JAPAN September 2019
 
Major beer producer aims to break into the Functional Food market
 
Kirin Holdings, the well-known Japanese beer producer, is now looking to venture into functional foods after buying a 30% stake in Fancl, a local cosmetics and health foods business, for Yen 129.3 billion (US$1.22 billion). Fancl markets consumer health foods and supplies ingredients to companies including Nestle. Kirin and Fancl are now working on the details of their collaboration which will eventually result in the offering of a wide range of products from beverages, food products to skin care, all focusing on enhancing its customers’ beauty and health.
Established in 1980, Fancl markets rice products and snacks, alongside supplements and cosmetics for women with sensitive skin. Fancl’s food and supplements business focuses on products with functional claims that respond to the growing health concerns of middle aged and older consumers. Fancl also works with food manufacturers like Nestle to supply ingredients for Nestle’s beverages sold in Japan.
Fancl also markets its health foods in China through a distribution deal with China Sinopharm International.
Kirin paid US$1.2 billion for a minority 30% stake in Fancl, which some analysts viewed with scepticism as this represents a multiple of earnings more than twice of its own. Despite the negativities, Kirin is confident that the deal will accelerate its shift into the ‘health and well-being’ segment. Kirin has been diversifying since the 1980s with its pharmaceuticals and biochemical business now generating 18% of its revenue.
Kirin also hopes the collaboration with Fancl will boost its top line. Fancl's revenue grew more than 12% for the year ended March 2019, helped by sales in markets like China and Singapore. As for Kirin, more than half of its revenue still comes from its Japanese beverage business.
However, Fancl's 7% net profit margin is more than one percentage point lower than the brewer's own.
 
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