Asahi Breweries
Introduction
Asahi Breweries is Japanese beer producer with a long history of operations since 1949. Prior to 1949 Asahi Breweries was a part of Dai Nippon, a large conglomerate of dif-ferent companies. After the defeat in World War II the allied forces forced Dai Nippon and other dominant companies to split. Dai Nippon Breweries was split into Sapporo Breweries and Asahi Breweries in 1949. At the time of split there were three major players in Japanese beer market – Sapporo Breweries, Asahi Breweries, and Kirin Breweries. Each of the brewer-ies roughly occupied about 1/3 of the market share. However in 30 years beer market in Japan has changed. Kirin Breweries was the biggest mover in the market during that period having increased its market share from 25.3 percent in 1949 up to 63.8 percent by 1976. Japanese culture is characterized by conservatism in everything even in beer. Lager beer has been the most popular kind of beer in Japan and by 1980s Kirin’s had used its commanding market share to capitalize on the lager beer and Kirin’s pasteurized lager beer became the industry standard. Asahi breweries in contrast were in a downward spiral – sales have been decreasing, expired inventories became a major problem that led to laying off 550 employees out of total 3200.
Analysis
Asahi Breweries were able to turn things around with the help of revolutionary presi-dents – Tsutomu Murai and Hirotaro Higuchi. Tsutom Murai became a president of Asahi Breweries in 1982. Previously he was an executive vice president at Sumitomo Bank, which was a close partner of Asahi. Under Murai Asashi was able to create and identify the mission and strategy for the company. Murai also created the Corporate Identity Introduction Team and the Total Quality Control Introduction Team. The major goal of those two teams was to improve customer satisfaction and company’s image for the employees and the customers. There was a major breakthrough that took place in 1985 when Corporate Identity team pushed for changing the taste of Asahi beer that would appeal to customers – that is when “Asahi Draft” was born. Higuchi succeeded Murai was a president. His actions that created the difference for Asahi breweries and it made one of the market leaders included following: recalling all of the old inventory, changing raw materials source to more premium malts, spending as much money on advertising and promotion as necessary until operating profit dropped to zero. In 1987 the company introduced a new product to the market which was called “Super Dry”. The new product gave a 33 percent boost to the sales and dry beer be-came a new bestselling beer that everyone tried to copy. Asahi Breweries was facing a deci-sion on whether to invest 230 billion yen into expansion of product capacity. I would defi-nitely support the aggressive expansion plan. There are two reasons for my support of the ex-pansion.
First, Asahi Breweries has been enjoying several years of high growth and market share expansion. The company increased its beer sales by 71.9 percent in 1988 whereas the industry as a whole grew only 7.6 percent. The market share has almost doubled from 10.5 percent in 1986 to 20.6 percent in 1988. So we clearly see that Asahi was growing its market share and taking away sales from its competitors. I think Asahi is in the excellent position to take advantage of the 7.1 percent expected growth in dry beer sector in the next year. According to the case study Asahi has actually suffered from not having sufficient capacity and it has already lost sales because of the capacity constraints. Competition is always there to capitalize on somebody’s capacity problems. Dry beer concept is appealing to the customers especially with old generation of old school beer lovers getting older and drinking less.
The second argument that supports my position is Asahi’s solid financial position. Asahi had low debt-to-equity ratio of 0.29, low current ratio of 1.08 in 1987 meaning that a company has a relatively low level of long term debt and company has a good liquidity. Also Asahi’s CFO commented that most of company’s assets have been undervalued and in reality there are worth of 600-700 billion yen. The company will be able to raise equity to finance the expansion versus turning to debt which another advantage.
I believe company is excellent financial and marketing point in order to increase its capacity and grow their sales. Asahi should capitalize on dry beer segment growth which ul-timately drive the overall sales of the company. To elaborate on my point above – Asahi should build a strong brand identity and loyalty for “Super Dry”. Loyal Asahi customers are likely to remain with Asahi brands even after consumers’ tastes and preferences change granted that Asahi always keep meeting consumers’ need concept in their minds.