TOKYO, Aug 18 (Reuters) - Kirin Holdings is unable to raise prices on beer and soft drinks without a risk of harming sales, the CEO of Japan’s second-biggest drinks maker said, underscoring the weak consumer sentiment that led to a quarterly contraction in Asia’s second-largest economy.
“Consumer spending remains weak. I think we are still in deflation,” Yoshinori Isozaki, Kirin’s president and chief executive, told Reuters in an interview on Tuesday.
Japan’s economy shrank at an annualised pace of 1.6 percent in April-June as exports slumped and consumers cut back spending, data showed on Monday. Private consumption makes up roughly 60 percent of Japan’s economic activity.
Kirin’s struggle for pricing power means it has to sacrifice profits to regain market share in its home market, where rivals have outpaced it in recent years.
Isozaki said he wants to raise prices of beer, which has not happened since 2008, but competition is intense and consumers are ready to jump to other alcohol drinks. The situation is the same for soft drinks, he said, where there are too many players.
“We need consolidation,” he said.
Isozaki, who took over the reins in March, also said Kirin will undertake a strategic review to decide whether to keep its struggling Brazilian unit after restoring its profitability. He did not give a timeframe for when the review will be done.
Kirin spent about 300 billion yen ($2.4 billion) in 2011 to acquire major Brazilian beer and soft drinks maker Schincariol. But the bet has turned sour as it struggles amid intense competition from rivals, with profits dropping to 1.4 billion yen in 2014 from 13 billion yen in 2012.
“What shall we do after it recovers profitability? We need to review our business portfolio,” Isozaki said. “There are many options. Whether it is better to keep a unit or trade it with others.”
Kirin is interested in raising its 48 percent stake in San Miguel Brewery Inc, a Philippine beer maker, the CEO said. But he added his company is not in talks with its parent San Miguel Corp for such a move now.
Isozaki also said Kirin is considering whether it should set up a specific return-on-equity (ROE) target for the medium-term business plan starting next year. The company is aiming for at least 9 percent ROE for 2018, from about 7 percent it has projected for this year, he said. (Reporting by Taiga Uranaka and Ritsuko Shimizu; Editing by Muralikumar Anantharaman)