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Investors Jump Aboard as Japan Brewers Pursue Drinkers Overseas

Investors Follow as Japanese Brewers Pursue Drinkers Overseas

(Bloomberg) -- From a small Californian brewery to a 175-year-old Czech pilsner brand, Japanese beermakers are in hot pursuit of more drinkers around the world as their home market languishes.

Kirin Holdings Co. has sought growth by expanding into craft brews, last year purchasing a 24 percent stake in Brooklyn Brewery and boosting its own line of artisan brews. Sapporo Holdings Ltd. scooped up Anchor Steam Brewery this summer in California in a bid to expand its North American footprint. Asahi Group Holdings Ltd. went on an $11 billion buying spree in Europe when it bought several beer brands from Anheuser-Busch InBev in 2016.

Investors Jump Aboard as Japan Brewers Pursue Drinkers Overseas

But even as they pursue overseas expansion, the brewers are still largely domestic businesses, with more than 65 percent of sales coming from the home market. That’s likely to weigh on earnings as all three companies report results this week.

The companies have been grappling with fewer Japanese turning legal drinking age and more-fickle consumer taste buds. Volume of beer and beer-like products shipped locally fell 4.2 percent in the July to September period, the lowest in seven years, according to data compiled from the five biggest beer sellers in Japan. That trend is expected to continue, according to forecasts from Euromonitor.

Investors Jump Aboard as Japan Brewers Pursue Drinkers Overseas

Investors have been focusing on the overseas story, sending shares of Asahi to a record on Friday while Sapporo touched the highest level in almost a decade. Kirin also is trading near its all-time peak.

The upside for Kirin, which reports Tuesday after the market close, stems from “top-line growth in overseas beverage businesses, and contributions to earnings from acquisitions,” Credit Suisse analyst Masashi Mori wrote in an analyst note.

Asahi, Japan’s largest brewer, is also expected to see upside from its deals. It forecast that more than 30 percent of its sales will come from overseas after the completion of its European deals this year, almost double the 16 percent from 2016. Asahi and Sapporo both report earnings on Thursday.

Investors Jump Aboard as Japan Brewers Pursue Drinkers Overseas

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net, Grace Huang in Tokyo at xhuang66@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Jeff Sutherland, Subramaniam Sharma

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