Continuing to navigate a slow-growth global beer market and the emerging area of no-and-low beer, Asahi Group Holdings has made a number of notable moves over the last 12 months, including investment in the US and changes to its production network in Europe.
Just Drinks met Asahi Group Holdings CEO Atsushi Katsuki in London to discuss the Japanese giant’s plans for the US, his take in the outlook for non-alcoholic beer and the Peroni Nastro Azzurro brand owner’s ESG strategy.
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Dean Best (DB): Since we met last year, Asahi has invested twice in the US. In January, the company acquired Wisconsin-based Octopi Brewing. Has production of Asahi Super Dry started yet?
Atsushi Katsuki (AK): The company is a co-packer for other brands. We’re hoping to utilise their lines to start producing Asahi Super Dry, probably at the beginning of next year, or, at the latest, sometime in Q1.
We want to expand our business throughout major cities across the US mainly using Asahi Super Dry. In terms of expanding the US business platform overnight through M&A, we’re not quite seeing any opportunities at the moment, so our plan is to aim for organic growth. That means that it may take some time before we achieve what we want.
DB: Are other brands going to follow after Asahi Super Dry?
AK: At the moment, it’ll be only Asahi Super Dry.
DB: What is your assessment of the outlook for the US beer market? It’s a very mature market, long-term growth is likely to be slow. Why is investing in the US an important strategy for Asahi?
AK: Because we think that the US, in the business of premium beer, is the best and the biggest market in the world. Aside from premium beer, I think that the concern about the future of mainstream beer is probably becoming more pronounced and also I don’t think we can expect much growth in craft beer in the future.
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By GlobalDataDB: January also saw Asahi announce an investment in US non-alc retailer The Zero Proof. You said Asahi isn’t seeing many opportunities for M&A. If Asahi does invest inorganically in the US, will it be smaller deals, minority investments like in The Zero Proof, that are more likely?
AK: I think to answer that question it is probably better for me to explain our business portfolio strategy. So far, we have mainly invested in beer and we have succeeded, so we want to continue to target to expand beer. That core philosophy hasn’t changed.
When we think about the change in consumers, in that they’re becoming more health conscious and also demand is becoming more diverse, we are focusing now on the ‘beer-adjacent’ category. The beer-adjacent category is a category made up of products like non-alcoholic beer, non-alcoholic RTDs and premium, adult soft drinks. Other companies refer to this category as ‘beyond beer’. This category is growing globally today.
We believe that it will continue to grow and I think we have the capability to grow. Looking at all the major global competitors, none of them have both the capabilities of beer, or alcoholic beverages, with soft drinks. We are the only major player in the world who has both of these capabilities. In that sense, I think we are highly unique. I think the fact that we can capitalise on the technology and also expertise in both of these categories is going to be our advantage.
DB: So, it’s fair to say Asahi may accelerate its investment, organically and or inorganically, in what it calls the beer-adjacent category?
AK: I guess we would like to and that is why, last year in San Francisco, we set up a corporate-venture capital [arm] called the Asahi Group Beverages and Innovation, with a view to have more contacts in start-ups in the beer-adjacent category. We are already in talks with a numerous number of start-ups, a few hundred of them, one of which resulted in that Zero Proof deal.
Going forward, we’d like to utilise that corporate venture-capital framework, to continue to be active in investing in start-ups. It could be in the form of taking minority stakes but, yes, I’d like to continue to be proactive. The absolute amount of a return on such investment, on an individual start-up investment, may not result in a huge return but I think the benefit — well, we’re actually investing in these businesses so that we can transfer our technologies or expertise to them and also we can gain, things like maybe their brands, also their agile product development capability and so on. So even if we were to only take a minority stake in these start-ups, I think it will be a mutually beneficial arrangement. That is the shape that we are aiming to achieve.
DB: Speaking about the beer-adjacent category or beyond beer, I guess, therefore, you weren’t surprised to see Carlsberg move for Britvic. Do you think there could be more deals in the drinks industry where a big brewer moves for a large operator in an adjacent category like that?
AK: There was no surprise. It just made me think ‘Okay, maybe Carlsberg is thinking something similar to what we are trying to do.’
DB: Would Asahi make a similar sizeable move in an adjacent category?
AK: Yes, the size of their deal was quite sizeable. If you’re simply asking me whether we can afford to do such a deal, then I think, yes, affordability-wise, we can. But, in reality, if you’re asking me whether there are any sizeable, large-scale opportunities, the answer is not at the moment. There’s nothing right in front of us.
