Craft beer could revitalise beer market

Sapporo’s purchase of San Francisco’s Anchor brewery needs to be viewed against recent developments in the Japanese market. Beer production has declined for the past decade to 55 million hl in 2016, according to the Barth Report, which included real beer, low-malt “happoshu” and zero-malt third-category beer, while craft beer has slowly risen to control between one and two percent of the market. There are currently over 260 small breweries in Japan.

Worse still, for the Japanese Big Brewers, US craft beer exports to Japan grew 22.6 percent in 2016, according to the Brewers Association, compared to just five percent growth in 2015.

In a market, where five large brewers (Kirin, Asahi, Sapporo, Suntory and Orion) jealously guard each percentage market share, the rising popularity of craft beer must hurt like hell, especially if one of their kind appears to get a head-start over the others. Late last year, Kirin bought a 24 percent stake in Brooklyn Brewery and the two announced they will roll out the Brooklyn brand in Japan.

Although it has not said what its strategy for Anchor will be in Japan, Sapporo would be daft not to explore opportunities there as well.

Recent changes in the country’s Liquor Tax Law, which came into force on 1 June 2017, might help.

Despite the fact that the law was meant to restrict beer price wars between the big retailers by outlawing sales of beers below cost prices, in order to protect small family-run liquor stores, the law will have the bizarre effect of making pricier craft beers more competitive by narrowing the prices between craft and mass-produced beers.

The law will come into effect in several stages. In 2020, the liquor tax on quasi-beer, which contains less than 66 percent malt, will be increased. In 2026, the same tax rate as “real beer” will be applied to it.

As was reported, the liquor tax on quasi-beer per 350 ml is 47 yen (USD 0.43), while the tax on regular beer is 77 yen (USD 0.70). The tax on “third beer” – that is beer-like beverages that contain no malt at all – is 28 yen (USD 0.25). A domestic beer can cost between USD 1.70 and USD 4.50.

Japan’s long-term economic stagnation has unfortunately boosted the popularity of quasi-beer and beer-like drinks, which brewers churned out in order to keep up volumes. But craft beer, its minuscule market size and high price notwithstanding, might help revitalise interest in beer.