Kirin Holdings Co. and Suntory Holdings Ltd. have begun negotiating a merger aimed at surviving the shrinking beverage market amid the low birthrate and aging population, sources said July 13.

The merged entity would be Japan's top firm in the beer and soft drink markets, and one of the world's largest beverage companies. Combined, the two firms had consolidated sales of around ¥3.82 trillion in the business year that ended in December 2008.

Analysts said the deal would drastically alter the power structure of the international food industry and could trigger further realignment.

The two food and beverage makers will aim to reach an early agreement, ironing out details, including whether to unite under a holding company, the sources said.

In addition to addressing declining domestic demand, Kirin and Suntory hope to strengthen their financial standing to remain competitive in the global market through a foray into high-growth foreign markets, and active mergers and acquisitions overseas, the sources said.