Asahi: Second Round of Price Hikes to Lift Margins of Domestic On-Trade Beer a Positive Surprise

Narrow-moat Asahi’s announcement of 6%-10% price hikes on mainly on-trade beers and selected off-trade beer and beer-like items was a positive surprise. The price hikes, scheduled for October 2023 in conjunction with the second round of tax reforms, are expected to contribute JPY 10 billion in profits over a period of 12 months. As we have stressed, the tax cuts present a rare opportunity for brewers to hike beer prices. We welcome Asahi’s efforts to improve profitability of low-margin products and more importantly, to embrace a more flexible pricing strategy of its domestic brewery business that holds a commanding lead in the beer category. We have maintained our forecasts and fair value estimate of JPY 6,400, indicating 24% upside to our intrinsic value. The awaited price hikes will also benefit rival Kirin, where we see an 18% upside to our fair value estimate of JPY 2,600.