(Bloomberg) -- Asahi Group Holdings Ltd. plans to maintain profitability for the next fiscal year as it looks to raise prices in line with inflationary trends while keeping a tight lid on costs, Chief Executive Officer Atsushi Katsuki said.
“Given the foreseeable inflationary environment, we’ll cut costs and raise prices as conditions require,” Katsuki said in an interview. The Japanese brewer has already announced price increases for its Super Dry beer and other beverages for the first time in 14 years in October, when consumers will pay 6% to 10% more for beer, Yoichi whiskeys and other beverages. “By doing this, we are planning to post another increase in profits for the next fiscal year.”
Asahi, along with other Japanese retailers, is under pressure to raise prices for the first time in decades. A weaker yen is pushing up the costs of imported goods, while higher global prices for energy and raw materials is making it more expensive to produce and transport goods. Even so, shoppers in Japan have become accustomed to flat prices, while wage growth has remained relatively stagnant.
Asked about the risk of a global recession, Katsuki acknowledged that while an economic downturn may happen, he was confident that beer sales will keep up. The weak yen is also helping to boost income brought back from overseas, he added.
“There’s no reason to fear any recession,” the CEO said. “When luxury spending drops off, demand will shift to beers.”
Asahi shares are up more than 6% since the brewer announced on April 26 that it is raising prices.
Analysts are projecting, on average, that Asahi’s operating profit will rise 15% to 245 billion yen ($1.8 billion) for the next fiscal year that will begin January 2023. For the current period through December, they are predicting zero profit growth.
Asahi cited rising costs for everything from ingredients including malt and corn to packaging materials such as aluminum and cardboard as well as transportation, for its price hikes.
“I believe we can overcome the current situation,” Katsuki said.
Asahi still has room to raise prices in Poland, Romania and the Czech Republic because beers are priced cheaply when compared with disposable income, according to Keiko Yamaguchi, an analyst at Goldman Sachs Japan Co.
For the nascent category of lower-alcohol drinks, which consumers have embraced in Japan and Asia, Katsuki said Asahi plans to boost sales to 15% of global sales, up from the current 10%.
(Updates with analyst’s comment in 10th paragraph. A previous version of this story corrected the company’s fiscal year.)
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