Japan: Suntory plans to increase whisky prices

Suntory Holdings CEO Takeshi Niinami has told Time magazine: “we have to brush up so that local consumers think that our brands are more premium than before, so that we can ask for higher prices”, The Drinks Business reported on October 14.

Niinami, who celebrates a decade as Suntory Holdings CEO this month, has revealed that the Japanese company plans to increase its whisky prices to keep up with a “higher tariff world”.

The CEO was asked about navigating “geopolitical headwinds”, particularly recent discussions about raising tariffs on whisky. In response, Niinami said: “First, we have to increase gross margins by efficient operation in our factories. And we have to brush up so that local consumers think that our brands are more premium than before, so that we can ask for higher prices. Second, we produce locally.”

Suntory Holdings, which celebrates 125 years of business this year, has grown to the third-largest spirits producer worldwide under Niinami’s tenure. The company — owner of Yamazaki Japanese whisky as well as Jim Beam, Maker’s Mark and Macallan — is now worth $11 billion.

Its CEO also shed light on the company’s focus on the ready-to-drink (RTD) category. He said: “For RTD, we can find co-partners and we [use] concentrate, just like the [Coca-Cola] model. So we have to make use of innovation to overcome the situation of the higher tariff world.”

Suntory is adapting to a changing society in which consumers are “drinking less”, Niinami told Time. “What we can do is make use of our strengths, that is RTD, because we are by far the number one in Asia, and we have the research and development capability in Japan, Shanghai, Singapore, and Kentucky. So make use of our R&D capabilities in adapting to the changing landscape of especially young people.”

He explained the impact of Covid-19 on drinking habits worldwide, arguing that an increase in spending was followed by a sharp downturn as “people spent all the money they allocated to drinking premium spirits”.

He said: “Right after Covid there were so many big parties, [everyone was] drinking a lot! Because at the time of Covid drinking at home was a frequent habit very much embedded in people’s lives. People ended up with a lot of cash because they didn’t spend so much in restaurants, and a lot of people got subsidies from their government, so their pockets were full. So that created a huge party in the industry and very good times. But now the party is over; I think people spent all the money they allocated to drinking premium spirits. Secondly, many of the young generation, like Gen Z, don’t drink or drink less. So, because of those factors, we need to respond to the market and happen to have the good skill sets of RTDs.”

Suntory was founded initially as a retailer of imported wines, before diversifying with its own fortified variety, and then opening Japan’s first malt whisky distillery in 1923.

14 October, 2024