But, for the beer business, if we see any opportunities for bolt-on acquisitions in the markets in which we are already present, then definitely we would like to consider those. Also, in the beer-adjacent categories, if there are opportunities for such investment, we would definitely like to look at those. Those are the types of deals that it is more likely that we will be doing and that we have more visibility.
In the beer business, emerging markets are something that we are also interested in looking at. The important point is whether we can take the risk by expanding into emerging markets. That is something that we have to carefully consider and we are currently doing the research and making careful consideration regarding emerging markets.
DB: Do you expect any of these types of deals in 2025?
AK: It depends on the opportunities, whether we see any attractive business that is an actionable deal. It is not something that we alone can make the decision.
DB: Let’s talk about one particular beer-adjacent area: non-alcoholic and low-alcoholic beer and the progress Asahi is making there. I may have these figures wrong, so tell me if I’m wrong. Group-wide, Asahi wants to have 20% of its sales volumes to be from non- and low-alcohol products by 2030. How is that going?
AK: The progress so far: as of the end of the first half of this year, it was 12.1% [of sales].
DB: What’s your assessment of that progress?
AK: Very happy. In fact, even though that’s the group-wide target, the actual percentage differs vastly from country to country. In Australia, non-alcoholic beer counts for 1%, in the UK it is 5% but, in Japan, it’s 15% [for no-and-low]. In Australia, if we include low-alcoholic beer – like 3.5% alcohol – then, in fact, 26.5% of sales are in low-alcohol. The Europe-wide figure [for non-alcoholic beer] is at 7.7%.
DB: Do you have targets for non-alcoholic beer only?
AK: In Europe, the target is purely on non-alcoholic beer. That 20% target by 2030, in Europe, is purely to do with non-alcohol beer. And in Japan, that 15% that we have today, the majority of that is non-alcoholic beer.
DB: By the time we get to 2030, what’s your best guess about the proportion of products that would be ‘non’ or ‘low’ in the market?
AK: We don’t have any corporate target as such but my gut feeling is for the Asahi group overall, in terms of volume split, I would say the ratio between non-alcoholic versus low-alcohol beverages is two to one. That two-to-one split is what I imagine the market split to be as well.
DB: I know it can vary across markets and it’s hard to predict but, in ten years’ time perhaps, what percentage of global beer sales could be from non-alcoholic products?
AK: I think probably about 20%. This is because all the big players, including Asahi, have already announced their targets. They’re basically saying they want to target 20% of the sales to be non-alcoholic beer, so I’m sure that everybody is making a very proactive move towards that shift.
DB: Do you believe, then, that the growth we’re seeing in no-low alcohol beer at the moment is sustainable? How confident are you in the prospects of this category?
AK: The growth [so far] is to do with the fact that the taste has significantly improved, especially ours [laughs]. If you compare non-alcoholic beer with regular beer, the manufacturing method of non-alcoholic beer, at least the main ones nowadays, use de-alcoholisation processes, so basically it is beer.
From that point of view, I think non-alcoholic beer will continue to grow but the consumer’s preference is becoming more diverse and, especially the younger generation, younger than Gen Z, I don’t think non-alcoholic beer, as is, is going to satisfy them.
There’s research in Japan that shows the population of those people over the age of 20 – 90 million – 20 million people drink every day and another 20 million would only drink once or twice a month. There are 50 million people who either cannot drink or never drink. And research suggests that, amongst Gen Z, the percentage of those people who cannot drink or never would drink is increasing compared to other generations.
But until now, all beer producers have made a mistake. For those 50 million people who cannot or would not drink, we have offered non-alcoholic beer as a value proposition. These people are not familiar with the taste of beer. They don’t want to drink beer.
It wasn’t just beer companies. Spirits, wine makers, they all made the same mistake. Basically, we all produced non-alcoholic versions of products, which are really conventional products. And then wondered why we haven’t succeeded.
DB: So, does that mean brewers like Asahi will be looking to create new flavours and new types of products, look at different consumption occasions?
AK: Yes … we have to create a new value for non-drinkers. That is why we are working to have dialogue with a number of start-ups in the beer-adjacent category so that we can absorb a lot of new ideas. We’re really hopeful for the future of our beer-adjacent category.
DB: Are you looking to invest more in production capacity to meet your targets on no-and-low products?
