By Hiroyuki Kachi
TOKYO—Sapporo Holdings /zigman2/quotes/200413497/delayed JP:2501 +4.22% Ltd. is mapping out strategies that could involve acquisitions or creating a new plant to meet rising demand for premium beer in North America. In Asia, meanwhile, the Japanese company is expanding its beer and soft-drink business through a recent tie-up with Pokka Corp.
"We will make a decision on investment after examining the details," such as expected demand in North America, Sapporo incoming President Tsutomu Kamijyo said in an interview. "The time hasn't come just yet, but we are now at the stage of saying it's about time," said Mr. Kamijyo, who is set to become president March 30.
"North America is the market that we have to consider on a priority basis," he said, citing Sapporo's existing network there and a steadily growing population. "Our counterparts are well aware of our interests in North America and our brand, so it's easy to talk with business partners."
Many of the big Japanese food and beverage companies are trying to extend their global reach out of concerns over saturated demand, a shrinking population and a weak economy at home.
While its Japanese peers are hunting for mergers or acquisitions, Sapporo is looking to markets outside Japan. Despite the popularity of its premium Yebisu brand, Sapporo has lost ground at home, partly because consumers have turned frugal. Sapporo in 2008 fell to fourth place in terms of domestic market share for the first time.
Sapporo hopes to enhance its image as a premium brewer in North America. It started selling Sapporo brand beer in the U.S. in 1985, targeting resident Japanese. In 2006 the company purchased Sleeman Breweries Ltd., Canada's third-largest brewer, helping broaden Sapporo's North American business.
With Sleeman's four breweries running nearly at capacity, Mr. Kamijyo said there are three options: build new facilities next to a brewery near Toronto, continue outsourcing beer production or purchase more breweries.
Sapporo may need to make a decision soon. It has enjoyed healthy demand in Canada for Sleeman's and other beers and predicts a 7% increase in sales volume for this year following a 6% rise last year. It has targeted a 16% gain in U.S. sales this year, following a 13% increase last year.
Yet it is well behind its rivals in terms of growth plans. Asahi Breweries /zigman2/quotes/206211507/delayed JP:2502 +4.08% Ltd. can procure 800 billion yen, or nearly $10 billion, by 2015 and maintain what it considers an acceptable debt-to-equity ratio. Kirin Holdings /zigman2/quotes/201605850/delayed JP:2503 +2.01% Co. has spent about one trillion yen on M&A in Japan and overseas in recent years, including buying a 48% stake of San Miguel Brewery Inc. of the Philippines.
Sapporo said it is ready to spend 100 billion yen to 200 billion yen between next year and 2016 on M&A and capital outlays. Overseas sales including liquor tax made up 25.3 billion yen, or 6.5%, of total sales of 389.2 billion yen last year. Sapporo aims to raise that ratio to 9.5% next year.
Sapporo this month decided to increase its stake in unlisted Japanese soft-drink company Pokka in a deal valued at 21.3 billion yen to strengthen Sapporo's nonalcoholic-drinks segment. Pokka sells coffee and green-tea drinks in about 60 countries.
Kirin already teams up with Pokka to sell beer in Singapore.
Mr. Kamijyo, who is a Sapporo managing director, said the closer relationship with Pokka will allow Sapporo to sell its soft drinks, together with beer, in countries such as India and Indonesia, where religious restrictions keep liquor consumption comparatively low. Sapporo currently doesn't sell its soft drinks overseas.
Beer sales in Japan fell 2.8% to 459.17 million cases last year, the sixth consecutive annual decline. That makes the market around 20% smaller than at its peak in 1994. Sales have declined as Japan's population has aged and consumer tastes have broadened to include such products as fruit-flavored alcoholic beverages.
Write to Hiroyuki Kachi at firstname.lastname@example.org