Japanese brewers turning to craft beer

Major Japanese brewing companies are stepping up development of craft beer amid falling domestic demand. Domestic beer shipments declined for 9 consecutive years until 2013 when they hit a record low. One reason is that younger drinkers are choosing other beverages. In an effort to reach new markets, beer companies are developing craft beers with unique flavors and aromas. They're produced mainly in microbreweries. Kirin Brewery will set up small brewing facilities at its plants in Yokohama and Tokyo. The company will start selling 10 varieties of craft beer online later this year. A Kirin official says craft beer accounts for less than 1 percent of Japan's beer market, while it amounts to around 14 percent in the United States. He says there is potential for growth. Asahi Breweries plans to launch 4 varieties of craft beer beginning in February. Sapporo Brewery is also considering increasing production of craft beer this year.

 

NHK World (January 2, 2015)

Unhappy hour for Kirin as its beer sales tumble in Japan

by Ritsuko Shimizu and Chang-ran Kim

Reuters

 

Kirin Holdings Co. is falling behind in the beer market with no clear fix in sight as it extends a multiyear sales slide and gives up market share to rivals more in touch with changing consumer tastes.

Once the undisputed leader with more than half of Japan’s beer market, worth roughly ¥4 trillion, according to Euromonitor, Kirin relinquished its crown to archrival Asahi Group Holdings Ltd. in 2001 and lost more ground this year.

While other brewers hit a sweet spot with high-end offerings like Suntory Holdings Ltd.’s The Premium Malt’s and Sapporo Holdings Ltd.’s Premium Yebisu, Kirin stuck with its tried-and-true brands, missing out on a premium segment that grew by nearly a fifth in the first half of 2014.

Its sponsorship of Japan’s World Cup soccer team fell flat when it made an early exit, curbing demand for its limited-edition Samurai Blue lineup named after the team. Competitors also went after the restaurant and pub business, even displacing Kirin from one chain in which it is a major shareholder.

Data released last week showed that Kirin’s beer sales in January-June sank 6.6 percent from the previous year — the biggest first-half fall in four years — making it tough for the 107-year-old company to achieve its 2014 target of a 0.1 percent rise.

Its market share also fell, to 33.1 percent from 35.0 percent in 2013, while Asahi gained 1 percentage point to 38.1 percent and third-ranked Suntory rose 0.4 point to 15.5 percent.

“Nothing’s going right at Kirin these days,” said Satoshi Fujiwara, consumer analyst at Nomura Securities Co. “They need to be more consistent in their focus on brands.”

Last year, Kirin poured its energy into ensuring a successful launch of the Sumikiri “third beer” — an inexpensive class of beerlike drinks made with little or no malt and taxed at a lower rate than regular beer.

The brand was a hit with 5 million cases sold in 2013, but sales have since tapered off as the company shifted its focus on rebuilding the flagship Ichiban Shibori and its core “third beer” brand, Nodogoshi.

Kirin also shifted its attention abroad in recent years to make up for a shrinking market in aging Japan, including its $2.6 billion acquisition of Brazil’s Schincariol in 2011.

But its overseas operations have also disappointed. Without reviving its crucial home market, Kirin runs the risk of struggling on both fronts, unable to earn enough to beef up its business overseas and reverse a decline in operating profit.

Kirin blamed the first-half sales drop on comparatively weak marketing and the effects of last year’s strong Sumikiri sales. But the fallout from the lack of a major premium beer product is growing.

The brewer faces a dilemma because it has long marketed Ichiban Shibori — called Kirin Ichiban overseas — as a premium beer in all but name, touting its first-press brewing process and all-malt formula. That is one reason why it has held back from developing a premium beer, fearing dilution of the Ichiban brand.

“We are focusing our resources this year on a smaller selection of brands, with an extra emphasis on Ichiban Shibori,” said Hiromasa Honda, deputy director of Kirin’s investor relations department. “We won’t spread ourselves thin with new products.”

Meanwhile, Asahi hit the jackpot with a premium version of its popular Super Dry lager during the traditional gift-giving season last summer. The product had been limited to box sales for seasonal gifts but proved so popular that Asahi added it to the regular lineup in February.

Kirin introduced a gift-sales-only Ichiban Shibori Premium this summer but said it has no plans to sell it year-round.

Analysts said it would take time for Kirin to come up with a viable premium beer strategy.

“(Asahi’s) Dry Premium has been this successful because they’ve got an extremely strong base product in the Super Dry,” said Barclays Securities Japan Ltd. analyst Takayuki Hayano. “What Kirin needs to do first is to build that strong base in the Ichiban Shibori and Nodogoshi before it goes for a premium version. In that sense, their strategy isn’t misguided.”

