EDITORIAL: Kirin-Suntory talks fail

After more than a year of negotiations, Kirin Holdings Co. and Suntory Holdings Ltd. on Monday announced the end of their hopes for a business merger.

Kirin and Suntory are Japan's No. 1 and No. 2 beverage powers. Combined, they would surpass Coca-Cola Co. of the United States as one of the world's largest food and beverage companies.

When the concept of the potential merger surfaced last summer, investors and consumers greeted the move with a mix of surprise and welcome.

Specifically, the two companies were praised for their refusal to be content with simply being winners in Japan by joining hands to target the rapidly expanding Asian and global markets.

The news also arguably roused all of Japan from its sense of stagnation amid the protracted deflationary economy. Thus, it is truly a pity that what appeared to be a pioneering new model for Japanese companies has now vanished.

One reason the merger plan was abandoned was disagreement over the merger ratio for shares in the new company. There were also differences in the companies' administrative philosophies.

Kirin is a listed company with numerous shareholders both in Japan and abroad. Suntory is a privately held business run by the founding family since its inception more than a century ago. It proved impossible to bridge this gap.

What the two companies did share was a recognition of a looming crisis in the Japanese market. They realized that neither side independently possesses the power to triumph in the global market. To prevail in such an environment, the dominant theme was to bring together companies plagued by the same sense of emergency.

The boom in corporate mergers and acquisitions among Japanese companies from the mid-1990s reflected a strong orientation toward the domestic market. It was likewise distinguished by moves to fend off hostile takeovers. The Kirin-Suntory vision, however, was a decision to take the offensive in the age of globalization.

Expanding the scale of corporate management is certainly not the only option. Also admirable is the ability of smaller companies to steadily produce quality products and services while supporting regional communities as local enterprises.

With Kirin and Suntory doing well even within the current economic slump, their current formats should enable them to succeed for some time.

Yet, the leaders of both companies have been looking to the next stage of development. Against the backdrop of Japan's rapidly aging society and declining population, there is little margin for growth in the nation's consumer markets.

Even if they cling to that business route, there are no guarantees the companies can retain their tens of thousands of employees and avoid defeat at the hands of mega-rivals overseas.

Many markets in Asia are projected to grow briskly over the years to come. On their own, individual companies lack the resources to channel the necessary personnel and capital into such markets, underscoring the need to hook up with a strong partner. This basic understanding fueled the plan for a Kirin-Suntory merger.

Now that the merger talks have collapsed, both companies will be under pressure to retool their strategies.

There has been no change, however, in the critical awareness on either side. Kirin President Kazuyasu Kato insisted his company would continue to set its sights on becoming the "leading company in Asia and Oceania."

Suntory President Nobutada Saji appears to have already switched gears with mention of a search for "overseas partners."

We respect the stances of both companies in facing their challenges.

Hopefully, their renewed efforts will reflect the pet motto of Suntory founder Shinjiro Torii: Yatte minahare (go for it).

--The Asahi Shimbun, Feb. 10