If it’s liquid Kirin will sell it

Wine and beer don’t mix, but they’re part of an increasingly complex cocktail the acquisitive Kirin Holdings is serving up to its shareholders. Australia’s National Foods group, which the Japanese brewer acquired last year for USD 2.4 billion, agreed in August to buy Australia’s Dairy Farmers for USD 790 million. Kirin’s operations now include beer, wine, soft drinks, drugs, milk and cheese, flowers and seeds and real estate.

Apparently, Kirin plans to enlarge its portfolio. It wants to spend USD 2.7 billion on alcohol and soft-drink acquisitions in the Asia-Pacific region through 2012. This may seem like a lot of money. However, these days USD 2.7 billion do not get you far and certainly not in the beer industry if you want to buy into a market and gain market leadership. Remember: investors prefer market leaders.

Despite its category spread, Kirin is not a consumer goods company yet. It does not compare and should not be compared with the likes of Danone, Nestle or Proctor & Gamble. Because these companies know that in order to stay profitable they have to constantly reassess their portfolios and weed out the underperforming parts. Otherwise the whole lot will be worth less than the individual parts.

Take Kirin’s profit margins. Although there is nothing “natural” or “obligatory” about profit margins hitting 30 percent or 50 percent, it still does not bode well on a company’s business acumen if its margins are as low as Kirin’s. Before recent acquisitions dented margins, the operating margin in drinks was 4.1 percent and 2.8 percent in food last year, versus 6.7 percent overall.

Diversifying beyond the Japanese market makes sense for Kirin, given the nation’s rapidly greying population. It already has a 46 percent stake in Australia’s Lion Nathan, and a 20 percent stake in San Miguel in the Philippines.

But where can Kirin go from here? We shall see.