Japan & Australia: Asahi continues to expand in Australia with smaller deals and a push into soft drinks

Five years after announcing its acquisition of Australian beer giant Carlton & United Breweries, Japan's Asahi Group Holdings continues to expand in the country with smaller deals and a push into soft drinks, the Nikkei Asia reported on July 23.

CUB is the largest beer maker in Australia, with six domestic breweries and 1,700 employees. A CUB-owned brewery in Melbourne's Abbotsford suburb produces 300 million litres of beer per year - around a fifth of the country's total consumption.

The Abbotsford brewery was established in 1904 by a local beer company before being acquired by CUB in the 1920s. On a recent visit, bottles and cans from such popular brands as Great Northern and Victoria Bitter were streaming out of the machines faster than the eye could follow.

Asahi entered the Australian market in earnest in 2009. In 2019, it agreed to acquire CUB from Belgium's Anheuser-Busch InBev, the world's largest beer company, for 16 billion Australian dollars ($10.8 billion at current rates). The purchase was completed in 2020.

In 2023, Asahi held a 59% share of the Australian midpriced-beer market, according to Statista.

After the acquisition, Asahi focused on improving morale. Australia's beer industry had cut jobs and reduced investment in the 2010s amid poor earnings. Asahi President Atsushi Katsuki promised CUB employees that the company would never be sold and asked them about things they had wanted to do but could not because of cost-cutting measures.

CUB was not the first overseas acquisition that Katsuki was involved in. "I understand the grief of a company that gets bought out," he said. "They wonder when they will be sold again."

"I told them that if it's an investment for long-term growth, let's do it," Katsuki said. "It motivated the people on the ground."

Asahi's Oceania region, which includes Australia, accounted for 24% of its consolidated revenue and around 40% of its core operating profit in 2023. Asahi has found success in marketing strategies like sponsoring rugby and tennis tournaments, which are popular in Australia and that Katsuki says beer matches well with.

Asahi also set up a plastic bottle recycling plant in collaboration with parties including Coca-Cola, increasing recycling rates.

Australia's population of 27 million is around one-fifth of Japan's. It grew 2.4% in the year through June 2023, according to the Australian Bureau of Statistics, in contrast to other major developed countries that continue to decline or stagnate. The population is expected to increase to as much as 45.9 million by 2071, thanks to immigration.

"With a growing population, we can expect healthy economic growth and stable inflation," Katsuki said. "It's also just the right size for an experimental market."

In Japan, by contrast, beer consumption is said to be declining by 1% to 2% per year on the shrinking population.

Asahi will focus on nonalcoholic and low-alcohol drinks going forward, aiming to increase the ratio of such beverages in its sales mix from 10% in 2022 to 20% by 2030. It launched a nonalcoholic version of its flagship Asahi Super Dry beer in Australia in 2023.

The company also aims to expand offerings in premium soft drinks for adults. Jeanie Chen of Morningstar has pointed out that Asahi's strengths lie in both alcoholic and soft drinks and that it has the ability to create innovative products.

Asahi has been repaying debt over the past few years in anticipation of large acquisitions, and it expects net interest-bearing debt to fall to 2.7 times its earnings before interest, taxes, depreciation and amortization this year. But some market analysts say there are no targets.

"Just because our finances have been shored up doesn't mean we have any big deals in the pipeline right now," Katsuki said.

Asahi holds a 20% share of the Australian market for nonalcoholic beverages. Any future big deals might come under scrutiny from the Australian Competition and Consumer Commission.

Against this backdrop, Asahi announced in May that it had acquired luxury gin maker Never Never Distilling, which has around 15 full-time employees and offers mainly 500-milliliter bottles for AU$68 to AU$80. Never Never sells roughly 100,000 bottles per year.

In considering the acquisition, Asahi looked at "whether there are synergies and whether it is beneficial for our premium strategy," Katsuki said.

He hinted at future acquisitions, saying that "we may acquire spirits makers and other companies with unique characteristics that would not run afoul of antitrust laws."

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .