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Adding value to restore love for beer

Kanshiro Sonoda / The Yomiuri Shimbun

Yoshinori Isozaki speaks to The Yomiuri Shimbun.

By Koichi Kuranuki / Yomiuri Shimbun Senior Writer Kirin Holdings Co. has been steadily reclaiming ground in the domestic beer market. President Yoshinori Isozaki holds a unique track record in the industry, having worked mainly in the hotel business and overseas rather than in domestic beer sales. For this installment of Leaders, a column featuring corporate management and senior executives, Isozaki explains his strategy for achieving sustainable growth.

[Kirin Brewery Company, Ltd.’s share of the beer market peaked in 1976 at 63.8 percent. Many households had the company’s bottled beer delivered directly to their home at the time. However, when the Fair Trade Commission began to take steps to revise the Antimonopoly Law to ease oligopolistic markets, Kirin faced public scrutiny over whether the company should be split up.]

When I joined Kirin Brewery in 1977, the company enjoyed a market share of 70 to 80 percent in some regions. During my job interview, I said that I wanted to engage in business diversification. The interviewer told me, “You have some strange ideas.” It seemed like the company’s beer business was already so well-established that there would be no room for me to play a role in it.

In the early years of my career, I worked in sales at a group company called Koiwai Dairy Products Company Ltd. Back then, supermarkets were not licensed to sell liquor. Whenever I visited a supermarket for promotion and said, “I’m from Kirin,” the store clerk would say, “We don’t sell beer here.”

Shoppers generally responded favorably to our six-pack cheese product when we offered samples in stores. However, they complained that it was too expensive and asked, “Do I have to buy all six?” In response, I came up with the idea of selling the pieces separately.

However, the company was reluctant. “It’s impossible because we would have to put the expiration date and manufacturer’s information on every individual piece of cheese,” they said. I eventually convinced the naysayers by declaring that we would sell more cheese than any other branch in the country. In the end, we did become No. 1 in Japan by selling individually wrapped pieces of cheese.

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  • The Yomiuri Shimbun

I thought that we needed to better consider our customers’ needs. Even with beer, I doubted that Kirin’s dominant market share could be maintained once liquor licensing was extended to supermarket chains. In fact, in my survey of liquor stores that lease space in supermarkets, I found that less than half of all customers were buying Kirin canned beer.

Supermarket chain The Daiei Inc. was rapidly expanding around that time, so I began to think that it was only a matter of time before the liquor licensing system would be deregulated. When I raised the issue at a meeting with the president of Kirin Brewery at the time, he fired back, “The government won’t grant licenses to supermarkets, so there’s no need to worry.”

Later on, supermarkets were given permission to sell liquor, and Kirin’s market share began to steadily shrink. The experience taught me the importance of being able to anticipate what will occur in the future.

Lessons from hotel management

I was assigned to Kirin Brewery’s headquarters in 1984. Even after the deregulation of liquor licensing for sellers in 1989, our share of the domestic beer market remained high at 50 percent. Nonetheless, I knew we had to prepare for fiercer competition. Rather than pursue a pricing strategy that would drain the company’s strength, I wanted to launch consulting services that would involve working together with liquor stores and supermarkets to solve their management problems while at the same time expanding sales of Kirin products.

To do that, I thought I should study personnel administration and other aspects of corporate management. I asked Koichiro Aramaki, my boss and future president of the company, for permission to study hotel management at Cornell University.

[Yoshiharu Hoshino, CEO of Hoshino Resorts Inc., also studied hotel management at Cornell. The personal relationships that Isozaki built through Cornell have served as an asset in his management of Kirin.]

After studying at Cornell for a year, I worked at a hotel in Missouri to learn the business firsthand. I experienced a wide range of jobs, from waiting tables and bartending to cleaning toilets.

