Home / World Business
Tue, Aug 15, 2006 - Page 10 News List

Japan's brewers struggle to prosper

BEER BATTLE Companies like Kirin, Sapporo and Asahi are facing a struggle to remain profitable and are now eyeing the enormous Chinese market as a potential savior

AP , TOKYO

Office workers raise their glasses at a Tokyo rooftop beer garden last week. Japanese beer shipments are on the rise for the first time in a decade as the world's second-largest economy toasts a brisk recovery from years of doldrums. But the future of Japan's US$24.8 billion beer industry is anything but bubbly.

PHOTO: APNWARNING: EXCESSIVE CONSUMPTION OF ALCOHOL CAN DAMAGE Y

The flaming barbecue grills aren't alone in whipping up a thirst for a cold beer at Shiodome Garden, a rooftop beer restaurant surrounded by flashing neon billboards. Also whetting the appetite is Japan's rekindled economy.

"I love beer," declared Akihiro Seki, a 39-year-old insurance accountant, downing his fifth icy glass in the muggy open air. "We know the economy's getting better so we feel more confident spending a little extra."

Japanese beer shipments are on the rise for the first time in a decade, as the world's second-largest economy toasts a brisk recovery from years of doldrums. But the future of Japan's US$24.8 billion beer industry is anything but bubbly.

Changing tastes, healthier life- styles and Japan's shrinking population are all problems for an industry that has already undergone painful restructuring during a recently ended decade of economic stagnation.

Struggling to maintain profits, Japan's big brewers -- Kirin, Asahi, Sapporo and Suntory -- are trying everything from diversifying into baby food to expanding into China and introducing soybean beer.

"Until now, the beer market has been shrinking because people wanted cheaper drinks," said Shuji Takimoto, spokesman for the Brewers Association of Japan. "But just judging by the changing population, the future of beer also looks tough."

The good news is that in the first half of this year, domestic shipments of beer rose 0.3 percent, the first increase in a decade, as rising wages and consumer optimism encouraged people to dine out. Shipments of all beer products, including low-malt beer and no-malt beer, climbed 1.1 percent to 230.66 million cases, its first increase in five years.

The Japanese didn't even brew their own beer until 1872. But by 2004, Japan was the world's sixth-biggest consumer, guzzling 6.55 million kiloliters a year. On a per-capita basis, the country is Asia's No. 1, with each Japanese quaffing an annual average of 51.3 liters -- or one 350 milliliter can every 2 and a half days.

But that grand drinking tradition is under attack from several directions.

Wine and spirits are slowing converting taste buds, while health concerns are turning increasing numbers of people off alcohol in general.

Meanwhile, Japan's declining population and rising numbers of elderly -- at 21 percent, the world's highest proportion aged 65 or over -- mean a future with fewer beer drinkers, no matter how devout.

To bolster sales during the economic slump when drinkers watched their wallets, Japanese beermakers introduced new products to dodge the so-called "taste tax" that accounts for nearly half the price of a can of regular Japanese beer.

The tax applies only to beers containing more than 67 percent malt. So Japanese brewers raced to roll out low-malt drinks, which substitute rice or corn syrup for malt, and even no-malt varieties made of soybeans.

At half the price of full-malt beers, they quickly won over penny-pinching drinkers. The only problem is profit margins on these variants are razor slim, and purists shun them.

"The difference in taste is obvious," says Yukiko Oshima, a beer analyst with Credit Suisse First Boston in Tokyo.

Kirin, which just wrested Japan's top-selling beer title from archrival Asahi, has branched into pharmaceuticals and seedlings for cut flowers to diversify revenue. Asahi, which gets 90 percent of its sales from alcohol, announced similar plans in April to buy baby formula maker Wakodo Co.

This story has been viewed 2303 times.
TOP top