Australia's biggest brewer Lion has been hit by sluggish earnings growth, discounting and intense competition in its dairy division, forcing its Japanese conglomerate owner Kirin to issue a profit warning which sent its shares plunging on the Tokyo stock exchange.

Kirin Holdings fell the most in almost a year in Tokyo trading this afternoon after cutting its 2015 sales forecast on weakening demand in its home market of Japan and a worsening outlook for its Australian subsidiary, which sells a portfolio of beers as well as milk, yoghurt and other dairy products.

The earnings disappointment is further proof of a worsening market for dairy producers in Australia following the introduction of $1 per litre milk by the leading supermarket chains nearly two years ago and the rush by customers away from branded dairy foods to private label products.

Kirin shares fell more than 3 per cent, its biggest slide since November, when the conglomerate announced its annual sales would reach around 2.3 trillion yen by 2015, significantly lower than an earlier projection of 3 trillion yen.

The blame was laid squarely at the feet of its Australian dairy operations, which sit under its Lion subsidiary.

“Domestic [Japanese] liquor and beverage business didn't grow as expected and growth in Australia's dairy business wasn't enough,” Kirin president Senji Miyake said at a press conference in Tokyo.

Earlier this year Kirin forecast 2012 earnings would land below analyst estimates amid declines in its Lion unit in Australia and in the Japanese drinks market. Kirin has forecast pre-tax earnings this year of $96 million from Lion, its Australian dairy, brewing and soft drink business, lower than the $350 million target set in 2010.

Lion's dairy division, which owns Pura milk, King Island cheese and Yoplait yoghurt, reported an 8.9 per cent fall in sales for the first half of 2012 to $1.317 billion while EBIT fell 27 per cent to $49.8 million.

Lion overtook market leader Foster's as Australia's biggest brewer earlier this year following continued market share gains by its XXXX Gold and Toohey's brands as well as picking up distribution deals for Corona, the country's most popular imported beer, Guinness and Stella Artois.