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Japanese brewers want to get drinkers drunk faster and cheaper
JAPANESE brewers are discovering a new way to tap the lucrative market of working adults: Get them tipsy more quickly and efficiently.
This domestic segment is becoming more important to beer makers Kirin Holdings Co and Sapporo Holdings Co, as Japan's famously ageing population - the oldest in the world - drinks less. The brewers have released canned drinks with up to 9 per cent alcohol by volume, the highest it can be without being pushed into another tax bracket.
The brewers are promoting the ready-to-drink (RTD) segment in Japan, looking for ways to expand sales as demographic changes and a trend of consumers diversifying their drinking habits has led domestic beer consumption to fall two years in a row.
Euromonitor analyst Akari Utsunomiya said: "It's because consumers are getting more value for their money; they can get drunk without spending too much. I think that is the products' biggest appeal. There's a deep-rooted tendency to save money among Japanese consumers."
The companies are going after consumers such as salarymen, as businessmen are known in Japan, and working women short on time. Executives say there is a desire among some drinkers to get more bang for their buck when imbibing. As a result, the high-alcohol segment is growing almost twice as fast as the ready-to-drink canned mixed alcohol business overall.
Japan's domestic beer doldrums echo the picture globally, with beer sales falling as wine and spirits revenue grows. This has led beverage companies to come up with products targeted to specific demographic groups. Brewing giant Molson Coors Brewing Co in the US has released fruity-tasting beers targeted at 21- to 24-year-olds to attract young drinkers. In Japan, companies are focused on a slightly older demographic, as the population dwindles and fewer people turn 20 - the legal drinking age - every year.
RTD beverages have typically been the less expensive choice for drinkers in Japan as they are subject to a lower tax rate than beer. The drinks in the segment mostly consist of canned chu-hi, made with flavoured mixer, and shochu - a spirit distilled from potatoes, grains or other food bases. In the past, these drinks typically contained 4 per cent to 6 per cent alcohol by volume; now, 9 per cent drinks are more prevalent.
The value of the market for RTD drinks with 8 per cent to 9 per cent alcohol content has nearly doubled to 125 billion yen (S$1.52 billion) from 2013-2017, said market research firm Intage SRI. Comparatively, the RTD market grew by 31 per cent in value.
Soon-to-be retiree Shiro Abe is part of the consumer base fuelling that growth. The value of the higher alcohol drinks resonates with him. The 58-year-old, who was in Tokyo to celebrate his retirement, said: "For an old man, getting drunk cheaply and quickly is very nice."
The appeal of high-alcohol drinks is rooted in other factors in Japan, such as high stress related to work and continued economic unease among consumers.
Alcoholism remains an under-reported issue in reputation-conscious Japan, health officials have said. A Ministry of Health survey showed that in 2013, there were 580,000 alcoholism patients in Japan.
Beer companies say they are careful to promote responsible drinking.
These drinks contain significantly more alcohol by volume than other products. A half-litre can of a mixed drink with 8 per cent alcohol is equivalent to about three tequila shots, said an industry group.
Ryosuke Den, a physician overseeing the alcoholic treatment department at Komagino Hospital near Tokyo, said stronger drinks can lead to alcohol abuse. "High-alcoholic RTD is easy to drink, so it makes you drink excessively," he said.
Global drinks makers see Japan as a good market to test concepts.
Coca-Cola Co last month started sales of a lemon-flavoured chu-hi drink, the first for the giant. Kirin intends to build a new domestic factory to increase production for canned mixed drinks. Beer-makers say they have been pushing high-alcohol drinks recently because they have adapted the taste to better suit consumers - less sugary and without the burning bite of some spirits.
Japan's largest brewers all have begun marketing an 8 per cent or 9 per cent chu-hi product. Among them are Suntory Holdings' Zero Strong, Asahi Group Holdings' Mogitate, which has shochu mixed with fresh fruit juice, and Sapporo's Relax, which is flavored with fruit vinegar. The companies also have been marketing pre-mixed cocktail drinks such as whisky-and-soda highballs.
Sapporo Beer president Hideya Takashima said in April: "We're increasing our variety of offerings within ready-to-drink. These types of products are gaining traction in the market."
The value of RTD products makes up about 7 per cent of the Japanese alcohol market, said Euromonitor.
Brewers still generate a majority of revenue from beer in Japan, though with falling sales, they are seeking markets overseas and reaching into areas such as craft beer.
Long-term prospects for this value-driven strategy are unclear. The focus on higher-alcohol content drinks as a way to get drunk less expensively also highlights an issue among Japanese beer-makers - they are not focusing enough on producing premium brews to improve sales and margins, said Bernstein analyst Euan McLeish.
"They've been very innovative in many ways, but they're innovating in the wrong way - they need to innovate upwards instead of downwards," he said. BLOOMBERG