The Kirin Group’s Integrated Beverages Business faces two major trends in the external environment. The first is a ceiling on market growth due to such factors as aging populations and declining birthrates, especially in industrially developed countries. In this setting, global companies have led industry reorganizations on a worldwide scale. The second trend is the diversification/individualization of consumer preferences due to changes in lifestyles. As a result of this trend, it has become difficult for brands to maintain their market presence, even for large global brands.
In this environment, I believe that simply pursuing share in markets that have limited growth potential will not contribute to gains in the corporate value of the Kirin Group. Instead, we will choose a path of targeting sustained growth by leveraging the strengths of our value chain to create new value for consumers.
The Kirin Group has successfully addressed the changes in its competitive environment by continually providing new value to consumers. We have created brands that, together with consumers, have created new facets of consumer culture and become long-selling brands. These include Kirin Ichiban Shibori, the world’s first beer to be made with only first-press wort; Kirin Gogo-no-Kocha, which opened up a new market for authentic black tea beverages in PET bottles; and Kirin Hyoketsu®, which leveraged an innovative concept to rapidly expand the RTD*1 market. In addition, the fermentation technologies and biotechnologies that we have cultivated through the brewing of beer have enabled us to develop biopharmaceuticals, establish a production system that achieves stable quality, and build the Pharmaceuticals and Bio-chemicals Businesses into two of the Group’s core businesses.
Through this type of value creation, we have built a value chain that has unique strengths that are not found in other companies. This value chain includes R&D that facilitates a wide range of manufacturing based on the fermentation technologies and biotechnologies that are a shared foundation of the Group’s businesses; a supply chain that delivers diverse products and services to consumers in an efficient, high-quality manner; and marketing that leverages deep insight into the needs of individual consumers and drives innovation. By coordinating the utilization of these strengths in a more organic manner, I believe that we can create new value that addresses the diversifying preferences of individual consumers and increase the profitability of our existing businesses.
Moreover, this value creation foundation also supports synergies with our initiatives to advance into new markets. Myanmar Brewery became a member of the Kirin Group in 2015, and in the process of integrating this company into the Group we have fully leveraged our production technologies and marketing capabilities. The Group’s experience and knowledge will also be useful in such areas as increasing production capacity and bolstering our sales capabilities, which will be necessary to address future market growth. The cumulative effect of these synergies will be a major asset in expanding our beer operations in Southeast Asia, a growth market.
The strengths of the Pharmaceuticals and Bio-chemicals Businesses, which are two of the Kirin Group’s core businesses, include therapeutic antibodies and other biopharmaceuticals. Biopharmaceuticals are expected to offer limited side effects and high levels of effectiveness against diseases for which existing treatments have not been satisfactory, such as cancer and autoimmune diseases. On the other hand, measures to control healthcare expenditures have led to the growing use of generics and to large-scale drug price reductions, especially in Japan. As a result, growth in pharmaceutical markets is sluggish. To achieve continued growth over the long term in this environment, we will need to further strengthen our global competitiveness and new product development capabilities.
Kyowa Hakko Kirin, which is responsible for the Kirin Group’s pharmaceutical operations, has world-class technical capabilities in the field of therapeutic antibody R&D, such as POTELLIGENT® technology and human antibody production technology. To realize outstanding growth by 2020, Kyowa Hakko Kirin will need to fully utilize these technologies to rapidly launch global strategic products in Europe and the United States. In addition, utilizing cutting-edge R&D capabilities cultivated in fields other than therapeutic antibodies, Kyowa Hakko Kirin will move forward with the stablishment of a promising pipeline in next-generation fields that offer substantial potential, such as nucleic acid drugs and regenerative therapeutics. Kyowa Hakko Kirin’s five-year mid-term business plan commenced in 2016, and the period covered by the first half of the plan has been positioned as an investment phase in preparation for the company’s leaping forward phase. On that basis, priority will be given to aggressive development investment rather than short-term profits.
Kirin’s business portfolio, which includes the Integrated Beverages Business and the Pharmaceuticals and Bio-chemicals Businesses, is one of the Group’s major distinctive strengths. Moving forward, the Group will strive to fully leverage this strength in order to continue to create new value and achieve sustained growth. To that end, creating shared value (CSV)— i.e., creating value that is shared with society*2—is a strategic framework that provides the foundation for Group management and supports the utilization and reinforcement of the value creation framework discussed above.
Accompanying several decades of global economic growth, there has been an increase in serious social issues, such as lifestyle-induced diseases and global warming. In this setting, the role of companies in contributing to the resolution of those issues is drawing considerable attention. Moreover, there are changes in the value that consumers seek from companies and their products and services, especially in mature markets; they are increasingly making purchase decisions based not only on superior functionality and appealing design but also on usefulness in improving society.
In 2012, Kirin moved quickly to introduce the concept of CSV, and since that time, we have achieved a series of successful CSV initiatives in each business. Through the formulation of “Our CSV Commitment,” we have laid the foundation for further progress in addressing these issues and clarified the direction that the Kirin Group will take in the future. Through this commitment, the Group has selected the following as priority social issues that have a particularly close connection to the Group’s businesses: “health and well-being,” “community engagement,” and “the environment.” We have announced how our businesses will contribute to the resolution of these issues, including approaches and results indicators. Kirin will solic#it opinions from inside and outside the Group and strive to foster innovation that transcends the boundaries of the Integrated Beverages and Pharmaceuticals and Bio-chemicals businesses, thereby further bolstering our value creation foundation.
The Kirin Group aims to achieve the creation of both social value and economic value, and to record sustained growth together with society.