After the rapid rise of sugar free beverage and functional beverage brands, Japan’s old brand Kirin has become less and less popular in China’s beverage market.
Recently, according to sputniknews, the Russian satellite news agency, Kirin holding company of Japan is considering adjusting the beverage business jointly developed with China Resources Group, and does not rule out the possibility of terminating the joint venture.
On January 14, Kirin holdings announced on its official website that although as an option, we are indeed discussing whether to sell our shares in China Resources Kirin, we have not yet made a final decision. Once there are facts that need to be disclosed, an announcement will be made immediately.
“At present, the main product of the joint venture is Yibao. The subsequent introduction of Chinese hot coffee and afternoon milk tea has no obvious advantages in the new brand, and may not be able to achieve the high profit goal of Japanese Kirin.” Marketing expert Tang Li believes.
Foreign media believe that the funds obtained from the termination of the joint venture may also be used to invest in new markets with growth potential. There is also a lot of speculation in the industry about this adjustment. It is believed that the profit margin of ordinary beer and beverage is low and squeezed by large European and American enterprises. Japan Kirin Holdings has to adjust its business, which will change its overseas strategy and invest in high-profit refined beer.
In fact, although China Resources has great ambitions in the beverage track, it is difficult to make a substantive breakthrough except drinking water.
At present, although the “breakup” is in the pending stage, the different business development demands are likely to be an important factor in the future breakup of the two sides.
Japan Kirin + China Resources, failed marriage?
Kirin Group was founded in 1907 and has been growing for more than 100 years. Starting from the beer business, it has expanded its business to the fields of food and beverage, medical treatment and health science.
In 2011, China Resources venture announced that it had signed a joint venture agreement with Kirin company of Japan. The two sides established a joint venture with a share ratio of 60% and 40%, and injected their non-alcoholic beverage business in the Chinese market into the joint venture. China Resources will inject the drinking water brand “Yibao” and Kirin into the joint venture.
However, with this marriage, China Resources has successfully expanded its business boundary.
In recent years, China Resources Yibao has been trying to expand its products in the beverage market. By the end of 2020, the number of SKUs sold by Yibao has increased to 35 on the basis of 2019, and Yibao has successively launched lactic acid bacteria beverage series, honey water series, holiday juice series, flavored tea series, etc.
“Grafted on the R & D capability of Kirin company and the accumulated self owned channel capability for many years, China Resources Yibao has comprehensively enriched the product line and completed the transition from single category to multi category.” Industry insiders believe that.
According to public information, after the establishment of a joint venture between Kirin and China Resources, Kirin has cooperated to launch a series of new products such as afternoon milk tea, hot coffee and magic.
However, due to the failure to overtake uni president, Master Kang, Nestle and other brands in the corner, the afternoon milk tea, fire coffee and other products cooperated by the two after the marriage failed to become popular in the industry, and its core business is still Yibao aquatic products. In April 2015, China Resources venture announced that it would divest 80% of its retail, food and beverage businesses and sell them to the parent company China Resources Group, leaving only the beer business with the strongest profitability and promising prospects. Since then, the name of “China Resources venture” has been officially changed to “China Resources beer”.
According to the data of China Resources, in the first half of 2021, Yibao’s water category revenue increased by nearly 30% year-on-year on the basis of an annual scale of 10 billion, the growth of beverages nearly doubled, and the market share of core water categories also increased by 1 percentage point.
However, the contribution of new beverage products to the revenue of China Resources Yibao is very limited. According to the social responsibility report previously released by China Resources Yibao, the new product sales of China Resources Yibao from 2017 to 2019 were 61.41 million yuan, 86.71 million yuan and 252 million yuan respectively; The total R & D investment is 47 million yuan; The total revenue of the company is 10.035 billion yuan, 10.435 billion yuan and 10.396 billion yuan respectively.
In fact, it is difficult to define the marriage as failure, but it is indeed in a bottleneck period.
