Business

NONALCOHOL DRINKS, 'THIRD BEER'

Most breweries report strong first half

Three of Japan’s four largest breweries have reported strong earnings for the first six months of 2004 despite a continued fall in beer sales.

The breweries said cost-cutting, nonalcohol businesses and a new beerlike drink helped overcome a steep drop in “happoshu” sales hit by a tax increase.

Kirin Brewery Co., the country’s largest in terms of sales, said Tuesday its net profit was up 2 percent to 14.23 billion yen, and revenue rose 3.6 percent to 759.45 billion yen.

Operating profit, which excludes extraordinary losses, jumped 19 percent in the first half to 44.87 yen, thanks to the strong performances of nonalcoholic beverages and an overseas subsidiary.

But the maker of Kirin Lager beer and Tanrei happoshu said its domestic beer and happoshu fared poorly during the six months. Happoshu, a low-malt, beerlike beverage, was hit by a tax increase in May 2003.

Kirin’s combined sales of beer and happoshu fell 6.7 percent. Continued growth of its Hyoketsu “chuhai” could not make up for the fall.

But robust earnings of its nonalcohol subsidiary Kirin Beverage Corp. and Lion Nathan Ltd., a brewery that operates in Australia and New Zealand, boosted the company’s profits.

Asahi Breweries Ltd. reported record earnings for the first-half last week, propelled by cost-cutting efforts.

Net profit jumped 87 percent to 15.46 billion yen, while revenue edged up 1.3 percent to 648.11 billion yen.

The maker of Super Dry beer slashed production and distribution costs as well as marketing expenses.

The country’s beer market saw the entry of another beerlike beverage with price appeal. Makers of “the third beer” said consumers are responding.

Sapporo Holdings Ltd. said last week it posted a net profit of 2.85 billion yen, reversing a loss of 13.36 billion yen a year earlier, buoyed by surprisingly strong sales of new beerlike drink Draft One. Revenue was up 4 percent to 224.3 billion yen.

The company, known for its Yebisu beer, has suffered weak sales in recent years. It closed down plants in Saitama and Sapporo last year.

Draft One, released nationwide in February, has proved a smash hit, selling 8 million cases in the first half. Its success prompted the company to revise its initial sales forecast of 10 million cases to 17 million for the full year.

What drives its sales is its low price: A 350-ml can is 20 yen cheaper than regular happoshu due to a lower liquor tax. The beverage cannot be classified as either beer or happoshu because it uses yellow peas instead of malt.

Suntory Ltd. said it is also seeing strong sales of Super Blue, a mix of happoshu and spirits released in late June. The beverage is similarly neither beer nor happoshu.

Unlike its rivals, Suntory’s first-half earnings fell due to higher marketing expenses to promote new products.

Despite a record-breaking hot summer, the breweries kept or even lowered their full-year forecast for beer and happoshu sales.

Kirin revised down its projections for beer and happoshu sales from an initial growth of 2.2 percent to virtually flat from year-before levels. The industry suffered an exceptionally cold summer last year.

“We had very hot days in July, but a drop in the first half was very steep,” Kirin Managing Director Kazuhiro Sato told a news conference. “The tax increase dampened demand and consumers defected to chuhai cocktails and even nonalcohol drinks.”

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