TOKYO -- When its acquisition of whiskey maker Beam is concluded, Suntory Holdings will be in a unique position: a global beverage maker spanning both alcoholic and nonalcoholic drink markets.
Few global companies have powerful brands in both the soft drink and liquor categories. U.S.-based Coca-Cola and PepsiCo devote themselves to soft drinks, while Belgium-based brewing giant Anheuser-Busch InBev and British spirit maker Diageo specializing exclusively in the liquor business.
Nobuhiro Torii, director of Suntory Holdings and president of Suntory Beverage & Food, said the Beam purchase will help the company become a well-balanced supplier with a formidable presence in both spheres. Beam is best known for its Jim Beam brand of bourbon.
The acquisition will also help narrow the steadily growing gap between Suntory's alcohol and nonalcohol sales.
Its soft drink sales first topped those of the liquor unit in 2000 and are now almost twice as large. The Beam deal would reduce the gap to almost nothing. Combined with Beam's sales, the alcohol sales of the Japanese company for 2012 would amount to 874.5 billion yen ($8.3 billion), just under the 984.4 billion yen in nonalcohol sales.
Having Beam, which sells its product in 120 countries through a robust sales network, would also be a big leg up for Suntory in developing markets. An analyst at a Japanese brokerage said that the deal would help Suntory boost its beverage brand visibility around the world. It would also make Suntory one of the few global companies that can cater to the demands of all ages, from small children to the elderly.
Suntory has a well-known knack for coordinating cross-divisional product development and sales promotions. However, creating synergy between liquor and soft drink businesses will be no easy task. Hurdles include not only the difference in business models, but also the obligation to maintain the independence of Suntory Beverage & Food as a listed company.
SBF, the nonalcohol unit of Suntory Holdings, debuted on the first section of the Tokyo Stock Exchange last July, largely to raise funds for mergers and acquisitions that are essential for further growth.
At the time, the TSE made SBF promise it would ensure that its nonlisted parent company would respect its independence from the group. Since then, SBF has been paying close attention to such details as transfer of employees between group companies.
Another price that Suntory will probably have to pay for the Beam acquisition is a downgrade in its credit rating.
Suntory Holdings, which currently has no outstanding loans, announced its plan to borrow 1.4 trillion yen for the deal from Bank of Tokyo-Mitsubishi UFJ. Almost immediately, rating firms started reviewing the company for a possible downgrade due to expectations that its financial position will weaken.
Closer alignment between SBF and its unlisted parent company could become an annoyance for the food and soft drink unit, according to Satoshi Fujiwara, an analyst at Japanese brokerage Nomura Securities, because negative factors such as this may force it to pay out more dividends to assuage the shareholders.
The 1.65 trillion yen deal would also result in drastic changes in relationship with its major domestic competitors, Kirin Holdings and Asahi Group Holdings.
An official at a beverage company said that although the ownership of global brands appeared lucrative, the exorbitant cost put such deals far beyond their reach.
After the deal, Suntory would become the world's third-largest distiller and the largest domestic beverage maker, with sales of more than 2.4 trillion yen per year. When Suntory and Kirin were mulling a merger in 2009, the latter's sales were roughly 800 billion yen larger than those of the former. Negotiations broke down due to disagreement over the ownership ratios of the merged company.