Kirin may sell Lion’s dairy and beverages unit

Japan’s beer and beverage maker Kirin Holdings recently announced a strategic review of its Australian Lion-Dairy and Drinks unit, looking at a possible sale among its options.

The unit, whose brands include PURA milk and Big M flavoured milk, is part of Kirin’s Australian subsidiary Lion, which is also the country’s number two brewer. Kirin bought the business a decade ago for about USD 2.6 billion.

Lion’s total sales for the year ended December 2017 fell 2.5 percent over 2016 to about USD 3.12 billion. Dairy and other non-alcoholic beverages contributed more than 40 percent to turnover, but the non-alcoholic segment is stuck with very low profitability.

The dairy side of things is not an easy sell nor a great business. Among Lion’s licensed products is the Yoplait yogurt brand which General Mills might like to take back. Speciality cheese is a separate business and could be carved off. Flavoured milk is a good business and probably the jewel in the crown. The remaining white milk business is tough and akin to running a charity. Since 2011 there has been a price war over milk and local supermarkets now offer “dollar-a-litre” (USD 0.70) milk ranges which must hurt farmers and dairy operations alike.

Overall, it is a complex low margin business probably best suited to a break up.

Kirin stressed that options included retaining the unit and investing in it and that no decision has been made yet.