The Kirin brewing group hasn’t even swallowed the rest of Lion Nathan here in Australia and it seems there’s a strong chance that Kirin will merge with rival Japanese beverage group, Suntory, thereby giving Lion Nathan a new owner.
Reports from Tokyo yesterday first hinted, then confirmed that the two Japanese beverage companies were having discussions that could result in a takeover.
Tokyo analysts said the most logical way for the merger to happen would be for the privately-owned Suntory to be taken over by Kirin.
The union with Suntory would create a drinks company with higher sales than Coca Cola and consolidate Kirin’s position as Japan’s top-selling beer maker and a major beverage operator in Asia, especially Australia.
A combined company would have annual sales of around $US41 billion. Coca Cola has sales around $US39 billion.
A merger would also put Kirin and unlisted Suntory on par in revenue terms with US giants Kraft Foods and Pepsico Inc.
In Australia it would control Lion Nathan and around 40% of the beer market, the biggest juice group in Berri, plus the biggest milk company in National Foods-Dairy Farmers.
Suntory distributes its alcohol products here, but last year bought the Fruccor beverage business of Danone of France.
That gave it New Zealand and Australian energy-drink brands Mizone and V.
Any merger would see the Fruccor business, or parts of National Foods Dairy Farmers or Berri either sold off to meet any competition concerns.
The news sent shares of Kirin soaring to a nine-month high, and lifted shares of other brewers amid speculation that a deal would trigger consolidation in the sector with rivals Sapporo and Asahi (the normal market leader) possibly eyeing a merger.
A Suntory spokeswoman said the company is considering various options, and that nothing had been decided, but that a merge was one of these.
The story on the merge was first disclosed by the Nikkei Business Daily.
Some analysts said the deal might not be completed with the companies in their present shape in Japan.
A combined company would control 50% of the market, forcing Sapporo and Asahi to merge their stakes into a similar-sized company.
Driving the deal is the same factor that has seen both companies expand into markets like Australia: the Japanese beer market has shrunk by 15% in the past decade as the beer drinking demographic has aged and shrunk in number.
After falling 3.8% in 2008, the beer market is projected to lose another 1.7% this year.
Kirin makes Ichiban Shibori beer and Kirin Lager, and distributes beers from Heineken NV and Anheuser- Busch InBev NV. Suntory brews Malt’s and Super Magnum Dry and distributes for Carlsberg.
Kirin was Japan’s biggest beer company in the first half of this year, just edging out Asahi Breweries for the first time in three years. Kirin had 37.5% of the beer market, followed by Asahi Breweries Ltd. with 36.9%, Suntory with 12.7% and Sapporo with 12.1%.
Suntory beat Kirin and Asahi for control of Fruccor juice unit and said it was ready to spend another $US2 billion or so on acquisitions outside Japan in beverages..
Suntory is almost wholly owned by its founding family, and they would need a major change of strategy to allow themselves to give up that privacy for life controlling Kirin as a public company.
For Kirin the merger discussions represent a reversal of a policy started three years ago to expand aggressively offshore, with the aim of racking up annual revenues of $US31 billion, with 30% coming from offshore, hence the moves in Australia and the Philippines.
Kirin has spent $US9 billion since 2007 to expand offshore with sales expected to hit $US24 billion in 2010. Around 26% of that would come from outside the country.
Now it wants to expand dramatically inside Japan.
