Japanese multinational beverage firm Kirin Holdings Co. Ltd has recently agreed to divest 40% equity in China Resources Kirin Beverages (Greater China) Company Ltd., a joint venture (JV) company in China, to the Chinese fund, Plateau Consumer for JPY115bn ($994m). 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, finds GlobalData, a leading data and analytics company.

Bobby Verghese, Consumer Analyst at GlobalData, comments: “According to GlobalData, the soft drinks sector (including bulk/HOD drinks) will continue to expand from $145.8bn in 2021 to $203bn by 2026. 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 JV with 40:60 equity stake with China Resources Enterprises Limited, 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.

Verghese concludes: “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 labor shortages. 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.”

*Data taken from GlobalData Consumer Intelligence Center — Market Analyzers, accessed in February 2022