Kirin looks beyond beer with $870mn push into healthcare and pharma

Kirin will invest about ¥ 100bn ($ 870mn) in its healthcare and pharmaceutical businesses over the next three years, as the Japanese brewer pushes beyond the shrinking beer market at home and setbacks to its core businesses in Asia.

Yoshinori Isozaki, chief executive, told the Financial Times in an interview that the pivot was Kirin’s “second revolution” after branching out to pharmaceuticals in the 1980s.

“If the beer segment would grow forever, it would have been better for us to focus on it, because making a challenge in a new business is very tough,” he said.

Kirin’s bid to reinvent itself reflects a broader trend among companies dealing with a rapidly aging population in Japan, where the beer market has shrunk by a third from its 1994 peak. The Covid-19 pandemic has also accelerated the shift as people drink less alcohol, experts said.

Isozaki added that investors’ increasing focus on environmental, social and governance criteria had ratcheted up the pressure on the industry due to the social impact of alcohol consumption.

“We want to turn Kirin into a fermentation biotechnology company. We need to grow a new business while the beer segment is still healthy, ”he added.

Isozaki said he wanted to avoid the fate of Eastman Kodak, the US photography pioneer that filed for bankruptcy in 2012 after focusing on its lucrative analogue film and missing out on the digital revolution.

Kirin wants to use the technology of the beer-making process, in which sugars are converted by yeast to alcohol, in its biotech ventures.

Under a three-year business plan unveiled last month, the company will invest ¥ 100bn in research and development or to expand factories in the health science and pharma sectors, and ¥ 80bn in its beer and beverage business. Mergers and acquisitions could be added on top of that amount, Isozaki said.

Isozaki said he expected health sciences to bring in revenues of ¥ 200bn by 2027 with 15 per cent operating margin. This compares with ¥ 98bn of revenues and less than ¥ 500mn of operating profit posted for health science in 2021.

The company also hopes to expand sales of LC-Plasma, a proprietary ingredient found in the company’s health drinks, for beverages and foods produced by other companies. US retail group Walmart is set to start selling supplements containing the ingredient.

And Kirin will expand production of Citicoline, a supplement to improve memory that is sold overseas, by building a new production facility that will be operational by 2023.

But activist shareholders have previously expressed skepticism that Kirin would be able to replicate the profits generated by its core business.

Nomura Securities analyst Satoshi Fujiwara said Kirin was capable of shifting to health sciences. “However, as of now, the contribution to the profits from the health science part is very small,” he said. “So, does everyone right now believe in the future potential of this business? I think the reality is that is not quite the case. ”

Kirin also announced it would withdraw from Myanmar, ending its joint venture with the military-controlled Myanmar Economic Holdings Public Company, following a coup last year. Isozaki said Kirin would sell all of its shares in the venture by the end of June and that the company was confident in finding a buyer for its stake.

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