Asahi Breweries, Ltd.

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Asahi Breweries, Ltd.

23-1, Azumabashi 1-chome
Sumida-ku, Tokyo 130
Japan
(03) 5608-5112
Fax: (03) 5608-7111
Web site: http://www.mediagalaxy.co.jp/asahibeer/home/homee.htm

Public Company
Incorporated: September 1, 1949
Employees: 4,274
Sales: ¥1.21 trillion (US$10.44 billion) (1996)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto
SICs: 2082 Malt Beverages; 2086 Bottled & Canned Soft Drinks & Carbonated Waters; 2834 Pharmaceutical Preparations; 5812 Eating Places

Asahi Breweries, Ltd. is the second-largest brewer in Japan; its 35 percent share of the Japanese market trails only market leader Kirin Brewery Company, Limited, which holds about a 47 percent share. Asahi also boasts the top-selling beer in its home country, Asahi Super Dry. In addition to its brewery operations—which account for more than 75 percent of the company’s net sales—Asahi also manufactures and markets soft drinks (headed by the flagship Mitsuya Cider) and food products (mainly brewer’s yeast extracts and related products), sells Pharmaceuticals, and runs restaurants. Asahi is very active overseas and has built a network of alliances with such major brewers as Molson and Miller in North America and Bass and Löwenbräu in Europe, as well as making aggressive moves to capture a major share of the emerging market in China.

Early History

The history of Asahi Breweries is linked with that of virtually every other brewery in Japan. The first brewery built by the Japanese was a government enterprise; it was established in the early days of the Meiji restoration on Hokkaido, the northernmost of the islands of Japan. In the 1880s the government sold its Hokkaido brewery to private interests—and thus the Osaka Beer Brewing Company, Japan Beer Brewery Company, Sapporo Brewery, and Nippon Brewing Company all came into being. In 1888 Hiizu Ikuta was sent to Germany by Osaka Beer Brewing Company to study brewing at the famous School of Weihenstephen in Bavaria. He returned the following year and was appointed manager and technical chief of the Suita Brewery, one of the individual breweries controlled by Osaka. Three years later, in 1892, his creation, Asahi Beer, was released for sale.

In 1906 the Osaka Beer Brewing Company, Sapporo Brewery, and Nippon Brewing Company were amalgamated into the Dai Nippon Brewery Co., Ltd. Asahi, now a separate division of the new company, began a long history of producing nonalcoholic beverages as well as beer. Asahi pioneered the soft drink industry in Japan with both Mitsuya Cider and Wilkinson Tansan, a mineral water. Mitsuya Cider was released for sale in 1907, 17 years after Asahi Beer had first been introduced to the market.

Asahi Breweries, Ltd. Formed in 1949

In 1949, as a result of the enactment of the Excessive Economic Power Decentralization Law, Dai Nippon Brewery was divided into two parts—Asahi Breweries, Ltd. and Nippon Breweries, Ltd. In 1951 Asahi introduced Wilkinson Tansan mineral water to the Japanese market. That year also saw the introduction of Japan’s first fruit-flavored soft drink, Bireley’s Orange. In 1958 the company launched a canned version of Asahi Beer, Japan’s first canned beer. Asahi’s first plant exclusively devoted to the production of soft drinks was opened in Kashiwa in 1966. Six years later another Asahi soft drink plant began production in Fukushima. By the mid-1970s soft drink sales accounted for 35 percent of the company’s total sales.

Asahi also enjoyed other kinds of success. Its Central Research Laboratory, charged primarily with quality control, also developed new products, including “Ebios,” a day brewer’s yeast renowned in Japan for its medicinal properties; the company introduced Ebios in 1930 and has been manufacturing it ever since. In 1965 laboratory staff invented the world’s first outdoor fermentation and lagering tank (the “Asahi Tank”); the West German beer plant construction firm of Ziemann soon negotiated with the company for a license to build the tank.

The early 1970s saw Asahi take its first serious moves outside Japan and in the area of importing. In 1971, in a joint venture with Nikka Whiskey Distilling Company, Asahi established Japan International Liquor to import foreign liquors, primarily Scotch whiskeys (Dewars and King George IV). Also in 1971, Asahi was the first Japanese brewery to have its beer produced overseas under license when it concluded a technical assistance agreement with United Breweries of New Guinea, and a brewery was subsequently constructed at Port Moresby. Two years later Asahi began to import French and German wine. In January 1986 a technology transfer agreement was reached with the San Miguel Corporation of Indonesia for the local production of Asahi beer. Another technical transfer agreement had previously been reached in 1979 with this same company for the use of Asahi’s automatic beer gauge system for beer fermentation at other plants under San Miguel control. This system had been jointly developed by Asahi and the Toshiba Corporation.

