Japan: New Japanese whisky regulations to give consumers more confidence in the products
New regulations governing the production of some Japanese whiskies could give consumers more confidence in the products, The Spirits Business reported on April 29.
These are good times for Japanese whisky, whose first distillery – Suntory’s Yamazaki – celebrated its centenary last year with special anniversary bottlings of Hibiki 21 and Yamazaki 12, among others.
The company announced a ¥10 billion (US$77 million) investment in Yamazaki and Hakushu that will include upgrading the visitor centres and installing floor maltings at both distilleries. There was also a fond cinematic tribute by the director Sofia Coppola, whose film Lost in Translation did a great deal to add Japan’s lustre in the West when it came out in 2003.
Since then, it has been a story of uninterrupted growth for Japanese whisky, with exports up by 1,400% in the past decade according to Takashi Harada, brand manager at Kirin Holdings, whose Fuji marque made its foreign debut four years ago in France. In September, Pernod Ricard took over its distribution in 13 European markets, which will go some way to help Kirin achieve its goal of a tenfold increase in net sales by 2030 from US$2.7m in 2022.
The Japanese Tax Agency valued whisky exports at ¥56 billion (£394m) in 2022, led by China on ¥19.6bn, followed by the US on ¥10.9bn, and France on ¥5bn. While this marks a huge increase on the ¥15bn shipped in 2018, exports still account for less than 10% of production. “The demand for Japanese whisky is escalating, paralleling the growth in distilleries,” says Ian Chang, master blender at the new Komoro Distillery. “However, the authenticity of whether a single malt whisky is 100% Japanese is a matter for further scrutiny and regulation.”
He continues: “Looking ahead, the health and competitiveness of the Japanese whisky market hinge on the establishment of stringent regulations governing production methods. This will ensure quality and authenticity, critical factors for long-term success.” Rather late in the day, in February 2021, the Japan Spirits & Liqueurs Makers Association (JSLMA) announced a set of rules similar to those of Scotch whisky, such that Japanese whisky would have to be 100% distilled, aged and bottled in Japan.
“It’s a very sensitive topic,” says Marc Torterat, brand director at Marussia Beverages, whose whiskies include Hatozaki. “The regulations that will be in force in April 2024 are trade body regulations. It’s not exactly a law – it doesn’t apply to all players, only to members of JSLMA. We’re part of it, and we are highly supportive because the rules will provide more transparency in time.”
When the rules were announced there was a week of buzz in the media, mainly in the trade press, revealing that not all Japanese whiskies were quite what they seemed, or claimed to be. But how much drinkers really cared is debatable. Torterat says at events like Whisky Live Paris, “less than 1% of consumers ask questions about it”.
The bulk imports of Canadian or Scotch whisky that miraculously become ‘Japanese’ after a quick rattle down a Japanese bottling line won’t disappear, though the big guns, led by Suntory and Nikka, are signed up to the new regulations. “We are proud that every Japanese whisky product we export globally already meets the new standards,” says a Suntory spokesman.
Meanwhile Nikka’s website admits that Nikka Days and Nikka from the Barrel, do ‘not meet all the criteria of “Japanese whisky” defined by the JSLMA’, which is all very transparent, but then again, no Scotch, Irish or American whisk(e)y has ever had to make such a confession.
“Obviously the stuff that’s heavily blended with distillate from other countries is really finding its joy, because it’s able to sell for so much less than anything wholly distilled in Japan,” says Chris Uhde, vice-president of San Francisco’s ImPex Beverages, which imports Fukano, Hakata, and Ikikko. These are so-called koji whiskies, distilled from polished rice or pearled barley and mixed with koji – the same mold used in sake and soy sauce. They fall outside the JSLMA definition of ‘whisky’, though they pass the test in the US, and are arguably the most uniquely Japanese of all whisky. They have a niche following in the US, and Uhde likens them to “punk rock bands playing basement clubs”, in contrast with Suntory’s top-selling Toki brand. “You can’t go into a bar without tripping over a bottle of Toki,” he says. “It’s the Jameson of Japanese whisky.”
