Japan: Sapporo Holdings 2005 net profit dropped 22 % on falling sales of beer, happoshu

Sapporo Holdings Inc announced on February 17 its net profit in 2005 tumbled nearly 22 pct, hit by tumbling sales of its beers, happoshu, according to AFX. Sapporo posted net profit of 3.6 bln yen last year, down from 4.6 bln in 2004.

Japan has seen an increasing consumer trend towards cheaper 'third-category' beer-tasting beverages, and away from conventional beers and happoshu, which offer higher profit margins.

Data issued by the industry association showed recently that Japanese breweries' shipments of beer in December fell year-on-year, the second straight monthly fall, while shipments of low-malt 'happoshu' fell for the 17th consecutive month.

By way of contrast, shipments of 'third-sector' drinks, which taste like beer but cost less, rose in December, with shipments having increased every month since Sapporo Breweries created the 'third-sector' category in February 2004 by introducing Draft One, a drink that tastes like beer but costs about half as much because it is made from peas and is taxed at a much lower rate.

In 2005, sales of conventional beers fell 2 pct to 37.3 mln cases from a year earlier and sales of happoshu tumbled 30 pct year-on-year to 7.8 mln cases. One case contains 20 633ml bottles. On the other hand, sales of third-sector drinks rose 19 pct to 26 mln cases.

Sapporo, which until last summer had controlled the third sector market, is now seeing its rivals catch up with Kirin Brewery, now having the No 1 brand in this segment.

As a result of tumbling sales of beers and happoshu and declining profit margins on its third-sector products, overall revenue last year fell 8.3 pct to 453.7 bln yen and operating profit dropped 56 pct to 10.3 bln.

Assuming sales of the third-sector beverages grow 21 pct this year, Sapporo forecast a 10 pct rise in net profit to 4.0 bln yen and a 63 pct increase in operating profit to 16.8 bln yen with a 2.5 pct gain in sales to 465 bln yen.

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