Japan, Tokyo: Kirin Brewery Co., Japan's second-largest beer maker, announced on January 12 it expects its domestic beer sales to rise 2.1% in 2005, boosted by new, low-priced "third-type beers". The brewer, known for its "Lager" beer, said it plans to enter a growing market for third-type beers, currently dominated by Sapporo Holdings Ltd.'s "Draft One", by the spring to counter lower sales of beer and low-malt "happoshu". Kirin aims for overall beer sales in Japan of 181.7 million cases in 2005. One case is equivalent to 12.66 litres.

Without a boost from a new product, Kirin sees a 9 percent fall in its combined sales of beer and happoshu in 2005 after a fall of 2.8 percent in 2004 as the popularity of Draft One -- which uses ingredients such as bean protein and caramel and has a similar taste to beer -- shot up after its February introduction. "We decided to join the (third-type beer) market as we saw it grow to about 5 percent of the overall market last year due to robust demand for Draft One and Suntory's 'Super Blue'," company president Kouichiro Aramaki told a news conference.

Unlisted Suntory Ltd. introduced Super Blue, which is made from happoshu and shochu -- distilled spirit that can be made from sweet potatoes -- in June. Since then it has sold 5.8 million cases of the product, compared with an initial target of 2.37 million.

Like happoshu, third-type brews escape the higher taxes slapped on beer because their ingredients put them in a different classification. Kirin said they generally have similar profit margins to beer but are cheaper because of lower tax.

Kirin expects the overall domestic market for third-type beers to reach 51.6 million cases in 2005, and aims for 19.7 million of that with the help of its new product.

Sapporo sold over 18 million cases of Draft One in 2004 after its launch in February, compared with its initial target of 10 million. The company said on Tuesday it aims to sell 22 million cases of the beer-like drink in 2005.

Top Japanese brewer Asahi Breweries Ltd. last week also revealed plans to enter the market by the summer. Neither Asahi nor Kirin disclosed their new products' prices or ingredients.

Shares in Kirin ended Wednesday down 0.57 percent at 1,048 yen. Tokyo's Nikkei average fell 0.75 percent.

Besides the hot domestic third-type brew market, Kirin has been looking for growth opportunities in overseas markets to make up for slower beer and happoshu sales.

On Monday, it strengthened its alliance with the Philippines' San Miguel Corp., Southeast Asia's largest food and beverage firm, spending $156 million to raise its stake to nearly 20 percent. "Investing in local firms that have already established production and sales systems is the best and least risky way to seek global expansion," said Hitoshi Oshima, Kirin International's chief executive officer. "We hope to raise our stake in San Miguel to the limit of 40 percent eventually."

Kirin also sees China as an important market. Last week, Kirin said it planned to form a wholly owned subsidiary in China to help its advance in the growing market there. An industry group said China became the world's number-one beer producing and consuming country in 2003.

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