ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Asia300

Liquid courage: Asahi and Nissin go it alone in China

Brewer and noodle maker leave partners behind as consumer habits shift

Asahi controls 40% of Japan's beer market, but it is still finding its way overseas.   © Reuters

DALIAN, China -- Asahi Group Holdings has a reputation among investors as a "lion at home, a mouse abroad." The brewer makes Japan's favorite beer of all time -- Asahi Super Dry -- but it lags behind its rivals when it comes to overseas expansion. 

This "mouse," however, is doing something Japanese companies have long feared: going it alone in China.

The country's increasingly discerning consumers are emboldening food and beverage makers like Asahi to expand without relying on local partners. Noodle maker Nissin Foods Holdings is now flying solo, too. While cheap but inferior products ruled the land during China's era of breakneck growth, more shoppers are now willing to pay for quality. 

Asahi announced in mid-December that it was selling its entire stake in Tsingtao Brewery -- some 20% -- to Chinese conglomerate Fosun International and others for about 106 billion yen ($967 million). This severed a relationship between Asahi and Tsingtao that stretched back to the prewar era.

Tsingtao was established in 1903 by German settlers in Qingdao, China, and later acquired by Dai-Nippon Beer Company. After World War II, Dai-Nippon Beer was divided into Asahi and what is now Sapporo Holdings.

Tsingtao came under Chinese ownership in the aftermath of the war.

Asahi in 2009 reacquired a little less than 20% of Tsingtao -- by that point China's second-largest brewery -- in hopes of turning around its struggling beer business in the country. The idea was to use Tsingtao's sales channels to market Super Dry across China, but the relatively small investment in the state-owned company did not deliver the outcomes Asahi was hoping for.

Asahi thinks it can bootstrap its way to bigger success. Sales are on the right track -- Super Dry volume is estimated to have swelled 20% in 2017 -- and the new plan is to focus on China's high-end beer segment using its own channels.

Nissin has a lot in common with Asahi.

Both have best-selling brands in Japan, where they command overwhelming market shares: 50% of the instant noodle market for Nissin, 40% of the beer market for Asahi.

Nissin dominates Japan's instant noodle market and wants to expand in China.   © Reuters

Outside Japan, they are both stragglers, compared with their Japanese counterparts. Nissin is playing catch-up with Toyo Suisan Kaisha and Sanyo Foods in a number of segments. Asahi has not shown the same knack for overseas acquisitions as Kirin Holdings and Suntory Holdings -- hence the "mouse" moniker.

Yet another similarity: Nissin, like Asahi, broke off a partnership in China.

Nissin formed a capital alliance with Jinmailang Foods, the No. 3 player in the country, in 2004 and established a joint venture. It cut the ties in 2015. 

In December, Nissin spun off the Hong Kong unit that handles local and mainland operations for a listing on the Hong Kong Stock Exchange. The funds raised in the listing are to go toward expanding the company's sales network nationwide, beyond Hong Kong and eastern and southern parts of the mainland.

Earnings have been trending up since the year ended December 2014, according to the Hong Kong unit's prospectus. Kiyotaka Ando, the chairman and CEO of the unit, said the progress is "attributable to the experience with Jinmailang." 

The unit is to expand its lineup of relatively pricey products, including Cup Noodles, snacks and cereal. 

Overall, China's instant noodle and beer markets have been shrinking, with few signs that a recovery lies ahead. But cheap, low-quality products are the ones that are really falling out of favor. Pricier but tastier products are gaining ground -- providing a tail wind for the likes of Asahi and Nissin.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends April 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media