Asahi Breweries

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Summary

We recommend proceeding with proposed investment plan with some revision. Detail analyses and rationalities state in the following sections.

Industry Analysis

Japan 's beer industry is concentrated and highly regulated. The industry was projected to grow by approximate 7.6% for 1988 as 1987 realized growth. There were mainly four kinds of beers: Dry, Draft, Lager, & Melt. Consumer taste was graduating changing. Their preferences were switching from Lager beer to dry and draft beer. The government has tremendous power in this industry in terms of price and distribution (a distributor or retailer needs a license issued by the government to sell beers). Therefore, both the beer license and structure of distribution channels
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Absence, or even a poor execution, of any of these three elements could lead to the logic of strategy to fail.

Investment Analysis

Strategic Perspective
Strategically, Asahi 's investment plan was sound. Before the big hit of "Dry Beer", Asahi was considered a marginal player in the market with a 10% market share. As the taste of Japanese consumers shifted towards dry beer, we expect that the dry beer sector would become the driver of the beer industry. As shown in the case, the share of draft beer sales (dry beer was considered one type of draft beers) had increased from 21% in 1980 to 50% in 1987. Asahi became a leader in this sector with a 54.1% as calculated with the monthly sales numbers in 1988.

However, during the "Dry War" initiated by its competitors, Asahi was only able to supply 70% of the orders placed in the summer of 1988. This caused not only lost sales, but also failure to match distributors ' expectations of the firm, thus threatening the firm 's leadership position in the sector. With the expansion plan, Asahi would be able to satisfy demands in a fast increasing sector.

Since the retail price of beer in Japan was virtually regulated at a uniform level by the government, the competition was about creating capacity to satisfy demand and delivering beers through the distribution network. Two key factors are capacity and distribution network.

The Ministry of Finance
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