When I returned to Japan, the company happened to be considering a plan to build a hotel in Amagasaki, Hyogo Prefecture, on the site of the Kirin Amagasaki Brewery that was scheduled to be relocated. Honestly speaking, even though I had studied hotel management, I had mixed feelings about continuing in the hotel business. I became manager of the hotel, and I had my work cut out for me. From the start, we knew it would be hard to reach the 70 percent occupancy rate needed to make a profit — while we knew people on business trips would stay on weekdays, we couldn’t expect many overnight guests on weekends.

Even people from other hotel companies advised us against building and managing a hotel. Because I had to cut labor expenses and other fixed costs, I decided to take up residence at the hotel. I cleaned the lobby and made the rounds at night. I went to bed wearing a tie so that I could respond to requests from guests in the middle of the night. I was on hand to serve guests whenever necessary.

Perhaps because they saw the boss working hard and taking the initiative, hotel staff and chefs began helping me promote the hotel through activities like passing out tissue packets around Amagasaki Station. I learned firsthand the importance of a leader stepping forward to set an example in the workplace.

New project

[Kirin has been strengthening its business in the Asia and Oceania region since the 1990s, with a case in point being its acquisition of a stake in San Miguel Brewery Inc. of the Philippines.]

Kirin owned a 15 percent stake in San Miguel Corp., a conglomerate whose businesses include food and beverage production. San Miguel’s beer unit controls 98 percent of the Philippines beer market, and we wanted the unit’s stock to be listed and to create synergies through the listing.

I was transferred to San Miguel Corp. to serve as vice president. I was initially met with a cold reception. I was persistent in my efforts to convince the staff, while also working to understand their culture. It took five years to realize the stock listing and acquire a 49 percent stake in San Miguel’s beer unit.

[In 2014, Kirin became the first major beer company in Japan to fully develop its own line of craft beers, which have become known for their distinctive taste.]

Beer consumption has been steadily decreasing. I believe many consumers had the impression that all beer tastes the same no matter the brewery.

That pushed me to give our beer a unique taste. People who enjoy craft beer are willing to share their knowledge in the same way as wine lovers. I think craft beer will be the big breakthrough that restores people’s love for beer products.

[In 2001, Kirin’s domestic market share fell to second place behind Asahi Breweries, Ltd. due to the overwhelming success of Asahi Super Dry. Kirin has since been closing the gap, with the difference in market share recently falling to just a few percentage points.]

When the overall market is shrinking, struggling for market share becomes nothing but a war of attrition. We can’t expect to increase sales volume in Japan because the population here is shrinking. However, we can engage in a different form of competition if we develop products with added value such as craft beer.

[The Kirin group, including pharmaceutical company Kyowa Kirin Co., Ltd., has embarked on a new business project to create value across fields ranging from daily food and beverages to pharmaceuticals. On Aug. 6, Kirin Holdings announced it would become the top shareholder of Fancl Corporation, a manufacturer of cosmetics and health food. The two companies will cooperate to develop and market their products. ]

I believe that a company can achieve sustainable growth by tackling societal challenges. Kirin is unique in that its product lineup ranges from liquor and soft drinks to prescription drugs. I would like to apply the knowledge we have gained from our various businesses to develop supplements and beverages that use unique ingredients grounded in science and deliver them to our customers.

■ Yoshinori Isozaki / President of Kirin Holdings Co., Ltd.

Born in Kanagawa Prefecture in 1953, Isozaki joined Kirin Brewery after graduating from Keio University’s Faculty of Economics in 1977. His posts have included general manager of the corporate planning department. He became president of Kirin Brewery in 2012 and president of Kirin Holdings in March 2015.

■ Key Numbers

¥300 bil.

Kirin Holdings launched full-fledged efforts to create value across many fields this year, seeking to take advantage of its wide range of activities — all while continuing to strengthen its existing liquor, beverage and medicine businesses. The company plans to invest about ¥300 billion in the project over the next three years to realize its long-term growth. According to the consolidated financial results for the year ended December 2018, its revenue was ¥1.9305 trillion. The consolidated number of employees was 30,464 as of the end of December last year.

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