Asahi entered the restaurant business in the early 1980s. Subsidiary companies—Asahi Kyoei and New Asahi— managed more than 100 restaurants in western and eastern Japan, respectively. The company also entered into a joint venture with the American company Pizza Hut to establish Pizza Hut restaurants in Japan.

Market Share Decline Turned Around in the Mid-1980s

In October 1981 Asahi Chemical Industry (despite their similar names, the companies were not previously related) acquired 22 million shares of Asahi Brewery. An agreement was concluded between the two companies concerning relations involving personnel, technology, and sales. Asahi Chemical eventually held about 10 percent of Asahi stock, making it one of the brewer’s ten largest shareholders.

Another of Asahi’s important shareholders at this time was the Sumitomo Group, which held about a 12 percent stake. Over the preceding decades, Asahi’s share of the Japanese beer market had declined significantly, from a peak of 36 percent in 1949 to 10 percent in 1981. Among Japanese brewers, Asahi was a distant third, trailing both Kirin and Sapporo Breweries Ltd. Executives at Sumitomo Bank had been placed into the president’s office starting in the early 1970s, but they were unable to stop the decline. Then in January 1982 another Sumitomo Bank executive, Tsutomu Murai, was sent to Asahi to take over. Murai specialized in turning around troubled companies and had previously helped to rescue Mazda Motor.

Murai began with a reorganization aimed at improving communication between company departments. He then concluded a series of licensing agreements with foreign companies. In 1983 the company entered into an agreement with the Löwenbräu Company of West Germany to produce Löwenbräu Beer under license in Japan. Asahi also gained needed technical know-how by signing contracts with American, British, and German brewers to obtain technology. In 1984 Asahi’s soft drink division concluded an agreement with Schweppes, which led to Asahi manufacturing several Schweppes brands in Japan—Tonic Water, Golden French (an apple and ginger drink), Passion Orange, and Grapefruit Dry. Asahi entered into other partnerships, notably to import foreign beers and wines into Japan. Asahi in 1985 formed a partnership with the Australian wine company Lindemann’s, after which Asahi sold Australian wine under the “My Cellar” brand.

Perhaps most importantly, Murai pushed the company to become more attuned to its customers. One byproduct of this was a renewed attention to quality. Asahi abandoned its policy of buying most of its wheat and hops in Japan, and began to buy the best raw materials available, regardless of cost or origin. The company also made moves to ensure the freshness of its beer, such as having salespeople visit stores where they would throw out any Asahi beer older than three months.

In 1985 Murai ordered a series of market surveys. Of most significance was that 98 percent of the beer drinkers surveyed advised Asahi to change the taste of its beer; consumers said that they wanted a beer that was rich but left no aftertaste, a combination that the company’s technicians said was not chemically possible. Murai insisted that nothing was impossible and Asahi subsequently developed and introduced in 1986 Asahi Draft, a full-bodied beer with a crisp taste. Then in March 1987 Asahi introduced Japan’s first dry beer, Asahi Super Dry, which became a blockbuster hit. Super Dry, a cold-filtered draft beer, contained slightly more alcohol than other Japanese beers—5 percent compared to 4.5 percent—but less sugar and was thus lighter. The brand became particularly popular among younger drinkers and helped Asahi’s market share increase to 17 percent just one year after its introduction.

So successful was Super Dry that Murai had to abandon a planned diversification, which aimed to derive half of the company’s revenue from nonbeer operations. Instead, beer increased in importance, making up 80 percent of sales in 1988.

Company Perspectives:

Established in 1889, Asahi Breweries, Ltd., is Japan’s leading innovator in the beer industry. Asahi Super Dry commands a leading share in Japan’s beer market. Asahi boasts fully integrated production, inventory control, and marketing systems that operate under the Company’s Fresh Management principles to ensure timely supply of products to consumers. Our corporate philosophy is based on meeting the needs and fulfilling the expectations of consumers with products of the highest quality.

