Asahi to sell stake in local NAB business
Japan’s Asahi Group Holdings said on 2 October 2017 that it plans to divest its interest in a beverage joint venture with Indonesia's Indofood, a unit of Salim Group, to refocus on its core alcohol business.
Asahi said it agreed to sell its stakes in a manufacturing and a distribution company, in which it holds 51 percent and 49 percent respectively. The terms remain to be negotiated. The combined worth of the two companies is reportedly USD 185 million.
Launched in 2012, the joint venture has produced bottled tea and coffee, and absorbed a bottled water business and the local Pepsi bottler. It has struggled for profitability amid intense local competition. In 2016, Indofood CBP’s beverage division reported a small operating loss.
Asahi seems to have returned its focus on its alcohol business after acquiring SABMiller’s central and eastern European beer brands from AB-InBev in 2016. Yet, in June, it announced it wants to sell its stake in China’s Tsingtao. Nothing has come of this yet.
Japanese media argue that Asahi’s intended divestment highlights challenges in Indonesia’s consumer market. Despite a rapidly growing middle class, tight competition and a spending slowdown have all raised obstacles. The local operator of 7-Eleven convenience stores, which totalled 161, shut down operations in June.
The decision came after the franchise struggled to make profit and a nationwide ban on the sale of alcohol at mini markets, introduced in the Muslim-majority country in 2015.
The Indonesian government banned alcoholic beverage sales at 16,000 minimarts and 55,000 other small outlets, which have become popular gathering points for youngsters. Supermarkets, hotels and food outlets are still allowed to sell alcoholic beverages.
Asahi’s decision to pull out from the joint ventures casts uncertainty on Indofood’s bid to diversify from its core instant noodle business. The company dominates the domestic noodle market, which is maturing as consumers move to more protein-based foods. The company is also facing growing competition in its dairy and snack businesses.
