Alcoholic Drinks in Japan 2024 Market Summary
EXECUTIVE SUMMARY
Alcoholic drinks in 2023: The big picture
In 2023, total volume sales of alcoholic drinks in Japan saw a slight decline. However, performances differed widely across the two different channels. The on-trade channel demonstrated a second year of robust rebound as Japan began to move past the COVID-19 pandemic. In May 2023, COVID-19 was reclassified to level five by the government, the same as seasonal influenza, which significantly altered how the disease was managed, and perceived socially. This reclassification meant that the government and local authorities no longer imposed legal restrictions on behaviour, and measures to prevent infection were left to individual discretion. As a result, social life largely returned to its pre-pandemic state, including the resurgence of large group gatherings and drinking parties that had been lost during the pandemic. Nevertheless, on-trade volume sales remained below the pre-pandemic (2019) level.
However, the strong growth in the on-trade contrasted with a decline in the off-trade, as for a second year there was a decrease in demand for at-home drinking as dining out became more common once again. In addition, an increase in production costs led to price adjustments, which also contributed to consumer restraint in purchasing, as higher prices made some people hesitant to buy as freely as before. This shift reflects the complex interplay between recovering social habits and economic factors influencing consumer behaviour in the post-pandemic landscape.
2023 key trends
In 2023, alcoholic drinks in Japan faced challenges and changes, including price increases due to higher raw materials costs and a weaker yen. Meanwhile, a revision in the liquor tax law narrowed the price gap between economy and mid-priced and premium beers, shifting the consumer focus towards the latter.
Despite a robust recovery in on-trade sales following the COVID-19 pandemic, total beer volumes declined slightly due to a drop in off-trade sales, although COVID-influenced lifestyle changes, such as increased working from home, remained to certain extent. The government's reclassification of COVID-19 to a less severe category led to more dining out, boosting on-trade sales, but these did not fully recover to the pre-pandemic level, with the number of bars and pubs seeing a significant decrease from 2019 to 2023.
Asahi Breweries continued its product innovation, especially in beer, with Dry Crystal under the Asahi Super Dry brand targeting younger consumers of legal drinking age. Meanwhile, Suntory Spirits saw success in beer, gaining share with Suntory Nama Beer, also appealing to the same consumer group through strategic marketing and collaborations.
Facing a demographic-driven decline in alcohol consumption, players in the industry continue to innovate, targeting diverse consumer needs with new products. These included Sapporo’s Sapporo Nama Beer Nanamaru, which offers the benefit of lower carbohydrates and purines without compromising on taste, and the reintroduction of Asahi Nama Beer Maruef in various pack sizes to cater to different consumer preferences. The industry’s focus on diversification, and appealing to younger demographics of legal drinking age, are key strategies to counter the overall decreasing consumption trend in alcoholic drinks.
Competitive landscape
In 2023, as trips outside the home increased in the post-COVID-19 era, companies notably focused on promotions that emphasised experiences to increase consumer engagement with their products. For instance, Sapporo Breweries Ltd held Dewar’s Alley Jack in March 2023 at Shibuya and Kobe Sannomiya. Consumers could enjoy pairings of Dewar’s Highballs with food offered at participating establishments, thus creating more opportunities for consumers to interact with the Dewar’s brand in a lively and social setting. Meanwhile, Sumadori, co-invested by Asahi Beer and Dentsu Digital, opened a new bar, THE 5th by SUMADORI-BAR, which specialises in non alcoholic and low alcohol beverages, in September 2023.
Retailing developments
With the lifting of pandemic restrictions in 2023, there was an increase in mobility. As people started going out more, convenience stores, which had been struggling during the pandemic, continued its recovery. The 24-hour operation of these outlets and widespread presence cater to both the ongoing demand for home consumption, and the needs of people making purchases while out and about. Events resuming across various locations contributed to continued growth, as there was an increase in foot traffic. For instance, with COVID-19 being downgraded in classification, there was a noticeable recovery in demand for initial drinking sessions at venues to pre-pandemic levels. However, it was observed that people spent more time at these initial gatherings and often headed straight home afterwards, skipping the second and third parties previously favoured. This change in consumer behaviour suggests an increasing number of individuals purchasing alcohol from convenience stores on their way home to enjoy another round of drinks at home instead. There has also been sustained demand for no sugar products that pair well with meals for home consumption. Convenience stores are therefore adapting their product offerings and shelf arrangements to meet consumers’ diverse needs, from daily home drinking to special occasions and post social gathering consumption.
