Asahi under pressure to step up acquisitions

Asahi, Japan's biggest brewer, is under pressure to step up acquisitions in an effort to double its overseas business and challenge the dominance of the world's largest beer producers.

Naoki Izumiya, chief executive of the beverage and food conglomerate best known for its Asahi Super Dry beer, told the Financial Times in an interview that size mattered when it comes to global competition.

"The top four companies [Anheuser-Busch InBev, SABMiller, Heineken and Carlsberg] hold about 50 per cent of the total sales and 80 per cent of the world's operating profits," he said. "The size of our group right now, is it big enough to survive? We need to grow our business to a certain size. We need to make efforts to that end, first and foremost."

Though Asahi is Japan's biggest brewer in terms of sales and the fifth-largest in the world, its overseas growth has fallen short of its own expectations.

It has also come under pressure from rival drinks group, Suntory, which joined the big spirits shots in January after its $16bn takeover of US bourbon maker Beam Inc, producer of Jim Beam whiskey.

Mr Izumiya ruled out similar large acquisitions for Asahi, saying he preferred to consolidate domestically and ride growth in Asia with M&A that could attract the interest of the multinational brewers. The group has a 20 per cent stake in China's Tsingtao brewer.

"By having bigger business in Asia, in the ASEAN, we will be able to compete with the global players, maybe to negotiate some strategic alliance," he said. "You can go like Suntory if you buy the big brand with a lot of borrowing. Our strategy may take more time but then we will be able to grow as the market grows."

Asahi's overseas business has doubled over the past two years to Y192bn in 2013 - 11 per cent of total sales - thanks to M&A. But this is well short of the three-year 20-30 per cent target it set itself.

Japan's three biggest brewers have spent more than $30bn since 2006 on foreign acquisitions, but they have yet to reap fully the benefits of the costly purchases.

Kirin, the country's second largest brewer, has taken a break from overseas acquisitions to focus on strengthening those operations. Its 2011 purchase of Schincariol, Brazil's second-largest beer group, has been disappointing with sales in Brazil falling by a third last year.

The size of Asahi's overseas losses doubled between 2011-2013 to an operating loss of Yen4.6bn, due to goodwill writedowns. And the group is bogged down in an acrimonious dispute with New Zealand's Independent Liquor, the beverages group for which it paid NZ$1.5bn in 2012.

Mr Izumiya also cited a dearth of Japanese mangers with international experience and English-language skills as the main barrier to external growth.

"We always have to ask local people to take over, but when the business goes south, unless we have [our own] good people, this may not be immediately grasped by us. And, if I could speak in English fluently without the interpreter, that would be fine - I think in the future we need that."

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