Reuters: Japanese Breweries Seek Production Capacity in North America

Kirin Holdings, parent company of the Lion Little World Beverages platform that includes New Belgium Brewing and Bell’s Brewery in the U.S., is on the hunt for more production capacity in North America to keep up with sales, Reuters reported this week.

“Our craft beer business in North America is on a roll,” CEO Yoshinori Isozaki told Reuters.

The company entered the American craft beer market in 2019 when the Lion Little World Beverages subsidiary struck a deal to acquire Fort Collins, Colorado-based New Belgium, then the country’s fourth largest Brewers Association-defined (BA) independent craft brewery by volume. New Belgium’s output increased +11%, to 1,080,000 barrels in 2021, after the first year under Lion’s umbrella, according to data from the BA. The deal also included San Francisco-based Magnolia Brewing, in which New Belgium had taken an ownership stake.

Last year, Lion announced it would acquire Comstock, Michigan-based Bell’s Brewery, then the seventh largest BA-defined craft brewer by volume.

Year-to-date through November 27, in chain off-premise retailers alone, New Belgium and Bell’s dollar sales increased +15%, to $485.9 million, and case volumes increased +8.4%, according to market research firm IRI. Kirin is projecting +5% growth this year, executives told Reuters.

In 2016, Kirin acquired a 24% stake in the Brooklyn Brewery.

To support its growth, Kirin is “considering buying facilities from other craft brewers that are in the doldrums and have excess capacity,” Reuters wrote.

Production capacity acquisition was at the heart of Japan-based Sapporo Holdings’ deal to acquire Stone Brewing, which was announced in June. The addition of Stone’s bi-coastal facilities will help Sapporo add 360,000 barrels of stateside production by the end of 2024.

Sapporo acquired Anchor Brewing, the San Francisco company largely regarded as the brewery that ushered in the first wave of the craft brewing movement, in 2017 for $85 million.

Kirin and Sapporo aren’t the only Japanese beverage-alcohol companies seeking production opportunities in North America. Both Asahi Group Holdings and Suntory Holdings are “looking to expand their footprint” in the western hemisphere as Japan’s bev-alc market continues to decline.

In the U.S., Suntory subsidiary Beam Suntory has entered a long-term strategic joint venture (JV) with Boston Beer to produce cross-category offerings, such as Twisted Tea-flavored whiskey and Sauza Tequila-branded flavored malt beverages (FMB).

In just two decades, the rate of Japanese consumers in their 20s who considered themselves regular drinkers declined -12.5%, to 7.8% in 2019, down from 20.3% in 1999, according to Reuters. The shift in consumer behavior – particularly among the younger demographic, which is typically an attractive cohort for businesses because they are at the beginning of their lifecycle a bev-alc consumers – has inspired Japanese manufacturers to seek markets abroad.

Japanese manufacturers have several routes to market in North America, Asahi CEO Atsushi Katsuki told Reuters in August. The company, which has no bev-alc subsidiaries in the region, would consider acquiring North American brands or “working with start-up companies,” Reuters reported. They also have the option to grow North American market share of their own brands, as Sapporo plans to do with its acquisition of Stone and its facilities.

To capitalize on the global trend of consumers’ declining interest in alcohol, Asahi intends to promote new product launches in the no- and low-alc segment “aggressively,” Katsuki told Reuters. Asahi has earmarked an investment of about $70 million in the segment by 2025.

In Japan, the non-alcoholic segment has been booming. Kirin’s NA beer sales doubled in the three-month period that ended June 20, compared to the same period last year, Reuters reported. Sapporo’s low- and no-alc beer sales increased +20% in the first half of 2022 compared to 2021.