Japan's second-largest beer maker, Kirin Brewery Co Ltd, forecast on January 8 a mild 2% rise in its core sales volume in 2004 and unveiled steps to lessen its reliance on the slumping domestic beer market, according to Reuters. In a new mid-term business plan Kirin projected a 16 % increase in group revenue over the next three years, largely on the back of a popular low-malt beer substitute and overseas markets. The new plan targets 1.86 trillion yen ($17.51 billion) in sales for 2006, compared with an expected 1.61 trillion yen for 2003.

It is also looking to lift its operating margin to 7 % from 5.6 % over the three-year period and raise return on equity to 6 % from 4.2 %. In 2002 Kirin defied waning thirst for beer in Japan to post a 41 percent rise in group net profit by slashing advertising and procurement costs and diversifying its revenue base. But the brewer has forecast net profit to be only flat in 2003 after the industry was hit by an unusually cool summer, a tax increase on the low-malt beer substitute "happoshu" and sluggish consumer spending. "It looks as though the company is moving away from the marketing war that so dominated 2003 and like other brewers is seeking to build its happoshu business," said Nomura Securities analyst Yoshiyasu Okihira.

Kirin was, however, somewhat more optimistic about prospects for the domestic market than rival Asahi Breweries. Kirin expects its combined sales volume of beer and low-malt "happoshu" to rise 2.2 % this year after a 7.6 % slide in 2003, with overall industry sales up 1 %.

Kirin said expanding sales of happoshu, which overtook beer as the favoured evening drink in Japanese household consumption for the first time last year, would be key to growth. "In 2006, happoshu will account for more of our sales volume than beer, comprising around 55 percent compared to 45 percent for beer," President Koichiro Aramaki told a news conference.

Kirin also said it was keen to actively seek additional partners in China, particularly in the northeast, Tianjin and Beijing, and in the rest of Asia. "In China we are looking for partners in the northeast, Tianjin, Beijing and the Guangdong region," President Koichiro Aramaki told a news conference. The company currently produces beer in China through a joint venture with a Taiwanese company in Guangdong and through its 46 %-owned Australian brewer Lion Nathan Ltd, which has factories in Suzhou and Wuxi. It also owns 15 % of San Miguel Corp of the Philippines.

Asahi, Japan's top beer maker, said earlier this week it would invest $384.8 million with trading firm Itochu Corp to set up a beverage joint venture with China's largest instant noodle maker, Tingyi. Asahi projected flat growth this year for its beer and happoshu sales volume, after a 2.6 % fall in 2003, with overall industry volume seen down slightly.

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