Is Kirin Stock A Good Buy?

Kirin Holdings Co Ltd (OTCMKTS:KNBWY) is a vertically integrated Japanese beverage company and part of the Mitsubishi Group of companies. Besides Kirin branded beverages, the company also owns the likes of For Roses Distillery, New Belgium Brewing Company, and Coca-Cola Bottling Company of Northern New England, along with tech, real estate, and pharmaceutical businesses.

Kirin has assets far beyond Japan’s shores and is a strong player in the global beverages market. It made several investments during the most recent market fizzle to assist with global efforts against the virus. Still, it struggles to reach its pre-coronavirus-crash stock prices, with a market cap under $20 billion. So, is Kirin Holdings stock a Buy?

Let’s pop the top on this company and figure out whether it’s worthy of a portfolio spot.

Kirin Has Switched Focus From Dairy To Alcohol

Kirin Holdings is a massive beverage conglomerate. While milk is a part of its portfolio, it sold its Lion-Diary branch in Australia to Bega Cheese for $400 million in late November 2020. This is because the company is reducing its SKUs to focus on its core offerings, which are mostly alcoholic and soft drinks.

This doesn’t mean it’s dropping completely out of the dairy market – in fact, it recently built a facility in Thailand to produce human milk ogilosaccharides (HMOs).

This should help it fill a growing market in Southeast Asia, producing up to 300 metric tons of three key HMOs per year. These are used for modern baby formulas, and two of the HMOs are being produced for the first time on an industrial scale.

Of course, the company is also heavily focused on the burgeoning craft beer trend, along with other beverage trends. Although these drinks are staples of diets around the world, international economic lockdowns did put a strain on the company. Let’s talk about that.

Is Kirin Stock A Good Buy?

Kirin Holdings had a market cap over $20 billion at the start of 2020, and it’s ending the year in a very similar position.

Kirin share price is in the $20-$25 range per share, thanks indirectly to a huge boost from the announcement of a COVID-19 vaccine from Pfizer (PFE) that lifted the market as a whole.

Indeed the stock market sustained its momentum for a while after AstraZeneca (AZN) also released positive results by the start of December.

While this is great for shareholders who bought during a dip, the company had already recovered from most of its early year losses. This is likely to limit investor gains by jumping in now.

Nevertheless, the reason that vaccine news continues to inject fuel into the market is because savvy investors know this should help the economy reopen and recover sooner.

Kirin’s sales ultimately depend on consumers returning to restaurants and being comfortable enough with their food supplies to splurge a little on beverages.

Restaurants heavily rely on beverage mark-ups to stay in business, whether alcoholic or non-alcoholic. The COVID-19 crisis led to bars closing and even soda machines at convenience stores changing rules.

This hurt beverage sales across the board, so let’s look at the risks of investing in Kirin Holdings.

Risks Of Buying Kirin Holdings Stock

Kirin Holdings is based in Japan, and can only be bought in the United States via the over-the-counter market.

This creates an inherent regulatory risk, but it’s not a handicap on its own except that OTC stocks have a somewhat jaded reputation among investors.

The next concern is the markets to which Kirin is exposed.

While it’s certainly not excluding dairy from its lineup, the rest of its drinks are seen as luxuries more than staples by consumers. Single-serve juices, sodas, and beers weren’t the top of many peoples’ lists as necessary to stock up on for the coronavirus. And this is where investors face risks.

Bars, restaurants, and public events reopening don’t necessarily mean the demand will be at the same levels they were a decade ago. There’s a distinct possibility many people will financially struggle when government-imposed safety nets run dry, making 2021 a turbulent year.

And then there’s the matter of Kirin competitors entering the fray.

Kirin Has Competition From Pepsi, Hershey…

Kirin has competition across the world, with giants like Nestle, Mondelez International, Kellogg’s, Hershey, PepsiCo (PEP), and more competing against them.

The beverages sector is one of the most competitive, and there’s a smaller pie for everyone to grab a piece of for nearly a year now. We don’t know how the economy will recover nor how long it’ll take with a new president stepping in to rearrange the White House economic policies.

Kirin’s strategy seems to be working so far, but it still has plenty of work ahead of it. The company will need to prove itself in every market it serves during a fierce holiday season. Its most recent quarterly earnings report in November 2020 showed a 48.7 percent profit increase year-over-year.

Is Kirin Holdings Stock a Buy? The Bottom Line

Kirin Holdings took a major revenue hit when bars and restaurants shut down around the world. This Japanese beverage giant lost its ability to push bulk B2B sales as a result. Still, it refocused operations to ensure it increased profitability to help attract more investors and succeeded in that.

The company trades on the over-the-counter market in the U.S., which means less oversight than a Fortune 500 stock. This makes it a risky bet in a lot of ways, but the sector itself is worth looking into.

People are stocking up for the holiday season amid a pandemic. Everyone’s gearing up for winter, and it’s only a matter of time before the alcoholic and nonalcoholic beverages start flowing. No matter how bad the economy gets, the one thing you can count on is people will eat, drink, and smoke their way through anything.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.