Japan: Asahi Group expects to increase profit outside of Japan by 10% a year as from next year

Asahi Group Holdings expects to increase profit outside Japan by about 10% a year beginning in 2019 on the strength of popular European brands it acquired recently, President Akiyoshi Koji told Nikkei.

"Next fiscal year's core operating profit overseas will exceed 100 billion yen [$896 million]," Koji said with confidence.

The Japanese brewer bought Western European operations from Belgium-based Anheuser-Busch InBev in 2016 and followed up with Central and Eastern European operations in 2017, spending a combined 9.85 billion euros ($11.5 billion).

Asahi had generated about a tenth of its core operating profit abroad before these purchases. But this year, profit from overseas will likely account for more than 40%, growing 40% on the year to 95.6 billion yen.

Having gotten an initial bump from the acquisitions themselves, Asahi will see the acquired businesses' growth potential put to the test starting next year.

The company is counting on Italian brand Peroni and Czech brand Pilsner Urquell to drive growth, planning to market them along with its own Asahi Super Dry brand as premium beers. Even though they are priced 20-50% above mass-market offerings, their sales are on the rise thanks to drinkers with discerning tastes.

"Boosting added value that enhances brand appeal will be at the center of our business strategy," Koji said.

The company is considering more acquisitions. "We will carry out 'bolt-on' deals" to develop mid-tier and smaller companies' promising brands via Asahi sales channels, Koji said.

Asahi's growing focus on the overseas market is driven by the lacklustre market at home, where it has hit a ceiling.

The alcoholic-beverage business in Japan logged average annual growth of about 1% between 2013 and 2017, hovering around 120 billion yen in the past few years. Meanwhile, the beer market has been shrinking. Shipments hit a 13th straight record low in 2017 - down 30% from the 1994 peak.

Asahi is now ahead of the competition in tapping markets abroad. Kirin Holdings' overseas profit is projected at just 66 billion yen this year, less than 70% of Asahi's. Kirin is rebuilding its overseas business, having sold off money-losing Brazilian operations, and is considering a sale and other options for its Australian beverage business.

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