Feb 24, 2017

Kirin Plans $4.3 Million Joint Venture Takeover of Mandalay Brewery

Japanese beer giant Kirin plans to pur­chase 51 percent of the Mandalay Brewery for around $4.3 million, a move which would con­solidate its position in the Myanmar beer mar­ket, according to a senior executive of Myanmar Brewery Limited.

The purchase would see the brewer take con­trol of Myanmar's oldest brewery through a new joint venture with its cur­rent owners, the military-owned Myanmar Eco­nomic Holdings Limited (MEHL), Hiroshi Fujik­awa, vice chairman of My­anmar Brewery Limited, told Myanmar Business Today.

“We're trying to set up a joint venture... make a new company with MEHL, it's not an acqui­sition,” said Fujikawa. “We've just submitted an application to the Myan­mar Investment Commis­sion so we don't know yet when the date of incorpo­ration would be,”

If the purchase gets ap­proved, Kirin would hold a majority stake in 90 percent of Myanmar's le­gal beer market, but, Fu­jikawa estimates, illegally brewed beer accounts for up to 20 percent of the total market in Myanmar, which puts Kirin's actual market share far lower, he said.

In 2015, Kirin asserted its dominance over oth­er recent international entrants to Myanmar's beer market, Denmark's Carlsberg and the Neth­erlands's Heineken, when it purchased a majority stake in Myanmar's big­gest brewer, Myanmar Brewery Limited.

The $560 million stake in the Myanmar Brewery which produces Myanmar Beer, put Kirin in control of an 80 percent share of the local market.

Just like the ubiquitous Myanmar brew, albeit less popular, Kirin plans to continue producing Mandalay Beer in order to maintain Kirin's “close relationship and good chemistry” with the My­anmar people, said Fuji­kawa.

“We all understand the competition in the beer industry here in Myanmar is becoming more and more tough and fierce be­cause of the new comers. So we're happy to support the Mandalay brand and keep it in the market,” he added.

Considering the rela­tively small size of the in­vestment and Mandalay Brewery's small market share, Kirin hasn't made a short term outlook on possible returns, but re­mains “optimistic”. Kirin plans to operate the two brewery's independently of each other but a merger between the two remains “a possible option” de­pending on time and reg­ulations, he said.

In 2014 Myanmar con­sumed 210,000 kilolitres of beer, about one tenth per-capita of its regional neighbors Thailand and Vietnam. However, Kirin eyes Myanmar as a mar­ket with much potential in the wake of falling sales in Japan, and the immi­nent sale of Kirin's failing Brazilian breweries, ac­quired for $3.4 billion in2011, to rival beer maker Heineken.

“Japan is declining, the market is shrinking, so it's important for Kirin group to have an emerg­ing, high growth market,” said Fujikawa.

Source: Myanmar Business Today