Brooklyn Brewery deal marks one of the first by a Japanese firm in specialty-brewing arena

By Atsuko Fukase and Tripp Mickle 

Kirin Holdings Co. of Japan said Wednesday it agreed to take a minority stake in Brooklyn Brewery, in one of the first investments by a Japanese company in a U.S. craft brewer.

The investment will give Kirin a 24.5% stake in Brooklyn Brewery, the U.S.'s 12th-largest craft brewer by volume. Financial terms weren't disclosed.

Kirin, Japan's second-largest beer maker by domestic market share, said it would set up a joint venture with Brooklyn Brewery in January, aiming to expand the craft beer market in Japan and possibly developing an original product in the future. The joint venture will be 60% owned by Kirin and 40% by the New York brewer.

Kirin said the investment was a response to Japan's shrinking population and the declining popularity of traditional beer brands among younger drinkers. Shipments of beer and related brews in Japan fell to about 425 million cases in 2015, compared with a peak of 573 million cases in 1994, according to the Brewers Association of Japan.

"The country's top four beer makers are competing ruthlessly with each other, so with value-added products like craft beers, we can get our heads above such competition," said Takayuki Fuse, the president of Kirin's core beer unit, at a news conference.

Mr. Fuse said Kirin also plans to do business with Brooklyn Brewery in Brazil, where the Tokyo brewer has a presence through an acquisition of its local brewery Schincariol in 2011.

With the investment, Kirin joins a host of Japanese companies that are using acquisitions to expand beyond traditional markets. Rival Asahi Group Holdings Ltd. on Tuesday closed a $3.5 billion acquisition of several former SABMiller brands, including Peroni and Grolsch.

Brooklyn Brewery, based in the borough's neighborhood of Williamsburg, was founded in the late 1980s. Its growth has accelerated in recent years as the borough where it was born has gained prominence and cultural influence world-wide.

The brewery produced 277,000 barrels of beer last year, up from 169,000 barrels produced in 2010, according to industry tracker Beer Marketer's Insights.

Brooklyn Brewery is one of the few American craft brewers that has worked to build an international business. In 2014, the brewery and Carlsberg A/S opened a joint-venture brewery in Stockholm.

The American brewery is privately held under the control of the Ottaway family. Robin Ottaway, the brewery's president, said at the news conference that he and his brother, Chief Executive Eric Ottaway, had been approached by several brewers about a possible acquisition, but they preferred Kirin's proposal for a minority stake.

Brooklyn Brewery is gearing up for an expansion. This year it signed a 40-year lease for 75,000 square feet at Brooklyn's Navy Yard, where it plans to have offices, a beer garden and brewery operations.

"This helps us execute those strategies," said Eric Ottaway. "We did not want to have to take on crushing amounts of debt or go to private equity and face pressure to flip the company. This gives us long-term, patient capital."

First Beverage Group advised Brooklyn and Nomura Holdings Inc. advised Kirin.

Write to Atsuko Fukase at atsuko.fukase@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

October 13, 2016 02:48 ET (06:48 GMT)