On-trade vs off-trade split
In 2023, the Japanese government downgraded the legal status of COVID-19 to class five, similar to influenza, which allowed individuals and businesses to make their own decisions on COVID-19 prevention measures. This led more consumers to eat out in consumer foodservice outlets once again, resulting in an increase in on-trade volume sales in 2023. By contrast, off-trade volume sales witnessed a decline in 2023, following the same pattern as 2022, with lower at-home demand seen due to the shift in sales to the on-trade channel.
However, on-trade volume sales still remained below the pre-pandemic (2019) level in 2023, as consumers’ lifestyles have changed. Before the pandemic, it was common for people to go to multiple bars and restaurants for second parties and third parties, called nijikai and sanjikai, but such habits did not return to such an extent, even after the reclassification of COVID-19. Moreover, labour shortages remained a serious issue for foodservice outlets, which hampered the recovery from COVID-19. The lack of manpower led to shorter opening hours in some foodservice outlets. The reduced demand for second parties and third parties, and the lack of workers in consumer foodservice therefore prevented on-trade sales from seeing full recovery in 2023.
What next for alcoholic drinks?
Alcoholic drinks in Japan is expected to maintain slight total volume declines throughout the forecast period, with both the on-trade and off-trade channels anticipated to see slight negative volume CAGRs. Consumer demands are diversifying when it comes to alcoholic drinks. Some decades ago, beer dominated the industry with its simple composition, but today, the shares of non-beer categories are also significant. This shift is due to consumers’ evolving values and their desire to enjoy a wider range of categories and products. Quickly and accurately grasping the changing and diversifying needs of consumers is crucial. With a growing focus on health, non alcoholic beverages, the availability and sales of which significantly expanded during the pandemic, are expected to continue growing. The Ministry of Health, Labour and Welfare’s official decision on Japan’s first “Guidelines for Health-Conscious Drinking”, published in February 2024, could further increase Japanese consumers’ interest in monitoring their alcohol consumption levels.
MARKET BACKGROUND
Legislation
Legal purchasing age and legal drinking age
According to the Act for Prohibiting Minors from Drinking, the legal drinking age in Japan is 20 years old. This Act places obligations on both consumers and retailers. Retailers are required to verify the age of all consumers purchasing alcoholic drinks in off-trade outlets, while waiters and bartenders have the same responsibility in on-trade outlets. Off-trade and on-trade establishments which sell alcohol to those who are underage risk fines of up to JPY500,000. If a minor is found to have consumed alcohol, the adult responsible for them is also liable to a fine. The manufacturers of alcoholic drinks usually place warning messages about underage drinking on the packaging of their products, as well as in their advertising materials. In addition, the websites of some alcoholic drinks manufacturers also require the user to enter their date of birth in an attempt to prevent minors from accessing the website’s content.
In April 2022, the legal age of adulthood in Japan was lowered from 20 to 18 by amendments to the Civil Code. There had been discussions about whether it would also be appropriate to reduce the legal drinking age to 18. However, the legal age for drinking was maintained at 20 for the consumption of alcoholic drinks, as well as for smoking and gambling, due to concerns over health and addiction problems.
Drink driving
Japan has a zero-tolerance policy when it comes to drink driving. The country’s Road Traffic Regulations were subject to various amendments in June 2007, which took effect from September 2007, and this led to the penalties for drink drivers becoming more severe. Furthermore, penalties were added for those who provide alcohol knowing that the offender is likely to drive, for those lending a car to someone who might drive when over the drink driving limit, and for those who travel in a car when they are aware that the driver is over the drink driving limit. 2009 saw further amendments to the Road Traffic Regulations, including stricter penalties for drink driving.
