Japan: Brewers expect better profits thanks to launch of vaccination campaign
Japanese beer makers expect better profits this year as COVID-hit restaurants see demand rising after the country's vaccination campaign takes hold, the Nikkei Asia reported on February 24.
In 2020, the coronavirus pandemic weighed on sales of Japanese brewers from restaurants, bars and others hit hard by social distancing measures.
Asahi Group Holdings' net profits dropped 34.7% in fiscal 2020, as the maker has largely relied on business demand.
Asahi said its beer business in the food service sector will likely recover, with a forecast of 63.7% growth in net profit for fiscal 2021 to 152 billion yen ($1.4 billion).
Japan began vaccinating health workers against the coronavirus last week. Asahi said the campaign will likely help fuel demand.
However, the brewer needs more than this to make up for last year's dive. Under incoming CEO Atsushi Katsuki, the company aims to increase revenue in its alcohol business 4.8% by stimulating home consumption. In response to growing health awareness, Katsuki said the company will focus on healthier options, such as sugar-free low-malt beer and more low-alcohol products.
The shift to remote working has more people drinking at home. Asahi plans to tap this new demand with the launch of a beer dispenser for homes in May.
In contrast to food service-focused Asahi, rival Kirin's beer sales for businesses comprise only about 20% of sales, with the rest coming from housebound consumers. "We've gradually lowered reliance on the [food service industry]," said Kirin President Yoshinori Isozaki. Beer demand from restaurants and bars is fairly stable but has additional overhead, he said, alluding to the weaker brand recognition gained from food service sales as opposed to retail sales, in which the brand is clearly prominent.
But this does not mean Kirin will abandon restaurants and bars. The dispenser will allow the company to focus on the more profitable craft beer market. Kirin also expects restaurant demand to return this year.
Given that the government's vaccination program could take about a year, Kirin wants to focus on home drinkers. The brewer sees its beer dispenser as a key growth driver. The company expects sales to hit 10 billion yen by year-end.
Kirin is also banking on the growth of its health-conscious, products such as sugar- or alcohol-free beer. Overall, the company hopes to see 2021 net income rise 43.2% after its 20.6% growth a year earlier. Kirin has not included in its forecast expected headwinds from Myanmar over the company's military-related joint venture partnership in the country.
While Kirin's overseas business targets Asia and Oceania, spirits maker Suntory Holdings is highly reliant on the U.S. market for international sales. Suntory saw a 28.8% drop in net income last year. For 2021, the unlisted distiller forecasts an increase in net income to 104 billion yen -- up 3.6% from the previous year.
For the domestic market, Suntory President Takeshi Niinami told reporters at this year's earning conference that "the first quarter will be pretty tough, but we see a steady recovery in the second quarter," adding that the company "believes cumulative demand will emerge strongly from around the third quarter," when people start to dine out.
As the pandemic increased public health awareness, Niinami said Suntory plans to roll out beer that targets health-conscious consumers. He also pointed out that Suntory wants to expand retail sales in the suburbs, as "there is a possibility that consumers may continue to eat closer to home, with family and friends."
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