Four sources told Reuters that Japanese beverage company Kirin Holdings is in discussions to invest $70 million in Indian craft beer maker Bira, doubling down on the rapidly growing South Asian market at a time when it is under pressure to maintain growth at home.

According to the sources, Kirin, which made its initial $30 million investment in Bira for a stake of less than 10 per cent last year, plans to inject additional capital at an equity valuation of $450 million. According to one of the sources, negotiations between the Japanese business and the owners of Bira are nearing their conclusion.

The most recent negotiations take place as Japan’s major beverage manufacturers struggle with a steady decline in alcohol sales revenue as the domestic population shrinks and younger people drink less than in previous decades, forcing the businesses to grow internationally or enter new markets.

The Japanese yen has fallen to 24-year lows, which is expected to increase the cost of overseas acquisitions for local businesses. Despite this, Kirin still plans to increase its investment in Bira.

Bira, one of India’s most well-known craft beer producers, was founded in 2015. In India’s estimated $5 billion beer market, it faces off against global brands like Carlsberg as well as Heineken-owned United Breweries.

Two of the sources claim that after the most recent funding round closes, Kirin will own a total of about 15% of Bira.

According to the sources, Mitsubishi UFJ Financial Group, a financial institution based in Japan, is also in discussions to invest $15 million in the round.

Ankur Jain, CEO of Bira, declined to provide comment for this article. Both Kirin and MUFG declined to respond. Since the deal discussions are confidential, the sources declined to give their names.

For Japanese beverage manufacturers, North America has been a key market. The American craft beer producers New Belgium Brewing and Bell’s Brewery are owned by Kirin’s subsidiary, along with a portion of the Brooklyn Brewery in New York. Asahi and Suntory, rivals, are attempting to enter the North American beverage market.

The first source noted that the new planned Bira investment “is a small amount, but Kirin is bullish on India,” and that Bira’s CEO Jain recently traveled to Japan to meet with Kirin management. Keisuke Nishimura, a senior Kirin executive, recently visited India to assess the retail market and Bira’s breweries.

The discussions regarding the additional funding take place at a crucial juncture for Bira, particularly after its sales suffered during the COVID-19 pandemic.

According to an internal investor presentation seen by Reuters, Bira reported an operating loss of $4 million in the quarter even though its net sales revenue in the quarter to June 2022 was 132% higher at $20 million.

According to the presentation, the quarter had the “highest ever” beer volume and Bira’s revenue was “more than 2X over Pre-COVID.”

Sales of craft beer are increasing in India as young, wealthy consumers choose brands and bars that serve lighter brews and guarantee fresher ingredients.

Bira claims that its beer is sold in 500 towns and cities across 15 countries and is produced in five breweries in India.

The initial source added that Bira planned to open new breweries and introduce new products like ciders with the money raised in the most recent round.

Reuters was informed by two additional sources that Bira was also thinking about going public, but at least two years away.

(Adapted from Reuters.com)