Japan, 2001: A Beer Oddity

Although in 2001 value sales of beer continued to fall manufacturers were able to take solace in the fact that overall volume sales were up by 2%, thanks largely to the influence of the domestic economy segment. Happoshu the low malt, low priced quasi beer had succeeded in raising overall consumption by offering reasonable tasting and more importantly a cheaper alternative to standard beers.

The development of low priced alcoholic drinks characterised by happoshu largely owed their success to the fact that they dovetailed well into trends of financial retrenchment born of Japan’s deepening economic crisis.

Haaapposhuuuuu!!!! Standard beer catches a cold

Asahi’s reluctance to introduce its own happoshu until February 2001 indicated that low malt success came at a price, namely that of profit margins as regular beer drinkers traded taste for price leaving brands such as Kirin’s Lager Beer faltering. The great stir created by the launch of Asahi’s Honnama happoshu helped the economy segment surge forward for yet another year with volume increases of 40%, the seventh straight year-on-year gain. Predictably, standard beers continued to fall, this time by almost 10% but the phenomenal success of happoshu aided by an advertising war between Kirin and Asahi resulted in an overall 2.5% volume increase in the Japanese beer market.

Bar brawl, Asahi and Kirin slug it out

The most significant development in the Japanese beer market during 2001 came as Asahi, after 46 years in the wilderness, came back to lift Japan’s heavyweight brewing crown. Kirin who had largely spent the previous decade fighting a rear guard action against the seemingly unstoppable Super Dry brand finally accepted defeat in summer 2001. Although Super Dry had been the focus of Kirin’s attention since its dramatic rise to prominence during the late 1980’s the final blow came as if a ‘rope a dope’ straight out of Ali’s locker. Honnama, Asahi’s first happoshu, emblazoned in distinctive red livery hit the shelves in February and by July Kirin, unable to compete, hit the canvas.

Fists of fury, a very public encounter

Even by Japanese standards, the advertising war for brand dominance reached new heights as Asahi heralded the arrival of its much-anticipated first happoshu brew with the red storm-advertising blitz. Red storm saw 4,000 Asahi employees hit the streets with bill posters, organised shop displays, and on the nations television screens those red cans were seen to fizz through the air like hand grenades during ad breaks. Kirin retaliated with its own ‘Blue Lightning’ advertising offensive, a phrase coined after the distinctive blue livery of its own Tanrei happoshu brew, “Kirin Beer” the slogan used to defuse the danger posed by Asahi’s red grenades. Promotions on such a grand scale intensified interest in beer and enlivened media speculation on which company would emerge in 2001 as Japan’s number one brewer.

2002 what a difference a year makes

Ironically Asahi’s entry into happoshu, although stimulating strong growth within the economy segment in 2001, in many ways began a sequence of events that would jeopardise the foundations of Japan’s dual beer market. With revenues falling due to the success of economy brands, manufacturers were unable to afford the kind of marketing effort that had seen Asahi’s flashy entry in 2001. Sales of happoshu although buoyed by the introduction of several new brands including Kirin’s Gokunama and Suntory’s Adnama failed to emulate the previous year’s spectacular growth with volume gains only up by 14%. Of greater concern was the performance of value sales, which suffered as price cuts came as both Suntory and Kirin fought to undermine Asahi’s position in the segment. With rival brands openly competing on price, manufacturers found it harder to substantiate claims that happoshu was a legitimate beverage in its own right and not a rouse to boost volume sales by means of a tax loophole.

Get tanked up! Government and brewers at war

For how long the alliance between brewers and consumers can resist tax increases on happoshu brands is unclear, however, the spate of price cuts in the happoshu segment which characterised developments in 2002 appears to have undermined their position. Brewers had won out before 2002 with the argument that an economy beer segment promoted product innovation and was in the best interests of cash strapped consumers. A price war in the first half of 2002 however suggested the opposite with falling prices clearly aimed at encouraging volume sales to the detriment of profits and product innovation. With the central pillar of the brewers argument collapsing, new tax proposals for autumn 2002 are likely to reform beer taxation especially as Prime Minister Koizumi will oversee the new legislation personally.