According to tianyancha information, at present, China Resources Yibao Qilin beverage (holding) Co., Ltd. has two subsidiaries, namely China Resources Yibao beverage (China) Investment Co., Ltd. and Beijing Feiteng Qilin Beverage Co., Ltd. Among them, Beijing Feiteng Qilin Beverage Co., Ltd. is in the state of cancellation, and two companies under China Resources Yibao beverage (China) Investment Co., Ltd. are also in the state of cancellation.
where will the two sides go after Japan Kirin exits?
At present, an important reason for the breakup of the two sides is the needs of their respective business development.
According to foreign media reports, Kirin holdings of Japan chose to adjust its cooperative relationship with China Resources or related to its profitability. Kirin of Japan has been actively investing in emerging market countries since about 2010, but in 2017 and 2021, it sold beer business in Brazil and beverage business in Australia, and adjusted its overseas business.
For the adjustment method, Kirin holdings may sell its shares to investment funds. The beer business in China will continue to expand, so as to select and concentrate the business.
However, Kirin holdings only said that it had been considering various schemes to optimize the business portfolio and maximize the value for shareholders. “We are indeed discussing whether to sell our shares in China Resources Qilin, but we have not made a final decision yet.”
relevant announcements issued by Kirin Holdings Co., Ltd
There is also a lot of speculation in the industry about this adjustment. It is believed that the profit margin of ordinary beer and beverage is low and squeezed by large European and American enterprises. Japan Kirin Holdings has to adjust its business, which will change its overseas strategy and invest in high-profit refined beer.
From the perspective of the Chinese market, under the wave of high-end beer, the heat of refined beer has increased rapidly. Everbright Securities Company Limited(601788) the research report points out that at present, Beijing, Shanghai and Nanjing are the core cities of refined beer culture, and refined beer is infiltrating second tier cities such as Hangzhou, Wuhan and Xi’an.
Budweiser, China Resources, Yanjing and other brands have increased the size of refined beer. Zhu danpeng, an analyst of China’s food industry, pointed out that at present, there is no national standard for the category of refined beer in China. Nowadays, many enterprises are involved in the upsurge of refined beer category, but on the whole, it has not entered the cycle of prosperous production and marketing.
“In Japan, Kirin Beer maintains a leading share in the low-cost market dominated by new beer and the high-end market dominated by refined beer. It is not surprising to explore the Chinese market.” Tang Li said.
Not only does Kirin need to adjust its business and development strategy, but CR’s delay in breaking through the bottleneck in China’s beverage market has also cast a shadow on this marriage.
The reason why China Resources Yibao chose to cooperate with Kirin was that China Resources Yibao tried to transform from a single bottled water enterprise to a diversified beverage company, but there were many challenges before China Resources Yibao.
For example, the most important competition of China Resources is nongnongshan spring, which is also overweight the beverage market. Nongfu mountain spring has launched new products such as NFC juice, charcoal coffee and plant yogurt. According to the financial report of nongnongshan spring in 2020, the revenue of other products, including soda drinks, aerated flavor drinks, coffee drinks and plant yogurt, was 1.054 billion yuan in 2020, an increase of 135.8% over 2019, accounting for 4.6% of the total revenue in 2020. New products have become the main force for the growth of nongnongshan spring’s revenue and profit in 2020.
In addition to nongnongshan spring, the rise of new brands such as Yuanqi forest also began to reshape the beverage market pattern. China Resources Yibao is facing increasingly fierce competition in the beverage market.
As for whether the business adjustment of Kirin holdings will have an impact on China Resources Yibao beverage business, as of press time, relevant staff of China resources have not replied to this question.
The industry expects that China Resources Yibao’s R & D investment in the beverage market will increase, and the playing method of expanding products in the beverage market will not be changed in the short term.
However, Zhu danpeng previously told reporters that in order for China Resources Yibao to really form two legs for water and drinks, it must make efforts in the marketing system. Relying solely on Yibao’s existing water marketing system is impossible.
