Suntory pulls back on acquisitions

Suntory Holdings has its sights set on joining the giants of the industry but will be patient about getting there, president Takeshi Niinami says in an interview with the Wall Street Journal.

“Nestlé, Unilever – we want to be one of those in the global market,” says Mr Niinami, who last year became the first outsider to lead family-controlled Japanese beverage giant.

For the next three years or so, Suntory plans to focus on integrating Beam, the US distiller it acquired last year for $US16 billion. It was the largest acquisition by a Japanese company in 2014.

At Suntory, Mr Niinami, who has an MBA from Harvard Business School and speaks fluent English, says he will promote diversity and understanding of different cultures – concepts that have gained more prominence recently at Japanese corporations.

“That’s a challenge we have to go through,” he says, “and then we will be able to acquire more businesses. Now is the time when we have to train ourselves, and we have to have more muscles as a global player. That’s why I’m here.”

Before joining Suntory, Mr.Niinami held the top job at Lawson,  a Japanese convenience store chain, leading its expansion in overseas markets such as China.

Japan’s shrinking, aging population has led many companies to look overseas for growth, and domestic prospects have been particularly bleak for Japanese consumer-products companies such as Suntory. Domestic whisky consumption peaked in the 1980s.

Mr. Niinami, a private-sector adviser to Prime Minister Shinzo Abe on economic matters, says he is upbeat about Mr Abe’s turnaround plan, dubbed Abenomics. 

He says the government’s pressure on employers to raise wages should eventually lead to more consumption. And if more women enter the workforce, as Mr Abe wants, it could increase demand for Suntory drinks because drinking in Japan often centres on post-work revelry.

“The society is now reorganised toward creating more of a consumption society,” Mr Niinami says.

Still, he says Suntory isn’t interested in domestic acquisitions. Japan has four major brewers, and two of them – Suntory and Kirin Holdings – discussed a possible merger about five years ago. Those talks foundered over the question of control and Mr Niinami says he has no plans to renew them.

“Domestic consolidation of the beer business is not our interest,” he says.

The Beam deal, which brought the company brands such as Jim Beam and Maker’s Mark bourbon, Courvoisier cognac and Canadian Club whisky, follows Suntory’s acquisition of soft-drink maker Orangina Schweppes Group for about $US3.8 billion in 2009. 

In an earlier foray abroad, Suntory acquired French vineyards such as Château Lagrange, while in New Zealand it acquired Frucor Beverages.

After the Beam deal, the company created a new, wholly owned unit, Beam Suntory, to house the newly acquired liquor brands, as well as Suntory’s existing Japanese whiskies. It has set a goal of more than tripling sales of Jim Beam bourbon in Japan, to 800,000 cases, by 2020. 

A separate, publicly listed unit contains Suntory soft drinks and foods.

With an estimated ¥2.4 trillion ($27 billion) in revenue in 2014, Suntory Holdings is about one-third the size of Unilever and less than a quarter the size of Nestlé.