British-based Independent Franchise Partners (IFP), which owns a 2% stake in Kirin, has called on the company to concentrate on beer, shed its investments in cosmetics and drugs, and use the proceeds to buy treasury shares worth 600 billion yen (£4.35 billion).

It has also offered a compromise, saying it would drop its demand for asset sales provided it makes its board more independent by adding two directors it has proposed, and that it conducts a rigorous review of Kirin's business strategy.

Kirin CEO Yoshinori Isozaki said the company had asked the two people in interviews for their views on "Kirin Vision 2027" - a plan to use its fermentation expertise to expand into areas, such as biotechnology, food and health over the next several years.

"Unfortunately, they did not know anything about Kirin," he told reporters on the sidelines of a meeting with investors, preparing for a battle with IFP at a March 27 annual general meeting (AGM).

"In the end, we decided that members being proposed by the company are more appropriate to achieve our 2027 vision," he said.

Proxy battles are rare in Japan's consensus-driven economy, but have been gaining momentum as Prime Minister Shinzo Abe has pushed for stronger corporate governance.

The names proposed by IFP are Nicholas Benes, a former investment banker who helped to draft Japan's corporate governance code, and pharmaceuticals executive Kanako Kikuchi.

Benes, who runs the non-profit Board Director Training Institute of Japan and has sat on many boards, said the CEO's comments underscored Kirin's unwillingness to hire directors who may question its existing strategy.

"Clearly, the litmus test of whether you're selected by them is whether you pledge allegiance to the flag of the 2027 strategy," he told Reuters.

He said he did not necessarily back IFP's views and that his practice was to avoid forming an opinion on a company's strategy before studying full internal data.

Kirin has said its investments in pharmaceuticals firm Kyowa Kirin Co Ltd and cosmetics company Fancl Corp were crucial given a decline in domestic beer consumption and a global shift towards healthier living.

Both investors and analysts have mixed views, with many supporting Kirin's push outside beer but also unsure whether its investments will pay off. Kirin shares are down around 10 percent year-on-year while the Nikkei 225 average is flat.

Isozaki said he did not know how many of the company's investors supported IFP.

By Ritsuko Ando