Kirin Divestment Fuelled by Slowdown of Chinese Soft Drinks Market

soft_drinks_decline

Kirin Holdings Co. Ltd., a Japanese multinational beverage company, has decided to divest 40 percent equity in China Resources Kirin Beverages Company Ltd., a joint venture company in China, to the Chinese fund, Plateau Consumer for JPY115 billion. According to GlobalData, a leading data analytics company, the divestment was expected, especially as the Chinese non-alcoholic beverages market experiences a slow-motion deterioration in sales.

Bobby Verghese, Consumer Analyst at GlobalData said statistics showed that although the soft drinks sector (including bulk/HOD drinks) will keep expanding from $145.8bn in 2021 to $203bn by 2026, the rate of increase will decrease significantly over the period. Withdrawing from the Chinese soft drinks market will not only minimize risk, but also enable Kirin Holdings to invest its resources in more profitable businesses, and perhaps return once the market recovers.

bar graph showign slowdwn of chinese soft drink sales

In 2011, Kirin Holdings formed a join venture with 40:60 equity stake with China Resources Enterprises Limited, a corporation based in Hong Kong specializing in the manufacturing and sales of non-alcoholic beverages in China.

Due to the economic burden and constraints imposed by the COVID-19 pandemic, businesses, including Kirin Holdings, are adapting their operations to align with the new normal to boost profitability.

To increase profit margins, Kirin Holdings recently released a corporate report outlining a new management plan to improve the efficiency and effectiveness of its global operations through 2024. The company intends to direct its resources towards selected food and beverages, health science, and pharmaceuticals.

“The pandemic has raised a slew of challenges for multinational consumer packaged goods companies including the seismic shift in consumer preferences, supply chain bottlenecks, and labor shortages. Corporate managements are going back to the drawing board, revamping business models and operations to ensure survival in the new normal,” said Verghese.

“During the transition to the post-COVID-19 scenario, the CPG industry will be abuzz with such mergers and acquisitions, divestments, corporate restructuring, and nearshoring and offshoring activities.”