Asahi To Hike Prices of Japan Alcoholic Items; a Positive Move for Long-Run Profitability and Kirin

Narrow-moat Asahi announced 6%-10% (averaged at around 8%) price hikes on a broad range of domestic alcoholic items including beer and beer-like drinks, ready-to-drinks, non-alcohol beer, as well as hard liquor, from October 2022. The domestic price hikes, last seen in 2008, validate our thesis that Asahi will hike prices in Japan to secure profits, although the timing is one year earlier than our projection. We anticipate the rivals including Kirin will follow suit, which, coupled with on-trade demand recovery post COVID-19, should curb Asahi’s volume decline. We have maintained our forecasts and fair value estimate of JPY 6,000, indicating an attractive 30% upside to our intrinsic value. The awaited price hikes will also benefit rival Kirin—there is 36% upside currently at our fair value estimate of JPY 2,500.