Business

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

Kirin will invest about ¥ 100 billion ($ 870 million) in its healthcare and pharmaceutical business over the next three years, with the Japanese brewery shutting down the home-shrinking beer market and thwarting its core business in Asia.

Yushinori Izuzaki, CEO, said in an interview with the Financial Times that the axis was Kirin’s ‘second revolution’ after branching out into drugs in the 1980s.

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

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

Izuzaki added that investors’ growing focus on environmental, social and governmental criteria has increased 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 sector is still healthy,” he added.

Izuzaki said he wants to avoid the fate of Eastman Kodak, the American photography pioneer who filed for bankruptcy in 2012 after focusing on his lucrative analog film and missing out on the digital revolution.

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

As part of a three-year business plan unveiled last month, the company will invest 100 billion yen in research and development or expansion of factories in the health sciences and pharma sectors, and ¥ 80 billion in its beer and beverage business. Mergers and acquisitions can be added to that amount, Izuzaki said.

Izuzaki said he expects health sciences to generate revenues of ¥ 200 billion by 2027 with an operating margin of 15%. This compares with revenues of ¥ 98 billion and operating profit of less than ¥ 500 million of health sciences 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. The American retail group Walmart is set to start selling supplements containing the ingredient.

And Kirin will expand the production of Citicoline, a memory-enhancing supplement sold overseas, by building a new production facility that will operate until 2023.

But activist shareholders have in the past expressed skepticism that Kirin will be able to recover the profits generated from its core business.

Nomura Securities analyst Satoshi Fujiwara said Kirin is capable of moving into health sciences. “However, at present, the contribution to profits from some of the health sciences is very small,” he said. “So, does everyone currently believe in the future potential of this business? I think the reality is that this is not quite the case.”

Kirin also announced this Withdraw from Myanmar, Completes its joint venture with Myanmar’s publicly held military-controlled company Myanmar, following a coup last year. Izuzaki said Kirin will sell all its shares in the venture by the end of June and that the company is sure to find a buyer for its share.

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

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