• Business Series

Business Reboot 4/Beer makers seek to diversify amid societal changes

The Yomiuri Shimbun
Sapporo plans to resume brewing beer at Yebisu Garden Place in Shibuya Ward, Tokyo, seen here on April 12.

After 35 years, beer will be made in Ebisu again.

Sapporo Holdings Ltd. plans to start brewing beer at the Yebisu Garden Place shopping complex in the Ebisu district of Shibuya Ward, Tokyo, by 2023.

Until the 1980s, the company operated a restaurant there next to the JR Yamanote Line, fashioned from a remodeled passenger train car. The freshly brewed beer was a big hit.

The site was originally a beer factory, and both the name of the area and the station come from Sapporo’s Yebisu Beer brand.

“We want to use beer as a starting point to increase the value of real estate through community-building,” Sapporo President Masaki Oga said.

While Sapporo’s signature flavors have won many fans, it has been stuck with only the fourth-largest share of the domestic beer market for at least a decade. Yet the company owns many pieces of prime real estate around the country, such as a commercial building in the Ginza district of Tokyo and the Sapporo Factory commercial facility near Sapporo Station. The firm’s core operating profit comes almost wholly from real estate.

The real estate sector has been hit hard by the novel coronavirus pandemic.

In addition, Yebisu Garden Place, which was once a leading Tokyo hot spot, has changed. The Mitsukoshi Ebisu department store, the facility’s anchor, closed at the end of February. A Life supermarket will take over the location. A floor that used to be filled with brand-name shops will become a space for teleworking.

The difficult business environment “doesn’t change its value as a prime location,” Oga said. “It will be the site of fierce bidding once the pandemic ends.”

Courtesy of Sapporo Holdings Ltd.
Sapporo used to run this restaurant in the Ebisu district of Shibuya Ward, Tokyo, where people could enjoy just-made beer from the brewery that was there.

Interest in sobriety

Non-beer revenue streams are increasing in importance for major beer manufacturers.

Last August, the Consumer Affairs Agency allowed Kirin Holdings Co. to indicate products made with the firm’s proprietary Lactococcus lactis strain Plasma as “supporting the maintenance of immune function in healthy people.” The label is displayed on beverages and yogurt.

The biotechnologically created bacteria was developed from the beer brewing process.

“Sales have gone up since the coronavirus began spreading,” said a spokesperson from Kirin’s marketing department. “People have become more health-conscious.”

Kirin plans to put more resources into its health science domain for products such as health foods.

Company President Yoshinori Isozaki said he wants the sector to grow into a pillar of the company on par with its pharmaceuticals business, which accounts for 30% of profits. The company is also accelerating its retreat from unprofitable businesses, such as in its recent sale of a Brazilian beer company.

Isozaki said he often hears overseas investors say that Kirin should watch out if all its investments are still in alcohol.

Alcohol has certain negative effects on people’s health. It may someday be regulated by the World Health Organization, just as tobacco is. Such concerns are spreading among pension funds and other investors around the world.

The term “sober curious” is used by young people in some Western countries to describe an increasing interest in staying away from alcohol. Refraining from alcohol, even in social situations, is starting to become more apparent.

A sense of urgency is pushing Kirin to diversify as it is too late to transform its business once regulations are enacted.

“Since the pandemic hit, the uncertainty of the business environment has grown,” said Waseda Business School Prof. Akie Iriyama, who studies corporate management. “Companies need to map out a clear strategy for what kind of business sectors they believe will grow.”

Expanding core business

Another strategy is to expand one’s position in the market.

Since 2016, Asahi Group Holdings Ltd. has acquired several overseas beer companies, turning it into the world’s third-largest beer maker. Last year, Asahi invested ¥1.2 trillion, equivalent to half its annual sales, to purchase an Australian beer company.

“The domestic market is shrinking,” said Asahi Chairman Akiyoshi Koji, who pushed for the acquisition as president. “When thinking about the future, diversification or globalization are the only choices.”

Behind the aggressive acquisition strategy is Koji’s belief that because of the nature of the beer industry, a manufacturer has to be of a certain size to take on foreign firms.

The beer industry is reexamining its business structure, as the pandemic has changed the way people interact with alcohol. Understanding this change and figuring out how to deal with it will perhaps determine future growth.