ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business

Kirin betting craft beer's novelty can spur growth

Kirin Brewery President Takayuki Fuse, right, with Brooklyn Brewery President Robin Ottaway Wednesday in Tokyo.

TOKYO -- Japan's Kirin Brewery is purchasing a minority stake in a New York craft beer maker, with an eye toward building "character" and eventually coming out ahead in an increasingly mature market.

Kirin, a unit of Kirin Holdings, will acquire a roughly 24.5% stake in Brooklyn Brewery, the Japanese company announced Wednesday. The deal is estimated to be worth a few billion yen (1 billion yen = $9.58 million). "We're partnering with a company that cares about quality, and we seek to fashion a craft beer culture," Kirin President Takayuki Fuse told reporters.

The beer market is shrinking in many countries. However, craft beer remains the sole growth segment due to the fact that small brew houses put out products with an array of unique flavors. Some $22.3 billion worth of craft beer was sold in the U.S. in 2015, a 150% jump from 2011.

Craft beer accounted for over 20% of all beer sales in the U.S. last year. Although the share in Japan wallows at around 1%, Robin Ottaway, Brooklyn Brewery's president, is looking to make the country into the largest craft beer market through the tie-up with Kirin.

The purveyor of Brooklyn Lager, the U.S. brewery's flagship product, was founded in 1988 by Steve Hindy, a former Associated Press reporter. Hindy became hooked on homebrewing while assigned to the Middle East, afterward opening up his own brewery in his hometown of New York. Attentiveness to flavor and locally focused marketing propped up the business, burnishing Hindy's appeal as a beer-lovers' guru.

Half of its shipments are exported. Brooklyn Brewery has many die-hard fans in Europe. That success story struck a deep chord within the Kirin group.

New path

"You have to read this," Kirin Holdings President Yoshinori Isozaki said when recommending Hindy's book "The Craft Beer Revolution" to employees. The insider account describes how a group of homebrewers and microbrewers banded together to turn a small brewery on the verge of dying into a credible threat to Budweiser and other major American brands. That was where Kirin's top management likely got the idea of how to overcome the adversity facing the group.

Kirin Holdings has been looking abroad for new opportunities to counter the shrinking domestic market. The company spent about 300 billion yen purchasing Brazil's second-ranked brewer, a deal which turned sour. That operation led to some 110 billion yen in impairment losses in the fiscal year ended last December. Beer demand had also fallen in Brazil. "There is no point in fighting for market share when the market is shrinking," said Fuse.

One pathway to escaping a war of attrition is to invest in craft beer. As a first step, the Kirin group bought a 30% stake in Yo-Ho Brewing, Japan's largest craft beer maker headquartered in Nagano Prefecture.

Brooklyn Brewery and Kirin already have a deal to produce Brooklyn-brand beers in Japan through a joint venture to be established in January, but they now plan to also develop new craft beers via the venture.

Kirin also expects the craft beer push to have a positive impact on the company's mainstay beer brand. Since May, the brewer has been rolling out versions of Ichiban Shibori tailored to the tastes of each of Japan's 47 prefectures. The marketing idea stemming from the craft beer concept has yielded sales beyond initial expectations. That success is also being replicated in Southeast Asia and other foreign markets.

Now that Anheuser-Busch InBev completed a megamerger with rival SABMiller this week, Kirin finds itself outside the weight class in the fight for global market share. For now, Kirin will shift to boosting its brand appeal through the partnership with Brooklyn Brewery, then gradually expand market share. The slow and steady approach may be the game-changer the Japanese brewery needs to win the global beer race.

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 June 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