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Sapporo Holdings Ltd., the nation’s fourth-largest brewer by volume, intends to increase beer production as much as fivefold in Vietnam by 2019 as a shrinking population at home crimps demand.

Sapporo, which started brewing beer in Vietnam last month, plans to boost annual output to as much as 200,000 kl from 40,000 kl in 2014, Yoshiyuki Mochida, president of Sapporo International, said in a recent interview in Tokyo.

Japan’s biggest brewers, including Asahi Group Holdings Ltd. and Kirin Holdings Co., plan acquisitions across Southeast Asia to access wider margins after beer shipments slumped in 2010 for a 14th consecutive year. Sapporo will compete with them in Vietnam, where the government estimates that demand for beer will more than double by 2020.

“Vietnam’s business environment is such that you have to knock the competition out before they do,” Mochida said. “If you fall asleep there, your head will be lopped off.”

The Asahi Group has identified targets in Southeast Asia, President Naoki Izumiya said in an interview on Dec. 12. Kirin will “consider corporate tieups and small-scale mergers and acquisitions” in the region, Chief Executive Officer Senji Miyake said Dec. 13.

Sapporo shares were unchanged at the close of trading in Tokyo. They have declined 19 percent this year, trailing the 20 percent slide for the broader Topix index. Asahi has risen 7.6 percent and Kirin has fallen 18 percent.

Sapporo, maker of premium brands such as Yebisu, may decide to open a second factory in Hanoi in 2014, Mochida said. Consumption in Vietnam is forecast to overtake that of Japan by 2020 if current trends continue, he said.

The Southeast Asian nation had a population of 89.6 million at the end of last year that is forecast by the U.S. Census Bureau to increase to 93.4 million by 2014. Japan had 126.8 million people and is forecast to drop to 125.2 million by 2014, data shows.

Demand for beer in Vietnam is expected to rise to 5.8 million kl by 2020 from 2.6 million kl last year, according to the nation’s ministry of industry and trade.

“The beer market for Vietnam is huge and will overtake Japan,” said Hiroshi Saji, a Tokyo-based analyst for Mizuho Securities Co. who recommends buying Sapporo shares. “But the first order of the day is to turn a profit for their overseas operations.”

The push into the region will give the brewers access to markets where some rivals’ operating margins are more than double those of Asahi, Kirin and Sapporo.

Sapporo’s operating margin of 7.1 percent compares with 26.7 percent for the Philippines’ San Miguel Brewery Inc. and 22.4 percent for PT Multi Bintang Indonesia, according to quarterly figures compiled by Bloomberg.

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