Advertising
In March 2021, the government approved a plan to combat alcohol-related health disorders. The plan covers the period of fiscal years 2021 to 2025, and it requests alcoholic drinks manufacturers consider displaying on the packaging of their products the amount of alcohol they contain. Before this, the only mandatory information on the packaging was the alcohol content in percentage terms, which was difficult to intuitively understand. The new request aims to make it easier for consumers to understand, and consumers themselves can judge the proper amount of alcohol they should drink.
Alcoholic drinks manufacturers quickly responded to this request. Asahi Breweries began labelling the grams of pure alcohol content on cans of beer and RTDs in August 2021, and completed the change at the end of 2023. Other big players also started displaying the amount of alcohol on their cans in 2021-2022.
Smoking ban
In 2018, Japan approved the introduction of its first national smoking ban inside buildings, with this implemented in two stages. At the first stage, in July 2019, smoking was banned on-site in schools, hospitals, child welfare facilities, and government offices. At the second stage, in April 2020, indoor smoking at all facilities, including restaurants and offices, was banned. However, the ban exempts restaurants and bars smaller than 100 sq m and with capital of less than JPY50 million, which waters down the impact of the ban. Larger and new restaurants need to either make their premises smoke-free or limit smoking to designated areas. These measures were aimed at minimising the exposure of people to second-hand cigarette smoke in the run-up to the Tokyo Olympics. Although there is no further ban scheduled at the time of writing, with the increasing lack of social acceptance of second-hand smoking, there is the possibility that further smoking bans will be enforced in the future.
Opening hours
During the COVID-19 pandemic, emergency statements or quasi-emergency statements were declared, calling for foodservice establishments to reduce their opening hours, such as closing at 20.00hrs, and ending the sale of alcoholic drinks by 19.00hrs. At the height of the pandemic, a stronger request called for foodservice establishments serving alcoholic drinks to close, effectively banning the serving of alcoholic drinks. However, with the lifting of all pandemic restrictions in the country, foodservice establishments can open for the same hours as before the pandemic. However, labour shortages remain a serious issue for foodservice outlets, which has led to shorter opening hours for some foodservice outlets.
On-trade establishments
Awareness and consumption of non alcoholic beverages has been boosted in consumer foodservice outlets. Sumadori, co-invested by Asahi Breweries Ltd and Dentsu Digital, a large digital firm in Japan, opened a new bar, THE 5th by SUMADORI-BAR, which specialises in non alcoholic and low alcohol beverages, in September 2023.
In addition, an izakaya (Japanese-style pub) chain, Tsukada Nojo, which operates mainly in the Tokyo metropolitan area, significantly expanded its non alcoholic beverage line-up in 2023. Riding the wave of the sober-curious movement, and aiming to create an enjoyable environment for non-drinkers, the chain introduced 19 types of non-alcoholic beverages, including beer and highballs, in addition to 14 types of soft drinks, totalling 33 types of drinks without alcohol.
TAXATION AND DUTY LEVIES
In December 2016, the government announced a provisional plan for the reformation of its liquor tax regime, to be implemented in three stages over a period of 10 years. Beer is currently classified into three types – “beer”, happoshu, and new genre beer – determined by factors such as the ratio of malt usage, the use of raw materials, and production method. Different tax rates are applied to each type of beer. However, the upcoming change in the liquor tax regime is set to tax all beer – “beer”, happoshu, and new genre beer – at the same rate by 2026.
The first stage was conducted in 2020, and the second stage was conducted in October 2023, when the classification of new genre beer merged into happoshu, and the tax rate increased to JPY47.00 from JPY37.80 per 350ml can. 2026 is set to represent the final stage of the standardisation of Japan’s liquor tax regime, with all beer to be taxed at the rate of JPY54.25 per 350ml can, and the liquor tax on sake, wine and RTDs will be standardised at JPY35 per 350ml.
