TOKYO -- Japanese brewer Kirin Holdings is seeking a "swift end" to its alliance with a company affiliated with Myanmar's military, Kirin's CEO said, as protests against the military coup continue to rage in the Southeast Asian country.
"I want to end our relationship with the [Myanmar] military," Kirin President and CEO Yoshinori Isozaki said in an interview with Nikkei on Thursday. "I want to settle it by spring, and definitely within a year."
Kirin said on Feb. 5 that it will terminate the partnership with Myanma Economic Holdings (MEHL), which co-owns two beer joint ventures in Myanmar, Myanmar Brewery and Mandalay Brewery, arguing that the military's actions "were against our standards and Human Rights Policy."
The risk of damage to Kirin's reputation was the biggest factor in the decision, Isozaki said. "Popularity is vital for the beer business. The longer this situation lasts, the more disadvantageous it becomes." He said nobody opposed the decision, which he made shortly after watching footage of the coup on Feb. 1.
Kirin has a 51% stake in both joint ventures, while MEHL owns the remaining 49%. Isozaki revealed that he held the first online meeting after the coup with MEHL chairman and others on Feb. 11, and directly informed them of his intention to terminate the joint ventures.
Kirin is seeking to replace MEHL with a private partner not affiliated with the military. Isozaki said MEHL's initial response to Kirin's declaration was "extremely friendly," but acknowledged that it is still unclear whether MEHL will agree to sell its shares in the joint ventures. "The final decision will be made by the commander-in-chief," he said.
Isozaki also stressed that Kirin intends to continue doing business in Myanmar, but may be forced to exit the country if MEHL does not sell its stake. "Our top priority is to buy stock from them. If we can't do that, we have no choice but to leave Myanmar."
As for a new partner in the event that MEHL agrees to end the two joint ventures, Isozaki suggested that there may be candidates already in mind. "It's not that we don't have any ideas," he said.
Whether Kirin itself will buy the shares will "depend on their valuation," he said, adding that the prices have likely risen since it first invested in the joint ventures because their financial performance is improving.
According to a Kirin disclosure, Myanmar Brewery had 31.8 billion yen ($300 million) in sales and 13.8 billion yen in what Kirin calls normalized operating profit for the year ended December. That amounted to 8.5% of the group's total normalized operating profit, up from 6.8% the previous year.
Myanmar Brewery is the dominant brewer in Myanmar, with its flagship Myanmar Beer brand. Kirin bought a 55% stake in the brewer for $560 million in 2015 to secure a foothold in the country. Later Kirin transferred a 4% stake in Myanmar Brewery to MEHL.
A U.N. mission investigating atrocities against the Rohingya Muslim minority in Myanmar reported in 2019 that doing business with MEHL and Myanmar Economic Corp., another military-owned entity, posed "a high risk of contributing" to human rights violations.
Kirin appointed Deloitte Tohmatsu Financial Advisory to review MEHL's finances and governance, but said in January that the probe was "inconclusive."
Kirin decided in November to suspend all dividend payments from Myanmar Brewery and Mandalay Brewery to shareholders in Kirin and MEHL "in view of a significant lack of visibility regarding the future business environment." The suspension has been in place ever since.
Isozaki defended Kirin's decision to invest in Myanmar in 2015, when the now-ousted civilian leader Aung San Suu Kyi won a democratic election in a landslide. The joint venture was based on an agreement that MEHL would "have no connections with the military, such as weapons," he said. "It should have followed the rules."
Additional reporting by Wataru Suzuki