Overall revenue and profit were up for the Japan alcohol giant which is increasingly investing more in its health science business, including the acquisition of Blackmores last year.
Total revenue for the company was up 7.3 per cent to JPY$2,134.4 bn (US$14.2bn), while profit before tax climbed three per cent to JPY$197 bn (US$1.31bn).
Profit attributable to owners of the company also increased by 1.5 per cent to JPY$112.7 bn (US$749m).
A breakdown showed continual revenue growth from its health science-related products, including non-alcoholic beverages containing its proprietary immune health postbiotic Lactococcus lactis strain Plasma, also known as LC-plasma.
Non-alcoholic beverages with health benefits saw its revenue went up by 30 per cent year-on-year. About 13 per cent of the firm’s non-alcoholic beverages are health science-related products.
In total, revenue from its non-alcoholic beverage business was JPY$516.2 bn (US$3.43bn) in FY2023, while its normalised operating profit was JPY$16.9 bn (US$112.7m).
A key revenue driver was the Kirin Oishii Immune Care series, which saw sales volume of its small-volume PET bottled products, which comes in 100ml each, went up by 3.4 times year-on-year.
The series includes products such as Kirin Oishii Immune Care Calorie-Off and Kirin Oishii Immune Care Sleep.
“Despite the environment in the domestic non-alcoholic beverages market being difficult due to soaring raw material prices, summer demand and the health market expanded due to the extremely hot summer and growing health and well-being awareness.
“In the Health Science domain, where we are focusing our efforts, we introduced a variety of products to the market, centred on non-alcoholic beverages containing LC-Plasma, to meet the needs of consumers and to make immune care a habit,” the company said.
The postbiotic is used not only in Kirin’s Foods with Function Claims (FFC) but also used by competitor companies in their functional foods and beverages.
In total, Kirin said that revenue from LC-plasma was over JPY$20 bn (US$132.9m) in FY2023.
It has set a yoy revenue growth of 30 per cent for LC-plasma in FY2024, which would be achieved by improving product mix and marketing cost efficiency.
The long-term revenue goal for LC-plasma is JPY$50 bn (US$332.3m).
"The Health Science business, which we started in 2019, aims to expand to a scale where it will account for 20 per cent of the Group's total revenue in the future.
"As for LC-Plasma, we are making progress in expanding the scale of our business, so our next challenge is to generate a solid profit. We will work to increase the ratio of high value-added products so that we will be profitable by 2025," said president and CEO Yoshinori Isozaki.
Aside from LC-plasma, the company has also developed other FFC products with FANCL.
An example is KIRIN x FANCL Calolimit Apple Sparkling – a canned drink that contains indigestible dextrin as dietary fiber and claims to reduce the absorption of sugar and fat from the diet.
Kirin’s overall revenue forecast for FY2024 is a 6.4 per cent to JPY$2,270 bn (US$15.1bn) and profit to owners of the company going up by 16.2 per cent to JPY$131bn (US$870.7m).
Goals for Japan, APAC
For FY2024, the company plans to further expand the scale of its health science business, in addition to achieving stable profit from core businesses such as alcoholic beverages.
Immune care will continue to be a focus for its domestic health science business, while Blackmores is expected to drive growth in South East Asia.
“In Japan, we will continue to work on expanding ‘immune care’ needs in 2024 and aim to grow the ‘LC-Plasma’ related business. With FANCL CORPORATION, we will expand group synergies by developing the CALOLIMIT brand in Kirin Group companies, improving efficiency by sharing know-how in the e-commerce business, and promoting joint research.
“Overseas, we will strengthen our position in the growing market of Southeast Asia, centred on the Australia-based Blackmores. Kyowa Hakko Bio will also promote the development of products utilising LC-Plasma.”
The company is also present in North America and the plan is to achieve growth through a stable economic environment and exploring new business opportunities.
Reorganisation
During its financial presentation, the company also announced the reorganisation of its main businesses into four segments, namely 1) Health Science, which consists of Blackmores, Kyowa Hakko Bio, 2) Alcoholic Beverages, 3) Non-Alcoholic Beverages, and 4) Pharmaceuticals.
The company will provide a breakdown of its financial performance based on these four segments.
Prior to the reorganisation, the business segments were categorised as 1) Japan Beer and Spirits, 2) Japan Non-alcoholic Beverages, 3) Oceania Alcoholic Beverages, 4) Pharmaceuticals, and 5) Others.
The forecast for its Health Science business for FY2024 is a growth of 9.9 per cent in normalised operating profit.
This will be driven by sales from Blackmores, LC-Plasma, and reduced losses at its specialty materials arm Kyowa Hakko Bio which sells ingredients such as human milk oligosaccharides (HMOs) and LC-plasma marketed as IMMUSE.
Kirin Holdings began full-scale operations in the health science business since 2019.
It said that the medium to long term goal for the health science business was to contribute 20 per cent of the revenue and net operating profit margin of 15 per cent.