Japanese multinational beverage firm, Kirin Holdings Co., has recently agreed to divest 40 per cent equity in China Resources Kirin Beverages – a joint venture company in China – to Plateau Consumer for $994 million.
Given Kirin’s renewed focus on the profit margins, the divestment comes as no surprise, especially as the Chinese non-alcoholic beverages market is headed for a significant slowdown, GlobalData found.
“According to GlobalData, the soft drinks sector (including bulk/HOD drinks) will continue to expand from $145.8 billion in 2021 to $203 billion by 2026,” GlobalData consumer analyst Bobby Verghese said.
“However, the growth pace will slow down considerably over the period. Besides reducing its business risk, the exit from the Chinese soft drinks market will allow Kirin Holdings to shift its resources to more high-margin businesses, and perhaps return once market conditions improve.”
In 2011, Kirin Holdings established a joint venture with China Resources, a business conglomerate based in Hong Kong, to manufacture and sell non-alcoholic beverages in China. However, following the massive upheaval caused by the COVID-19 pandemic, corporates, including Kirin Holdings, are realigning their business operations to the “new normal” to increase profit margins.
This aligns with a recent corporate report released by Kirin Holdings, wherein the company management outlined a new management plan to streamline its global operations to boost profitability through 2024. The company plans to focus on 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 labour shortages,” Verghese said.
“Corporate managements are going back to the drawing board, revamping business models and operations to ensure survival in the new normal. 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.”