JAPAN – Asahi Group Holdings plans to maintain profitability for the next fiscal year by raising prices in line with inflationary trends while keeping a tight lid on costs and Japan’s sober youth trend that is giving brewers a headache.
Chief Executive Officer Atsushi Katsuki explained that the plans to post another increase in profits for the next fiscal year is because of an increased pressure to raise prices by Asahi along with other Japanese retailers for the first time in decades due to economic challenges faced.
The Japanese brewer announced price increases for its Super Dry beer and other beverages for the first time in 14 years in October when consumers will pay 6% to 10% more for beer, Yoichi whiskeys, and other beverages.
Asahi said the price increase is a measure to try and neutralize the high production and transportation cost caused by a weaker yen that is pushing up the costs of imported goods including ingredients such as malt and corn, prices for energy, and raw materials such as aluminum and cardboard.
Even as businesses are straining to cool off the heat of inflation, Katsuki said shoppers in Japan have become accustomed to flat prices since their wage growth has remained relatively stagnant.
Commenting on the global recession, Katsuki acknowledged that while an economic downturn may happen, he was confident that beer sales will keep up at the back of the weak yen which is also helping to boost income brought back from overseas.
In addition, when luxury spending drops off, demand will shift to beers, which is why the company has no reason to fear any recession.
Analysts are projecting, on average, that Asahi’s operating profit will rise 15% to ¥245 billion (US$1.8 billion) for the next fiscal year that will begin in April of 2023 while in the current period through March, they are predicting zero profit growth.
For the nascent category of lower-alcohol drinks, which consumers have embraced in Japan and Asia, Katsuki said Asahi plans to boost sales to 15% of global sales, up from the current 10%.
To realize its full growth and profitability, the beverage giant is considering full-scale entry into the North American market, where it has no alcohol production subsidiaries.
The Tokyo-based beer maker is considering the move after pausing major acquisitions in the past couple of years to pay down debts acquired in buying sprees in Europe and Australia.
The company is considering brand acquisitions or working with startup companies in the region to have a stake in the market that it describes to enable it to earn “slight” revenue in financial books.
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