| BUSINESSWEEK ONLINE : MARCH 15, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- INT'L COVER STORY
Sobering News on the Beer Front, Too (int'l edition) Every December, as business winds down for the year, Japanese companies break out the sushi and beer as a gesture of thanks to their hardworking staff. For Mitsubishi employees, there's no question over what brew to drink. Kirin is the country's largest beermaker and a core member of the Mitsubishi Group. ''It's true that Mitsubishi firms are loyal,'' says Yasuhiro Satoh, president of Tokyo's Kirin Brewery Co. Too bad customers don't share the same allegiance. Like others in the exclusive Mitsubishi club, Kirin is going through difficult times amid a severe economic slump: Its market share has drooped from 50% a decade ago to 40.3%. Kirin is still profitable, earning $225 million last year. But rival Asahi Breweries Ltd. is challenging Kirin for the No. 1 spot, using saucy ads and aggressive distribution for its Super Dry brand. Asahi now has almost 34.2% of the local beer market, up from 24% in 1989. ''Consumers have chosen [Super Dry],'' admits Kirin's Satoh. ''We have to accept this and respond accordingly.'' But the response has been slow to come. Like their counterparts at other Mitsubishi companies, Kirin's managers had grown complacent. After all, Kirin has been a market leader from its start in 1870. It took pressure from antitrust regulators to open up the beer market in the 1970s when it had a 70% market share. Even so, Kirin assumed it would always be No. 1. ''Kirin acted like a feudal lord,'' says Yoko Fujii, beverage analyst at Jardine Fleming Securities (Asia) Ltd. A desperate Asahi moved to take advantage of Kirin's shortcomings. After nearly going out of business in 1985, Asahi commissioned market studies that showed young Japanese, tired of Kirin's bitter lager, based on a 110-year-old formula, were craving a lighter tipple. In 1987, Asahi launched Super Dry and scored a perfect hit. Asahi also figured that consumers preferred to buy their beer in cans rather than Kirin's heavy glass bottles. While Kirin continued to cater to mom-and-pop retailers, Asahi sold directly to discount retailers who were fast gaining popularity. Asahi also developed a strong brand image with clever TV ads featuring sports. SHELL GAME. Kirin's conservative leadership gets the blame for its decline. In 1990, a marketing team developed a lighter beer, Ichiban Shibori, that proved popular with Tokyo consumers. When they tried to market the beer nationwide, top executives blocked the move for fear that Ichiban might dilute Kirin Lager's franchise as top brand. They even told sales staff to fill restaurant orders for the new brand with Kirin Lager instead. Satoh, 63, is now trying to repair the damage. Since taking over in 1996, he has scythed management ranks and put beer sales directly under his control. He plans to cut costs by $250 million, reducing the 8,000-person workforce by 1,100 over the next three years. He closed two breweries in August and will shut a third this year. Kirin finally has a hit product: its budget-priced low-malt Tanrei has captured more than 60% of the market for the new type of beer. But Asahi is fighting back with a new light beer. So Satoh needs to run fast to keep Kirin on top. By Irene M. Kunii in Tokyo _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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