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Some of Australia’s best-known exports come in the form of amber nectar, with the logos of Foster’s and Victoria Bitter among the most recognisable brands the country has produced.
Less known is that the local brewing industry is in effect owned by two Japanese companies — Asahi and Kirin — which now own eight of the top 10 selling beer brands in Australia after consolidating the industry in recent years. Even Coopers, the one large brewery that has stayed independent, has joined the club by brewing Sapporo beers in Australia.
It is a sign of Japan’s heavy investment in Australia, which has stretched far beyond the “stubby” beer bottle into renewable energy, finance, software and other consumer-focused areas such as insurance, cosmetics and vitamin pills.
The depth of the Japanese-Australia partnership has been laid clear in a report from law firm Herbert Smith Freehills and the Australian National University. This states that Japanese finance “is one of the great untold stories of supporting Australian prosperity”.
In 2023 alone, there were 44 takeovers of Australian companies by Japanese buyers and 38 partnerships struck. Japanese foreign direct investment, at $88bn (A$133.8bn) in 2023, now represents 12 per cent of the total and the country remains Australia’s second-largest trading partner and export destination.
Meg O’Neill, chief executive of Woodside, highlighted the impact of Japanese investment on Australia’s largest oil and gas producer “since day one” with the Asian country’s banks, government and energy companies key players in the growth of the local energy industry. That has extended into 2024 as Japanese investors have spent around $2.3bn to acquire stakes in Woodside’s Scarborough offshore gas project — Australia’s largest energy project — to lock in supply of liquefied natural gas into the future.
The enthusiasm for Australian investments was evident in the coastal city of Newcastle last month when Canberra-based start-up MCi Carbon launched a pilot facility called Myrtle to transform carbon dioxide into cement. The company has been backed by Japan’s Itochu, Mizuho Bank and Sumitomo Mitsui Trust Bank. Potential customers including Nippon Steel and Mitsubishi UBE Cement, were in the crowd.
China remains Australia’s largest trading partner despite tariffs and sanctions being placed on Australian imports such as wine, beef and lobster in 2020 only just starting to unwind. Yet Chinese-led takeovers have dropped sharply. A report from KPMG and the University of Sydney Business School this month showed that 2023 was the joint lowest year for Chinese takeovers of Australian companies since 2006 with only 11 transactions completed. The value of takeovers dropped 36 per cent in Australian dollar terms in 2023 to $850mn from $1.4bn as Chinese development money was focused on other markets across south-east Asia. In contrast, there were 271 Chinese takeovers of Australian companies between 2017 and 2023 worth $23.5bn when mining was a key area of focus for buyers.
So have Japanese buyers plugged a hole left by Chinese companies that are now looking elsewhere? Shiro Armstrong, director of the Australia-Japan Research Centre, doesn’t believe that there is a direct causal link between the rise in Japanese deals and the sharp fall in Chinese takeovers in Australia and sees politics instead playing a part in the trend.
Armstrong said that there has been a tightening of national interest rules in Australia in sectors like critical minerals that has deterred Chinese buyers. He pointed to a 2020 decision by the Australian government to block a Chinese takeover of a milk and juice company on national interest grounds, even though the business was already owned by a Japanese company. Armstrong cited this as an example of “exaggerated concerns” surrounding foreign takeovers of companies perceived to have been bought for strategic reasons.
For Armstrong, the irony is that Japanese buyers and investors met a similar attitude in the first wave of investment into Australia in the 1970s and 1980s. That is no longer the case with the Woodside deal and a $5.8bn takeover of a Tasmanian software tools company by Japanese chipmaker Renesas in February proving uncontroversial. Armstrong says Japanese companies were once treated with suspicion and investment was kept quiet. “Companies want to tell you their story and Australia is championing it,” he said.
nic.fildes@ft.com
Source: Economy - ft.com
