005, but sales of high-margin beer rose 0.2 pct to 150.1 million cases.

Sapporo Holdings Inc, Japan's third-largest brewer, posted a record current profit of 18.0 billion yen in 2004, net profit of 4.6 billion yen and operating profit of 23.6 billion yen on revenue of 494.9 billion yen. Because of the continued sluggish sales of conventional beer and weak sales of happoshu, the company launched its Draft One beer-tasting liquor, which falls into the so-called third category.

Third-category products are cheaper than beer and happoshu as they are taxed less because they do not use malt, which is subject to high tax. For example, the top-selling drink in that category, Draft One, introduced last February by Sapporo, is made from peas. Brewers began developing third-category products when sales of happoshu started dropping last year after the government raised taxes on that product. Sapporo's shipments of beer fell 5 pct to 40.2 million cases in 2004 and shipments of happoshu dropped 28 pct to 17.75 million cases. But deliveries of Draft One reached 18.15 million cases in 2004, less than 12 months since it was launched. Sapporo Holdings senior managing director Masaru Fukunaga shrugged off the challenge posed by its rivals Asahi and Kirin in the third category product.

Both Kirin and Asahi will release their own third category liquors this year. “I believe that the entry of Kirin and Asahi will help expand the market for this (third category product) segment and we will benefit from such an expansion as top-brand holder,” Fukunaga said at a news conference. Kirin Brewery, the second-largest brewer, posted record operating profit of 109.4 billion yen in 2004. Net profit of 49.1 bln yen was the second highest it has achieved and current profit of 106.6 billion yen was also the second best on record. Kirin's revenue rose to 1.65 trillion yen from 1.60 trillion yen in 2003. “We managed to post a record-breaking operating performance, thanks to the strength of our diversified group,” Kirin managing director Kazuhiro Sato told a news conference.

Kirin's shipments of its mainstay 'Lagar' brand beers dropped 7.3 pct to 46.9 million cases in 2004, and shipments of 'Tanrei' happoshu declined 1.1 % to 74.7 million cases. “The brisk performance of the beverage business, as well as the pharmaceutical division and the Australian unit Lion Nathan all contributed to the profit growth,” Sato said. And as Kirin is trying to further diversify its revenue base, Kirin recently bought a stake in a Chinese brewer, while allying with CJ Group of South Korea in bidding for the control of Jinro, South Korea's largest producer of blended and distilled beverages. Its rival Asahi has partnered with Lotte Group for the bid.

For 2005, Asahi is projecting net profit of 46 billion yen, current profit of 98 billion yen on revenue of 1.525 trillion yen, all record highs if achieved. Asahi forecast 2005 shipments of 150 million cases of beers, down 0.1 pct from a year earlier, happoshu shipments of 38 million cases, down 29.5 pct, and 22 million cases of third-category liquors.

Kirin is projecting net profit of 50 billion yen, current profit of 112 billion yen and operating profit of 111 billion yen on revenue of 1.695 trillion yen for 2005. Both current and operating profits will be new records, if attained. The company is forecasting shipments of 42.9 million cases of its 'Lagar' brand beers, down 8.5 % and 64.8 million cases of 'Tanrei' happoshu, down 13.3 %. Kirin said it expects to sell 249,000 kiloliters of third category products this year.

Sapporo Holdings is projecting 2005 net profit to grow to 8.0 bln yen but forecast current and operating profit to fall to 16.5 billion yen and 20.8 billion yen, respectively, due to rising marketing costs. Sapporo's Fukunaga said he expects operating and current profits to rise again in 2006 with the company planning active promotion its flagship brands. Sapporo is projecting beer shipments of 38.3 million cases this year, down 5 pct from 2004, 14.7 million cases of happoshu, down 17 pct, and 22 million cases of third category products, up 21 pct.

19 February, 2005

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