AK: If you’re asking me purely about production capacity globally, I think we have enough. Of course, in some markets, we don’t, in other markets, we do. If you’re just talking about enough capacity to produce, say, enough volume, then, yes, I think we do. What we don’t have is different capabilities, like the capacity to make a small batch of products or to have a very high-speed product development capability. It is not the production capacity that we don’t have but it has more to do with capability, or maybe the mindset that we need to change.
DB: On Asahi’s production network here in Europe, there have been changes, including the closure of the Meantime brewery in the UK. You’ve also been investing in Hungary at Dreher. Are there plans for more closures or investment projects in Europe?
AK: We intend to, of course, continue to invest in the supply chain but, at the moment, we don’t have any more plans to close any plants. We have made an investment in the Czech Republic and also in Poland. In Poland, we have built a new distribution centre on the site where we have the brewery. When we opened up the new distribution centre, we closed down the smaller one, which was located in the neighbouring area. This kind of small adjustment is something that will be ongoing.
In terms of new investment programmes, we’ll continue to do minor adjustments in the different production lines because, in Europe, we’re seeing some shifts in demand. For example, we’re seeing an increase in the demand for canned drinks. We have to adjust production lines as the demand changes.
DB: And then, while you’re continuously examining your production network, you’ve got your 2040 value chain net-zero target, a big project for the entire company. Scope 3 is the biggest area of emissions for any company. What are the big challenges you’re seeing at the moment as you work to reduce those emissions?
AK: More than 90% of [our] emissions come from Scope 3. Out of Scope 3, around 70% relates to materials and packaging and 20% comes from distribution, both upstream and downstream. If we are to reduce CO2 emissions in materials and distribution, it is unavoidable: we have to have partnerships with our business partners.
And naturally, our business partners are not only doing business with us. They have other business interests. We will make our effort to cut emissions but we need to collaborate with our business partners and ultimately we’ll also have to collaborate with our competitors. Of course, when we collaborate with our competitors, we’ll do so in non-competitive areas and we call them co-creation areas. We are already engaged in dialogue with them and we will continue to expand and strengthen that conversation.
In terms of our primary suppliers, they are part of our Scope 3 but we’re not too worried about reducing the emissions from their primary suppliers because most of them already have a clearly stated target to reduce GHG [emissions].
Recently I was talking to a chief sustainability officer. We came to the conclusion that it is basically agriculture that is the most difficult part. If you’re just thinking about plants or crops, they absorb CO2 so it can offset on the actual farming site but, associated with growing crops, you have to think about water, gases like methane. We were saying that, when you think about GHG the agricultural sector has a very meaningful impact, and that is why, going forward, we have to think about working on co-creation with farmers.
DB: In your meetings with investors this week, to what extent did ESG and environmental sustainability come up? How much priority are Asahi’s investors putting on your actions in ESG?
AK: From 2019 until I think until ‘21, there were a lot of questions regarding ESG and sustainability management. There were meetings where investors in charge of the sustainability side would be present. However, from around ‘22, I think partly because investors have enough trust in our ESG actions, I find that fewer and fewer of them are asking anything specific about ESG.
In the past, investors would say ‘Please make sure that you do enough activities around sustainability.’ More recently, their tone is changing to ‘Okay, Asahi is doing an excellent job when it comes to sustainability. Of course, we don’t want anything that is going to have a negative impact on your business or society but, once you’ve done all that, then, please increase the return to us.’ That’s what we’re hearing.
I think that we must never relax on taking sustainability actions. Absolutely, no. In any year, if the business earnings are rather weak, we mustn’t use sustainability actions as an excuse because it is our responsibility to society and to shareholders to do it.
DB: Do you think consumers care? Do you think it shapes what brands they buy?
AK: To be honest, when we look at research in all countries, if you ask consumers, they will always respond by saying ‘Yes, we do choose the brand that is produced by those companies with an excellent sustainability record.’ In reality, I feel that so far, we haven’t really seen consumer behaviour being dictated by a company’s sustainability actions.
I think that recent trend maybe was affected because of Covid-19 and inflation pressure. Maybe consumers did not really choose a brand based on sustainability. However, we cannot be complacent going forward. I am certain that, amongst young people – and not necessarily young people [but] people driven by ideals – I’m sure those consumers would definitely choose companies and their brands that are working properly on sustainability and social issues. I’m certain that it will change.