In Japan, Suntory has increased storage capacity by 160% in the decade to 2022, according to a spokesman. It has also suppressed demand by ramping up prices. In the US, Yamazaki 12 has jumped from US$40 to US$160 in just a few years, claims Uhde, who has a word of warning for all the new Japanese brands hoping to make it in the US. “People look at the US as the promised land, but the fact is the second you go above the US$50 mark, sales drop off significantly unless you have real brand cachet behind you,” he says. “It’s hard for US consumers to swallow the idea of paying US$150 for a three-year-old single malt from Japan.”
In the UK, supply constraints have “definitely eased,” says Chris Seal, managing director at Specialty Brands, which imports Nikka. “Of all the range, apart from Nikka Days, we are still being allocated, but we’re getting bigger allocations.” With demand “still very strong” he believes the brand benefits from its wide spread of price points from £45 for Nikka Days in Waitrose up to £300 bottlings for independent retailers and five-star hotels. In 2023, he says: “We were able to release the first age statement from Nikka that I’ve seen for seven or eight years, the Yoichi 10-year-old.” Clearly the brand owner had been laying down more stock.
Before the pandemic, France was the second-biggest foreign market, but it has been pushed into third place by the meteoric rise of China, which accounted for a third of exports by value in 2022, up from 8% in just four years. “French people love Japan,” explains Nicolas Rua of the French-based online specialist retailer Uisuki. “But people are now turning to sake and umeshu (plum liqueur) because Japanese whisky has become very expensive.”
He recalls that only a decade ago the spirit was struggling to catch on in France. “At the beginning, La Maison du Whisky couldn’t sell Karuizawa – there was no interest,” he says of the fabled distillery that closed in 2001.
Today it’s become the world’s most collectable Japanese whisky, while its name has been revived by the new Karuizawa distillery that went into full production last year. Branding itself as ‘the rebirth of a legend’, it aims to produce a whisky as close to the original as possible. Nothing will be bottled for at least a decade, although private casks are being sold through its partner – Dekantā. Talking of the overall category, Liam Hiller, Dekantā’s operations manager, says: “Demand is still very strong, and while there are a lot of new distilleries springing up, they don’t necessarily have the capacity to serve the international market. Relatively soon it will be more akin to Scotch whisky’s landscape, where consumers have more choice.”
Torterat agrees: “The market will fragment. Until now Suntory and Nikka have been dominant, but I’m sure there’ll be new players challenging them, and consumers will become more demanding. Until a few years ago, to some extent the market was very much commodity-based.” He has also noticed greater availability in the US, where supply tensions have eased in part because the category’s “growth is decelerating from what was expected two or three years ago”, he says. Hiller adds: “Supply is still not where it needs to be for international markets. When the shortage happened, Suntory and Nikka instantly ramped up production, but it’s not quite there yet.”
One of the most exciting newcomers is Komoro, owned by Karuizawa Distillers (no relation), where Ian Chang, formerly of Taiwan’s Kavalan, says: “The landscape of Japanese whisky distilleries is burgeoning, reflecting a spirited and competitive market. This growth is a testament to the industry’s vibrancy, but also brings to light the survival of the fittest. Over time, we’ll see which distilleries not only survive but thrive, based on quality and sustainability.” Komoro plans to release younger age-statement whiskies, in 2026, but these will eventually be withdrawn, when a 12-year-old and above will take over.
The scarcity and high price of Japanese single malts is because distillers never laid down sufficient stocks as they met the demand for young whisky in Japan, which was drunk in Highballs. It’s still a huge market, from the four-litre jugs of Suntory Kakubin in Highball machines and endless RTDs, to gourmet Highballs served in top whisky bars with beautifully carved ice balls. Suntory says 17.8m cases of Japanese whisky were sold in Japan in 2021, up from 8.2m in 2008, but way below the 42.3m case peak in 1983. Juggling domestic and international demand will be challenging, as will keeping consumers loyal despite the hefty price premium. But if Japanese whisky can do that, the good times look set to continue.
30 April, 2024
