Asahi, Japan’s biggest brewer, cuts down on the booze as consumers go teetotal

Atsushi Katsuki, chief executive officer of Asahi Group Holdings. Photo / Getty Images

A growing number of health-conscious consumers rejecting beer, wine and spirits represents “a big opportunity”, said the chief executive of Japan’s biggest brewer, Asahi, who forecast zero- and low-alcohol drinks would generate half of the company’s beverage sales as early as 2040.

Atsushi Katsuki, whose group produces beers including Asahi Super Dry, Peroni Nastro Azzurro and Pilsner Urquell, said the company was planning to expand its line-up of alcohol-free beverages in the United States, one of the world’s biggest drinks markets, through investments in start-ups.

“It’s a big opportunity as long as we can go down the premium path,” Katsuki told the Financial Times. “Among global players, we have a strong advantage since we have capabilities in both beer and alcohol beverages as well as soft drinks.”

Asahi recently outlined an ambitious target to increase the share of beverages with 3.5 per cent alcohol or less from about 10 per cent last year to 20 per cent of its product mix by 2030. Katsuki said he wanted to bring that to half by 2040 or 2050.

The world’s biggest brewers, including Heineken, Budweiser and Guinness, are racing to capitalise on health-conscious, younger consumers. The shift has resulted in consumers drinking less but higher-quality alcohol, or choosing low-alcohol or alcohol-free versions.

Like many of its rivals, the so-called beer-adjacent category is attractive to Asahi since the products have higher margins than soft drinks and non-alcoholic drinks can be more profitable than beer because they do not incur alcohol taxes.

The value of the market for alcohol-free or low-alcohol beers is more than US$13 billion ($21.8b), according to drinks analytics group IWSR. It forecasts the no-alcohol share of the overall alcohol market will grow to nearly 4 per cent by 2027.

Before Katsuki took over as chief executive in 2021, Asahi had spent billions of dollars scooping up European and Australian assets from AB InBev, including Grolsch, Carlton & United Breweries and Fuller’s in Britain. It was ¥1.8 trillion ($19.7b) in debt by December 2020, giving it a net debt-to-earnings before interest, tax, depreciation and amortisation ratio of more than six.

While the group is ready to resume large acquisitions after significantly reducing its debt load, Katsuki said there were no big attractive targets for now and signalled a shift in its merger and acquisition strategy.

In the new category of no- and low-alcohol beverages, he added that the company would invest more in start-ups to gain the technology and capability to produce more beverages in small volumes.

“The US market is the best and biggest market for us, and it’s also the missing piece for us,” Katsuki said, adding that the company wanted to expand sales of its flagship Super Dry brand in the US. “We’ve always said we want to do M&A, but there is currently no target for us.”

Japanese beer consumption has been steadily declining for more than 20 years while the Government has tightened its crackdown on heavy alcohol consumption. In February, the Government released its first guidelines against excessive drinking.

Daiwa Securities analyst Makoto Morita said Asahi was likely trying to generate more cash from its existing business by targeting the premium segment and expanding the higher-margin alcohol-free beverages to prepare for future acquisitions.

“Asahi cannot become a global brand unless it has the American market,” said Morita. “To address this missing piece, M&A will be an effective tool.”

Written by: Kana Inagaki and David Keohane

© Financial Times