E-Malt.com News article: Japan: New taxation may change Japan’s beer consumption pattern

This summer’s crop of TV beer advertisements from Japan’s big three brewers has not veered far from tradition: salaryman heroes, sassy damsels, partying youngsters and contented pensioners all slaking their thirst to the sound of explosive can-openings and wildly exaggerated gulps, The Financial Times reported on August 19.

The imagery is nearly unchanging; but the industrial war being waged behind it has never been so fraught. Beyond the usual Japanese tussle for share of a shrinking market is the future of a national drinking culture in a country that has still not fully escaped a deflationary mindset.

Beer consumption is also shaping up as a revealing gauge of Abenomics — the so-far inconclusive suite of stimulus and reforms intended by Prime Minister Shinzo Abe to propel Japan back to sustainable growth. The nation’s choice of drinks, say analysts, will reflect how well his plans are working.

Japanese beer consumption has been on a steady downward slide for more than 15 years as ageing demographics and long years of stagnation have taken effect. Diets, parsimony and alternative drinks have dented beer’s crown. Decoratively wrapped cases of beer have gradually lost their status as a standard unit of seasonal gift-giving.

Many of those who do fancy a beer and its effects hold their noses and put up with much cheaper happoshu “beer-flavoured alcohol” drinks in order to trim their spending. In theory, they will revert to real beer if and when Abenomics does its job and they begin to feel wealthier. For now, though, household consumption is still struggling, wages are rising only slowly and happoshu sales are stable.

The beer ad campaigns are also straining against a backdrop of changes under way both in the office and after work. Younger salarymen and women have better things to do after hours than drink with their bosses, and have greater licence than their predecessors to simply decline and go home. In any case, companies no longer spend money financing the beer-centric “team-building” sessions that once swelled the bar districts of Japanese cities, so they happen much less.

Other changes are draining beer from Japan’s social system. Some people even predict the demise of the “toriaezu-biiru” — the glass of beer once instinctively ordered on entering a restaurant to cover the time spent working out what to eat.

Even as the largest beer companies — Kirin, Asahi and Suntory — scramble to secure their competitive positions against one another and within the beer-happoshu tussle, the Japanese taxman could soon play a decisive role. Plans to standardise how beer and its imitations are taxed will test, via differentials of just a few yen, whether this is a market driven primarily by taste or by economics.

The biggest doubt is over the future of happoshu and “third category” drinks, which are low-cost alcoholic concoctions that taste something like lager but deliberately fall short of the legal definition of beer.

Happoshu may have a few genuine fans, but it was primarily developed to cheat the taxman and exploit a system where beer is taxed on its malt content: beer is defined as a product fermented from at least 67 per cent malt extract. Since the first happoshu product hit the market in 1994, Japan’s big three brewers have produced a colourful parade of beer-flavoured alcohol and third category drinks with names such as Clear Taste and Style Free. On average, most have malt contents of around 25 per cent and cost about Y55 less per 350ml can than real beer.

The government, casting around for sources of tax revenue, is now considering a unification of the tax rate for all beer types. Makoto Morita, a drinks sector analyst at Daiwa Securities, says he expects the government to announce its plans along with other tax amendments slated for December. The new beer tax regime, which would probably be phased in over years, would lower the tax on real beer, while raising it on happoshu. The expected result would be happoshu priced at around Y20 less than beer — a small enough discount, perhaps, for taste to triumph.

Whether it is Abenomics or the taxman that hurts happoshu sales first, the brewers already know they have work to do, as they expect the marketing focus to return wholeheartedly to real beer, where premium products will drive margins.

Some may decide it is time to dispense with the tired old norms of beer advertising.


21 August, 2015