Jim Beam Owner Suntory Postpones $36 Billion Revenue Target
Suntory Holdings, the liquor giant that is facing a slowdown in the Japanese market, stepped back from its goal of almost doubling annual revenue by 2020.
The company will reach the sales target of four trillion yen ($36 billion) – made in 2014, after it agreed to acquire Beam, Inc. – at least two years later, chief executive officer Takeshi Niinami said in an interview. Suntory, the owner of Orangina soft drinks and Jim Beam bourbon, said that it set the sales goal as a way of measuring its performance as a global company.
Suntory Holdings, which is closely held and has operations from food to spirits and beverages, is facing headwinds in its home market, as the population ages. Soft-drink and alcohol sales volume in Japan, where the company derives about 66% of revenue, is forecast to grow at a slower pace than the global average over the next four years, according to research firm Euromonitor.
“Realistically, our current sales are not enough,” Niinami said in Tokyo recently. “Buying Beam was a big step in getting to the four-trillion-yen sales goal, but to get there, it may take until 2022 or 2023.”
Shares of Suntory Beverage & Food Ltd, the publicly traded unit controlled by the holding company, fell as much as 1.8% in Tokyo trading recently. The benchmark Topix index was little changed.
The company expects to post revenue of 2.69 trillion yen for 2017. Reaching the four-trillion-yen goal would require a 50% sales increase from that level. The sales forecast was made three years ago, when Suntory’s annual revenue was about two trillion yen, and about one trillion yen of the target was projected to come from the spirits operations.
Suntory placed its biggest bet when it purchased Beam, the US bourbon-maker, for about $16 billion, including debt to grow beyond Japan. The company has also scooped up assets such as Orangina and the Lucozade sports-drink brands.
Volume sales of soft drinks and alcohol in Japan are expected to grow below 1% every year for the next four years, according to Euromonitor forecasts. Suntory is the second-largest soft-drink seller in Japan, after Coca-Cola Co., and it is ranked third in the country’s alcoholic-beverage market, after Asahi Group Holdings Ltd and Kirin Holdings Co.
Sales growth will stem from the successful integration of Beam, as well as the soft-drinks business, run through the publicly traded Suntory Beverage & Food Ltd, said Niinami. The 58-year-old executive joined Suntory after the Beam purchase as the first person outside of its founding family to lead the company.