Suntory plans to transfer part of its production line in China back to Japan

Reporter | Liu Yujing

Edit | Zan Huifang

Suntory, the world's third-largest spirits and beer manufacturer, is considering moving some of its beer production lines from China back to Japan in the future.

Sina Gangshi, CEO of Suntory Holding Company in Japan, told FT a few days ago that the impact of the epidemic on offline catering industries such as bars and restaurants will gradually have an impact on Suntory's sales and profitability.

Suntory plans to move some of its Chinese beer production lines back to Japan. "China will still be the production center, but it will be a trend to transfer production lines globally, and our production lines will gradually move back to Japan." Sina Gangshi said.

At present, Suntory Holdings owns Suntory (China) Investment Co., Ltd., Huiyuan Suntory (Shanghai) Beverage Co., Ltd., Saint-Pierre Boutique Wine (Shanghai) Co., Ltd., Suntory Analysis Technology (Shanghai) Co., Ltd. and Bin Suntory Foreign Wine Trading (Shanghai) Co., Ltd. in China, of which Suntory Investment Co., Ltd. has beer production lines in Kunshan, Jiangsu Province and Shanghai. According to the official website, Suntory China's production line in Kunshan was established in 1998 and currently has an annual production capacity of more than 200,000 tons.

However, the beer produced by the two factories is supplied to Japan. Suntory's beer currently selling in China is mainly produced by Tsingtao Beer.

Suntory Beer sold its stake to Green Beer as early as 2015, exited the Chinese beer market, and shifted its business center to the spirits and wine trade. In 2012, Suntory announced the integration of Shanghai and Jiangsu businesses with Tsingtao Beer, each with a 50% stake in the establishment of a joint venture, and Tsingtao Beer was authorized by Suntory to produce brand beer; but in 2015, the two sides announced the termination of the joint venture relationship due to poor cooperation and fierce competition in the Chinese beer market; after that, Suntory Beer withdrew from China, and Tsingtao Beer continued to produce and sell Suntory beer.

Due to the impact of the epidemic, the most important sales channel of major beer and spirits manufacturers- the catering channel was suspended for a time, and multinational beer and liquor producers such as Budweiser and Diageo were facing a crisis of declining revenue.

Budweiser Asia Pacific said in its annual report that due to the epidemic, China's revenue in the first two months of 2020 may be reduced by about US$285 million compared with the same period in 2019, and there may be an increase in sales caused by retaliatory consumption after the end of the epidemic, but it is not excluded that consumers will reduce their intake of alcoholic beverages due to health trends. Diageo expects the pandemic to cost its operating profits 200 million euros.

At present, the new crown pneumonia epidemic in Japan has begun to spread, and consumption in the next quarter is likely to be affected by the same impact. Restaurants have seen sales fall by an average of 60 to 80 percent in the face of the government's trend of asking consumers to go out less. In addition, Nikko Securities data shows that due to the decline in consumption caused by the epidemic, the annual sales of beer in Japan may fall by 4% year-on-year.