Kirin Holdings to expand to health care space as beer business loses momentum

JAPAN – Kirin Holdings, Japan’s second-largest brewer, is eyeing the health care space in order to reduce its reliance on beer which may be forced to accommodate a set of new regulations.

The company said the plan is an aftermath of an announcement made by the World Health Organization (WHO) in May.

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The United Nations agency responsible for international public health revealed that excessive use of alcohol kills 3 million people worldwide each year, about one every 10 seconds, accounting for roughly 5% of all deaths.

As of that finding, WHO called for stricter rules on digital marketing that companies use to promote their products across borders and urged governments to set higher prices to discourage alcohol beverage drinking.

As much as Kirin is expanding to the health care sector to be able to remain profitable during the call for increased regulations, its bigger rivals like AB InBev and Asahi Group Holdings, are making swift moves in the alcohol space.

The companies are doubling down on alcohol and investing in higher-end businesses like craft beers.

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Takeshi Minakata, head of the health science business at Tokyo-based Kirin said: “I feel that more regulations are to come, and the future of the beer business will probably be very difficult.

There is a certain risk to continue to rely on the alcohol industry forever, that the reason the shift is very necessary.”

He added that the company is in the progress to invest resources that will enable the establishment and growth of the health care business as its next area but acknowledged that it may take time.

Kirin aims to generate ¥500 billion (US$3.8 billion) in health care sales over the next decade by starting contract manufacturing for pharmaceutical ingredients and expanding its food additives and supplement operations.

The company has also allocated a budget of ¥200 billion (US$1.52B) for the merger and acquisitions(M&A) and has an option of borrowing if need be to facilitate the move.

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Kirin said it is interested in buying businesses to boost Kirin’s presence in North America and Southeast Asia, as well as mail order businesses overseas.

The company is also seeking to collaborate more with Fancl, which sells skincare products and dietary supplements, in which it bought a 33% stake for ¥129 billion (US$0.98B) in 2019.

The brewer expects the expansion will enable it to generate ¥200 billion from the sale of nutrients such as lactic acid bacteria to boost immunity, citicoline to help brain function, and human milk oligosaccharides for baby formula

In addition, Drug ingredients will contribute ¥100 billion (US$0.76B), while another ¥200 billion in sales will come from acquisitions.

Accordingly, Global Newswire, a marketing research firm, projects the global dietary supplement market to grow by a CAGR of 8.9% to reach US$307 billion from 2022 to 2026.

The company is confident about its prospects in the dietary supplements business, where the market is growing, and products are made with the fermentation technology that Kirin has long cultivated through making beer.

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