Marketing Innovations and Globalization in the Late 1980s and 1990s

By the end of the 1980s Asahi’s market share had surpassed the 20 percent mark and the company leapfrogged Sapporo into second place among Japanese brewers. In addition to the new brands, Asahi’s success in the late 1980s and early 1990s was also attributable to changes in marketing. In Japan, most beer was traditionally sold in small liquor stores by the bottle. Asahi targeted nontraditional customers by producing more of its beer in cans and packaging it in six packs, and by sending the canned beer into supermarkets and convenience stores. The company also became much more aggressive in its pitches to retailers who sold beer. Asahi continued to emphasize the freshness of its product and by 1995 was able to deliver beer to stores just 10 days after brewing. By 1996 Super Dry had dethroned Kirin’s Lager brand from the top spot among Japanese beer brands and the following year Asahi’s overall market share hit 35 percent.

From the late 1980s into the mid-1990s, Asahi continued to be active in importing but at the same time stepped up its export activities. A technological agreement was reached with the U.K.-based Bass Brewers Ltd. in 1988, whereby Asahi began to import the Bass Pale Ale brand. In 1996 the two companies entered into a new agreement which called for Bass to produce and market Asahi Super Dry in the United Kingdom and elsewhere in Europe.

In 1990 Asahi gained further access to manufacturing and marketing channels outside Japan by purchasing a significant stake—which stood at 20 percent in 1992—in Foster’s Brewing Group Ltd., based in Australia and then the fourth-largest beer company in the world. In the succeeding years Asahi expanded its own system of overseas operations so that the purpose of the tie-in with Foster’s grew less important. Asahi consequently reduced its stake, then in mid-1997 sold its remaining 14 percent stake back to Foster’s.

A 1994 license agreement with Molson Breweries brought Super Dry into the Canadian market. Asahi then targeted the two largest beer markets in the world—the United States and China. In 1995 a wide-ranging alliance with the Miller Brewing Company commenced, which initially featured the introduction of the Miller Special brand in Japan—a brand brewed specifically for the Japanese market—and the Super Dry brand in the United States. In September 1996 Asahi and Miller introduced Asahi First Lady, a beer targeted toward women, in Japan and the United States.

On the Chinese front, in 1994 and 1995 Asahi acquired shares in and began managing five Chinese brewing companies in Beijing, Yantai, Hangzhou, Quanzhou, and Jiaxing. Initially four of the companies sold a beer called Asahi Bichu, then in 1997 production and sale of Asahi Super Dry began at two of the breweries. Asahi’s Chinese partners sold 1.5 million cases of beer in 1996 and aimed to double that for 1997.

In addition to growing market share in Japan and an increasing presence in Europe, North America, and China, further proof of the brewer’s resurgence came in 1996 when Asahi posted record net sales, operating income, and net income. In mid-1997 the company finished construction of a new research and development center in Ibaraki Prefecture, and was confidently building its ninth brewery, the Shikoku brewery, which was scheduled to be completed in March 1998. Asahi Breweries seemed certain to remain a leading Japanese brewer and to increase its stature internationally.

Principal Subsidiaries

The Nikka Whisky Distilling Co., Ltd. (58.2%); Asahi Beer Pax Co., Ltd.; Asahi Beer Malt, Ltd. (91.9%); Asahi Beer Winery, Ltd.; Nippon National Seikan Company, Ltd. (51%); Torii Pharmaceutical Co., Ltd. (51%); Asahi Soft Drinks Co., Ltd. (97.2%); Asahi Beer Food, Ltd.; Asahi Beer Pharmaceutical Co., Ltd. (99.7%); Asahi Cargo Service Tokyo, Ltd.; Asahi Cargo Service Nagoya, Ltd.; Asahi Cargo Service Osaka, Ltd.; Asahi Cargo Service Kyushu, Ltd.; Asahi Beer System, Ltd. (75%); New Asahi, Ltd.; Asahi Beer Pizza Studio, Ltd.; Asahi Beer Garden, Ltd. (81.3%); Asahi Beer Restaurant Service, Ltd.; Asahi Beer Real Estate, Ltd.; Asahi Building Management, Ltd.; Asahi Beer Finance Co., Ltd.; Asahi Beer Communications, Ltd.; East Japan Asahi Draft Beer Service, Ltd.; West Japan Asahi Draft Beer Service, Ltd.; Chuo Advertising Shinsha, Inc. (53.3%); Asahi Beer Information System, Ltd.; Asahi Breweries U.S.A., Inc.; Asahi New York, Inc.; Asahi Beer International Holding (Australia) Ltd.; Asahi Beer France S.A.R.L.; Asahi Beer International Finance B.V. (Netherlands); Buckinghamshire Golf Company Limited (U.K.); S.A. du Golf International de Grasse Claux-Amic (France).