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A mixed brew

An improving economy has many in the country celebrating, driving up imports. But signs point to the tap running dry.

By ASSOCIATED PRESS
Published August 16, 2006

TOKYO - The flaming barbecue grills aren't alone in whipping up a thirst for cold brew at Shiodome Garden, a rooftop beer restaurant surrounded by flashing neon billboards. Also whetting the appetite is Japan's rekindled economy.

"I love beer," declared Akihiro Seki, a 39-year-old insurance accountant, downing his fifth icy glass in the muggy open air. "We know the economy's getting better, so we feel more confident spending a little extra."

Japanese beer shipments are on the rise for the first time in a decade, as the world's second-largest economy toasts a brisk recovery from years of doldrums. But the future of Japan's $24.8-billion beer industry is anything but bubbly.

Changing tastes, healthier lifestyles and Japan's shrinking population are looming buzz kills for an industry that has undergone painful restructuring during a recently ended decade of economic stagnation.

Struggling to keep the profits coming, Japan's big brewers - Kirin, Asahi, Sapporo and Suntory - are trying everything from diversifying into baby food to expanding into China and introducing soybean beer.

They've had mixed results.

"Until now, the beer market has been shrinking because people wanted cheaper drinks," said Shuji Takimoto of the Brewers Association of Japan. "But just judging by the changing population, the future of beer also looks tough."

The good news is that in the first half of 2006, domestic shipments of beer rose 0.3 percent, the first increase in a decade, as rising wages and consumer optimism encouraged people to dine out.

The Japanese weren't even brewing their own beer until 1872. But by 2004, Japan was the world's sixth-biggest consumer, guzzling 1.7-billion gallons a year. On a per-capita basis, the country is Asia's No. 1, with each Japanese quaffing an annual average of 13.5 gallons - or one 12-ounce can every 2½ days.

But that grand drinking tradition is under attack from several corners.

Wine and spirits are slowly converting taste buds, while health concerns are turning more people off to alcohol.

Meanwhile, Japan's declining population and rising ranks of elderly - at 21 percent, the world's highest proportion 65 or older - mean a future with fewer beer drinkers, not matter how devout.

Sales at Japan's big brewers have been mostly flat in recent years, while profits have been erratic. But results have gotten a lift recently from the introduction of the new beer variants.

Kirin, which just wrested Japan's top-selling beer title from archrival Asahi, has branched into pharmaceuticals and seedlings for cut flowers to diversify revenue. Asahi, which gets 90 percent of its sales from alcohol, announced similar plans in April to buy baby formulamaker Wakodo Co.

Beckoning from over the horizon is a potentially bigger savior in China, the world's top beer consumer and its fastest-growing market, expanding at around 10 percent in 2004. Japanese brewers are ramping up production there as fast as possible.

Leading the way was Suntory, which began brewing beer in China in 1984. In June, it bought Chinese operations from Australia's Foster's Group Ltd. and controls about 60 percent of the booming Shanghai beer market.

Asahi is setting up its fifth beer plant in China run via joint ventures. And Kirin plans to build a brewery in southern China's Guangdong province and buy out its local partner to make Zhuhai Kirin Brewery a wholly owned subsidiary - an investment of about $87-million.

Profits are hard won because of historically low prices, however, and Japanese brands still trail other foreign competitors.

And unlike their U.S. and European rivals, Japanese beers face a unique barrier in a country that harbors bitter memories of Japanese militarism during World War II. Especially if your name's Asahi - or "rising sun" in Japanese.

Last year, Asahi beer was temporarily yanked from shelves in a Chinese boycott triggered by lingering anti-Japanese outrage.

[Last modified August 15, 2006, 23:13:08]