Kirin said it would announce a “new project” in its beer business Wednesday, declining to go into specifics.

Kirin is also looking vulnerable in restaurants and pubs, a segment that accounted for 48 percent of the total market last year. Asahi has moved in aggressively, investing about ¥2.5 billion in restaurant and pub chain operator Chimney Co., eventually taking customers away from Kirin at some of its locations.

In April, Kirin also lost a deal to Suntory at grilled-chicken restaurant chain operator Torikizoku Co. despite being one of its top shareholders.

“We had lots of customer requests to carry The Premium Malt’s,” a Torikizoku spokesman said. “It fits right into our policy of offering high-value premium beer for ¥280, so we made the switch.”

While Kirin says it will stick to its strategy of drumming up sales for its core products, Nomura’s Fujiwara said that in the longer term, he wanted to see the company develop a product in a new genre — something it has traditionally excelled at — much like it did with the no-alcohol Kirin Free five years ago.

“It won’t happen in the short term, but they have a chance to come back,” he said.

The Japan Times (July 14, 2014)

Neue Welt and Bergen Bräu Are No More

Looks like Daiei’s store-brand new genre “Neue Welt” is no more. I went to Daiei’s Imaike branch in Nagoya in mid-May 2014, but Neue Welt was nowhere to be found. Instead, the supermarket was filled with Aeon’s store-brand beer TopValu Lager and new genre TopValu Barreal. Too bad, I really wanted to give it a try before it goes into oblivion.

The low-priced Korean import was probably phased out after Aeon acquired top stake in Daiei, making the smaller rival retailer a subsidiary. Aeon succeeded in raising its stake in Daiei to 44.24 percent from 19.89 percent in August 2013.

Neue Welt was launched by Daiei in October 2006, becoming the first new genre to be developed and released by a major retail store.

Along with Neue Welt, Daiei’s other brew Bergen bräu was pulled from the shelves as well. Bergen bräu was the only store-brand happoshu on the market and what’s more it wasn’t a Korean import, but came from Belgium. It hit the market in December 1993, becoming the very first happoshu on the market. In fact, the term “happoshu” wasn’t even in use at that time. Since it could not be called beer, the industry called it “hops” until the word happoshu came along.

Sapporo to revamp popular Goku Zero drink after tax snag

Reuters

Wed Jun 4, 2014 10:34am EDT

* Sapporo production probed, may owe $113 mln extra tax
* Sapporo to change process to avoid risk of tax rise
* Low-tax 'third beer' beverages enjoy rapid growth
* Japan's complex beer taxes draw industry complaints (Adds details of product, relaunch plans, complex regulatory regime)

By Ritsuko Shimizu and Taiga Uranaka

TOKYO, June 4 (Reuters) - Beermaker Sapporo Holdings Ltd said on Wednesday it will tweak the production process for its Goku Zero beer-like drink and relaunch it following a tax snag that may cost the group an extra 11.6 billion yen ($113 million) in liquor taxes.

Japan's fourth-largest brewer said tax authorities had requested data on the production methods for Goku Zero, which is classified as "third beer", a drink made from malt alternatives or a mix of low-malt beer and other alcohol, and taxed at barely one-third the rate of regular beers.

These low-priced alcoholic drinks known as "third-beer" products are a major growth market for Japan's breweries. But Sapporo will now recast Goku Zero as a "low-malt" beer, which will carry a tax rate two-thirds higher than "third beer."

Taxes on beer in Japan vary depending on the volume of malt they contain as a percentage of fermentable ingredients. The regime is highly complex with eight separate categories.
The beer industry has long urged changes to this tax system by the government, which, under Prime Minister Shinzo Abe, is focused on regulatory reform.

The tax authorities are still evaluating whether Sapporo's existing production process for Goku Zero meets the criteria for "third beer." Goku Zero, marketed as a purine- and sugar-free beverage, had surpassed the company's sales targets.

"If the investigation concludes that it does not qualify as 'third beer' it would be a burden on our customers, so we voluntarily decided to change it to low-malt beer," Sapporo Breweries Ltd President Masaki Oga told a news conference.

If Goku Zero cannot be classed as "third beer," the company would owe the additional 11.6 billion yen in tax, based on sales since its launch last June and remaining inventories.
Sapporo's sales volumes in this part of the market rose 43 percent in the January-March quarter from a year earlier, versus 5 percent growth for regular beer and a 4 percent drop for low-malt beer. Its "third beer" volumes matched regular beer sales in the quarter at 5.57 million cases each.

The company had sold 6.13 million cases of Goku Zero as of end-May after nearly one year on the market. ($1 = 102.4300 Japanese yen) (Additional reporting by Chris Gallagher; Editing by Edmund Klamann and Jane Merriman)