Kirin’s subsidiaries distance themselves from Myanmar military scandal

Two breweries in the UK which were purchased by a subsidiary of Japanese drinks giant Kirin have attempted to reassure customers they are not “funding atrocities” in Myanmar.

(Photo: Fourpure)

London-based Fourpure and Huddersfield’s Magic Rock Brewing have both distanced themselves from an Amnesty International investigation that revealed their parent company, Japanese brewer Kirin, has “funded atrocities” committed by Myanmar’s military against the minority Rohingya population.

In a statement shortly after the news broke, Magic Rock said that Lion Little World Beverages, the brewers’ parent company which itself if a subsidiary of Kirin, “does not have any stake in or control over Kirin’s operations in Myanmar”.

“However, aligned with our commitment to human rights, we continue to advocate to find a resolution to this difficult situation as quickly as possible.”

London-based Fourpure issued a similar statement at the same time, which said that “when drinkers buy a Fourpure beer, they can be assured that any profits will remain in the UK.”

Kirin owns Myanmar Brewing as part of a joint venture with Myanmar Economic Holdings Limited, a military conglomerate led by commander-in-chief Min Aung Hlaing, who is accused of leading the alleged military-backed genocide of the area’s Rohingya Muslim minority.

Kirin also owns Fourpure and Magic Rock through its Australian subsidiary Lion. The latter acquired Bermondsey-based craft brewery Fourpure for an undisclosed sum in 2018, followed in March 2019 by the purchase Huddersfield’s Magic Rock Brewing Company.

According to Amnesty International, Kirin’s Burmese subsidiary company, Myanmar Brewery, made three donations amounting to $30,000 between 1 September and 3 October 2017. The brewer’s financial ties with the military has led to its Australian subsidiary facing backlash whenever it makes a new investment or acquisition. Little Lion World faced criticism last December when it took over US craft brewer New Belgium Brewing, which let to founder Kim Jordan insisting the company was “dedicated to being a force for good”.

The UK announced sanctions against Min Aung Hlaing and his Deputy Soe Win for their alleged involvement in human rights violations against the Rohingyas in July this year.

It is common practice for multinationals to separate their finances depending on where their subsidiaries are based, particularly when there could be ethical concerns.

For example: a shipping company that deals with a UK commercial bank may need to refuel in a country that has trade sanctions imposed on it by the UK government. The bank could theoretically still work with that company if it opens a separate account with another lender for the sole purpose of refuelling in the sanctioned country. That would mean the financial transaction (i.e. refuelling) in the sanctioned country is separated from the business as a whole.

A spokesperson for Lion Little World Beverages told the drinks business that both of its Magic Rock and Fourpure brands have “no stake in or control over Kirin’s operations in Myanmar, but we’re advocating strongly for a resolution to this complex situation as quickly as possible.

“While we know it in no way diminishes the need for an outcome that addresses the concerns raised in the recent Amnesty International report, the profits we make here, stay here. When drinkers buy a Fourpure or Magic Rock beer, they can be assured that profits remain in the UK.”

Lion focuses on developing craft beer brands by refinancing profits generated by Lion Little World Beverages, the company’s craft drinks arm, and by subsidiaries such as Fourpure. This means that profits are never directly transferred to Kirin, and that money can not be subsequently directed to its Myanmar business.

However, a former associate director at HSBC said that just because the profits from one subsidiary are shielded from the parent company “doesn’t mean the company sees no benefit.”

“Ring-fencing of funds is common practice to navigate sanctions and banking restrictions but despite this, the overall group still benefits,” he said.

“Money is by definition fungible, meaning that cash stored in one part of the group (even if ring-fenced) contributes to the group’s revenues, profits and cash – all of which are key metrics that impact anything from share price to year end reporting and negotiations with clients.

“Just because funds are ring-fenced, doesn’t mean the company sees no benefit.”

Kirin launched an independent probe into its beer businesses in Myanmar last June following pressure from human rights campaigners. It has appointed Deloitte Tohmatsu Financial Advisory to review its Myanmar business as “a matter of urgency”.