June 7, 2024

Kirin Holdings Will Acquire FANCL, a Leading Health Food Supplier

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Kirin has strategically invested approximately 33% in FANCL and plans to acquire the remaining shares to make it a wholly-owned subsidiary through a tender offer within the year. The expected acquisition price is about 210 billion yen. Despite a sluggish beer market, the health food market is expanding globally. This strategic move by Kirin aims to bolster its growth sector by tapping into the thriving health food market through the acquisition of FANCL.

Based on a report from Euromonitor, a UK-based research firm, the global market size for health food (including vitamins and supplements) was $133.6 billion in 2023 (approximately 21 trillion yen), representing a 20% growth over the past five years. This growth is attributed to increased health awareness following the COVID-19 pandemic and the expansion of the middle class in emerging economies due to economic growth. In response to these market trends, Kirin Holdings is strategically focusing on developing markets worldwide, particularly in Asia, by acquiring FANCL.

Fancl, a major health food supplier, has demonstrated robust financial performance with consolidated sales of 110.8 billion yen for the fiscal year ended March 2024, which is a 7% increase from the previous year. In addition to health foods, Fancl also sells cosmetics, and its operating profit increased by 60% to 12.5 billion yen. Kirin aims to leverage this strong performance to improve the profit/loss situation of Health Sciences and return it to profitability as soon as possible by making Fancl a wholly-owned subsidiary.

In 2019, Kirin Holdings acquired a 33.0% stake (based on voting rights) previously held by the founders of Fancl and others. The investment was approximately made to collaborate on jointly developing and producing foods, beverages, and supplements. The goal is to extend the healthy lifespan of consumers as the population ages, both domestically and internationally.

The acquisition is partly due to a crisis in the original beer business, which continues to decline. In 2023, the sales volume of domestic beer-type beverages was 336 million cases (equivalent to 20 large bottles per case), down 40% from the peak year of 1994, when it was 573.16 million cases. Even in the last ten years, consumption has decreased by 23% and is not expected to return to previous levels due to population decline and increased health consciousness.

Comparing the consolidated sales of the major domestic brewers, Kirin Holdings lags behind Suntory Holdings (3.2851 trillion yen) and Asahi Group Holdings (2.769 trillion yen). With the acquisition of Fancl, the company intends to reorganize its business structure boldly to maintain competitiveness.