OPERATING ENVIRONMENT
Contraband/parallel trade
Contraband is not prevalent in alcoholic drinks in Japan. However, parallel imported products can commonly be seen on the shelves of specialist drinks retailers such as Yamaya and Kakuyasu. In general, parallel imports are cheaper than conventionally imported products. While typically smaller in corporate scale than mainstream importers, parallel importers can often gain access to more exotic products. Therefore, purchasing parallel imported alcoholic drinks is quite common in Japan, especially in wine and spirits.
Duty free
Inbound tourism in Japan has surged notably since Q2 2023, fuelled by the relaxation of COVID-19 restrictions and the depreciation of the yen. Tourists are finding Japan’s lower prices for shopping, dining, and entertainment highly appealing, particularly as inflation burdens other regions. The weakness of the yen since 2022 has made Japan a cost-effective destination for international visitors. The recovery of inbound tourism is expected to make a positive contribution to the performance of duty free sales.
Cross-border/private imports
As an island nation, Japan does not share land borders with any other countries, making cross-border private imports of alcoholic drinks problematic. The result is that there is no culture of travelling overseas for the express purpose of purchasing alcoholic drinks, or any other products.
KEY NEW PRODUCT LAUNCHES
One of the successful new product launches in 2023 was Takohai, from Suntory Sprits Ltd, which gained popularity partly due to its intriguing advertising campaign, which cleverly chose not to explain the product in its advertisements. Tacohai means a mixed sour drink of shochu and carbonated water, often known in izakaya. However, the name Takohai was not familiar to many consumers, especially young drinkers, and it was hard to imagine the flavour from the name. Leveraging this, in television advertisements, Minami Tanaka, a famous voice actor in Japan, says, “What is Takohai flavour? What do you think Takohai flavour tastes like?” and did not explain anything about the taste itself. This marketing strategy was well-received, sparking curiosity and interest amongst consumers, hitting its initial annual sales target of 2.5 million cases within three and a half months of its March 2023 launch.
Outlook
Health is expected to remain important concern for consumers when making purchasing decisions, especially in the wake of the pandemic. According to Euromonitor’s Voice of the Consumer: Lifestyles Survey, fielded January to February 2023, the percentage of respondents looking for healthy ingredients in food and beverages increased to 27%, from 24% in 2020. Moreover, to raise awareness about the risks associated with the consumption of alcoholic drinks and to prevent health issues, the Ministry of Health, Labour and Welfare in Japan established its first “Guidelines for Drinking Alcohol with Health Consideration”, officially announced in February 2024. The guidelines emphasise the importance of focusing on the amount of pure alcohol in drinks, rather than the volume of alcoholic beverages consumed. While many industry players have already addressed the guideline by indicating the amount of pure alcohol on their cans, this initiative is expected to heighten consumer awareness about the amount of pure alcohol they consume, and may encourage consumers to opt for healthier options such as low alcohol products, similarly to how they consider calorie content.
On the other hand, taste can be as important as health. According to Euromonitor’s Voice of the Consumer: Lifestyles Survey, fielded January to February 2023, in a question asking which aspects respondents are willing to pay more for, the percentage who selected “superior taste” was 32%, which was way above the 20% who chose “health and nutritional properties”. Looking at the global average, it was the other way round, with 29% saying “health and nutritional properties”, and 23% saying “superior taste”. Japanese consumers put a great emphasis on taste. Players are therefore making efforts to deliver value by offering both health and taste. For example, Sapporo Breweries Ltd renewed Sapporo Nama Beer Nanamaru in March 2024. It contains 70% less carbohydrate and 70% less purines compared with regular beer products. Usually, removing these ingredients can spoil the taste to some extent, but Asahi claims that the renewed product has both the healthy aspect of reducing two less desired ingredients in beer, while maintaining the rich taste of beer, providing an excellent balance. Meanwhile, Asahi Breweries Ltd launched Asahi Zero, containing 0% alcohol. It adopted a “de-alcohol manufacturing process”, of brewing the beer, and removing the alcohol afterwards. This way, the company claims that while containing 0% alcohol, the product has a rich beer-like taste. New product developments are therefore likely to continue to focus on delivering a good balance of both health and taste.