Japan: Asahi plans further acquisitions after 2022

Asahi Group Holdings, beer market leader in Japan, is planning further acquisition on a global scale after buying Carlton & United Breweries from Australia in July. Akiyoshi Koji, President and COO of the Tokyo-based beer and soft drink company told Bloomberg on Friday that he intends to establish Asahi Super Dry, best selling beer in Japan as an international premium brand at eyelevel with brands like Heineken. As part of the strategy the company could add further geographic hubs to its existing locations in Japan, Europe and Australia, the manager said.

“I’m OK with having four or five geographic hubs; it’s a step by step process,” said Koji. “Once we expanded into the three areas and they are stable, depending on our financial conditions and if there is a good target, we’d expand to the next hub.”

Currently, Asahi’s net debt is more than four times EBITDA. Therefore the focus of the company will be in the next years to bring down this multiple to around three times before continuing its acquisition spree. “Until our balance sheet normalizes I don’t think we can make major investments,” Koji was quoted by Reuters. “Considering our current calculations... that would take until around 2022 to 2023.”

In order to improve its financial ratios Asahi is betting on non-alcoholic beers. Koji sees further growth potential in this segment. “We want to make non-alcohol beers a revenue pillar,” he told Reuters in an interview. The manager believes that Asahi’s strong focus on research and development gives the company a competitive advantage over competitors. “Japanese technology is being used quite a bit among these non-alcohol beers, to make good products,” he said.  According to the manager, sharing know-how was one of the benefits of being an international brewing group, in addition to achieving synergies in procurement and production costs.

For this reason, Koji does not rule out further acquisitions.

In the last years Asahi was always frontrunner for breweries which were split off by AB InBev after the company purchased its direct competitor SABMiller. In 2016, Asahi bought as a first step SABMiller’s former West European business from AB InBev, including the Peroni, Grolsch and Meantime brand families and associated businesses in Italy, the Netherlands, and the UK for EUR 2.55 billion (USD 2.9 bn) on a debt free/cash free basis (inside.beer, 11.10.2016). Shortly later, Asahi also picked up SABMiller’s former East European business including brands and breweries like Pilsner Urquell (Czech Republic), Tyskie and Lech (Poland), Dreher (Hungary), Ursus (Romania) and Topvar (Slovakia) for  EUR 7.3 billion (USD 7.8 bn) (inside.beer, 13.12.2016). Earlier this year Asahi bought Fuller, Smith & Turner (Fuller's), a regional, family-run 300,000 hl brewery, from Chiswick, West London, UK (inside.beer, 5.2.2019). Latest move was the purchase of AB InBev’s Australian unit Carlton & United Breweries at a price of USD 11 billion in July (inside.beer, 19.7.2019). The deal is expected to close in the first quarter of 2020.

Koji said that he intends to grow also Asahi’s food business which currently accounts for only 5 percent of all sales. Extending the geographic reach of its beer business could also help to widen distribution for its food products like freeze-dried miso soup from its subsidiary Amano Foods, the CEO was quoted by Bloomberg.

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