Inside the Japanese market – wine market – Industry Overview
Kevin Sinclair
Japan’s well-heeled consumer market is often fueled by fad. Steven Tolliver, the Japanese-speaking marketing executive of Spain’s Codorniu Group, likes to point to the “tiramisu tsunami” of a decade ago. Top women’s magazines featured stories on the Italian dessert, and before you could say “chocolate” it was featured in every trendy restaurant, supermarket and fast food chain in the country. Once universally available, it lost its exclusive allure and sales fell.
Will the same thing happen to the current soaring wine market in Japan, I asked the Barcelona-based American?
He doesn’t think so. Along with just about everyone else involved in the tricky business of predicting Japanese trends, Tolliver tips toward continued growth.
But he urges caution.
“Is wine going to repeat the tiramisu pattern, or will it become an accepted part of modern Japanese consumption habits?” he asks. Part of wine’s appeal in Japan (at least for red) has been its image of exclusivity and “connoisseurship” needed to be comfortable when ordering and drinking wines.
David Combe, international export director of the Australian giant Southcorp., points to simple figures. In 1997, 160 million Japanese drank 1.2 liters of wine a head. That doubled in 18 months. They are now appreciatively sipping 3 liters per capita. “A dramatic increase,” says Combe, with understatement.
Cheaper Wine
He points to changing mercantile patterns which have impacted strongly on wine sales. One benefit of the agonizing Japanese economic downturn has been a rationalization of the distribution system. In concrete terms, that has meant a bottle of wine which cost Y1,500 now costs about Y1,000. The consumer pays less. So he – or more likely, she – can afford to buy better.
As with many Asian countries, the ludicrous prices once paid for grands crus has stopped. Instead, people are being more discerning in terms of value, Combe notes.
With Australia supplying a mere 2% of the market, he’s confident that in five years Japan could be Australia’s number three wine export market, after the U.S. and U.K.
There are a growing number of restaurants in Japan developing traditional menus married with red wines. A decade ago, the market was dominated by sweet white wines, mainly from Germany.
Steven Tolliver recalls a supermarket buyer telling him Japanese would never accept red wines because they were “too difficult to appreciate.” He laughs. The country’s palate has greatly matured, he notes. In 1996, red wine imports were 24%, which had leapt to 60% by last year. White, which was 60% in 1996 had dropped to 32% in 1998.
The American has been closely involved with sales to Japan for more than a decade; he once worked there and speaks the language. The public is very enthusiastic in learning about wine and its culture, he contends. This should continue to boost growth.
Atsuo Seki, of the Foreign Ministry’s Trade & Industry section, says virtually every drop of U. S. wine imported to Japan comes from California. Last year, that was 25,314,013 kilo liters worth $84,683,000. Compare that with three years earlier when 1995 statistics show California shipped 9,757,622 kilo liters valued at $26,014,000. In 1988, there were 11,098,514 kilo liters worth $27,651,000. The figures show U.S. sales reached a plateau until the mid-’90s, when they suddenly erupted; this coincided with the red wine boom.
France Leading Importer
France still reigns supreme, and has been the leading source of supply since the first driblets of wine seeped into Tokyo 5-star restaurants after World War II. Last year, the Japanese eagerly paid $1.32 billion for 111,967,791 kilo liters of French wine. Many wine lovers question the provenance of much of this, which is shipped in bulk and bottled in Japan. Whatever the origins, Japanese appreciatively guzzled it down; the value of French imports doubled from 1997 to 1998, up from $668 million.
“Look at these trends,” says Seki. “Then you can imagine the future.” Consider the past. In 1990, Japan’s tax man collected duty on 17 million cases of fruit wine, local as well as imported. By 1998, he was getting revenue from 46 million cases, most of it imported. The annual growth in wine tax over the nine years averaged 13.3%, but in 1997-98, the growth of imported wines rocketed 115%. This means Japanese are turning to the world for their wines.
Customs Bureau figures show wine imports went up from 5.2 million cases in 1992 to 27.7 million in 1998, with that great quantum leap coming in 1997.
That year, 43% of imports came from France, and 19% from Italy. There were still 14% from Germany but demand for those cheap whites was crumbling fast. The U.S. accounted for 9%, Chile for 5%, Spain for 3% and Australia for a meager 2%. By 1998, Chile had doubled its slice of a vastly expanded market and Argentina had come storming into the picture, grabbing a 2% slice. Who bought it? Bar suppliers took 37%, liquor shops 24%, supermarkets 15% and department stores 6%.
Many knowledgeable Japanese wine drinkers look at the difference in taste and techniques between France and California and have opted to taste the New World product. Seki is among those who feel taste and supply may bring about a revolution in purchasing patterns. “Californian red wine is now very popular in Japan,” he says. “Chilean as well.” If this popular wave is lost, wines from other countries may catch the public fancy.
Bulk Imports
However, connoisseurs would likely shudder if they could witness Japan’s wine imports. Most is in bulk. The cheapest is likely to enter the country in big plastic bags stuffed into containers. Much of it comes from cheap source producers in Bulgaria, Romania, Argentina and Chile or anywhere else on the planet. Mixed in a huge tank with 5% Japanese grape juice, it can then legally be sold with a Japanese label: Sapporo, Suntory, Asahi.
Total Japanese Wine Market
UNITS 000 9 LITER C/S 1997 1998 VAR. % INCREASE
Domestic Wine 11,844 16,883 5,039 43%
Imported Wine 12,668 27,688 15,020 119%
Total Wine Market 24,512 44,571 20,059 82%
Imported/Still Wine Market by Country of Origin
COUNTRY 1997 1998 VAR. % INCREASE
France 4,886 11,545 6,659 136%
Italy 2,114 5,078 2,964 140%
Chile 616 3,066 2,450 398%
USA 1,058 2,610 1,552 147%
Germany 1,603 1,909 306 19%
Spain 378 1,144 766 203%
Others 846 2,353 1,507 178%
Total 11,501 27,705 16,204 141%
Source: Customs Bureau
Sandra Shoji is one of the most respected wine educators and analysts in Japan. She casts a cynical eye over the industry. She said that corporate executives are going down the price ladder to mid-market, buying medium-priced Mondavi and Penfold labels for business entertainment, and shying away from awesomely-priced Bordeaux.
The princess of the business world is the young Japanese working woman. They are fueling the continuing wine boom. They love Italian food and love eating it with Italian wines. Men drink sake or whisky if they have money, cheaper shochu spirits if they are hard up. Cocktails are usually shochu-based. They make fortunes for restaurants and bars.
Shoji contends that some top Japanese wine executives don’t really like wine. She recalls: “A few years ago I was at a tasting given by Hugh Johnson and was enjoying some soba (buckwheat noodles) with a glass of red. The president of Suntory wine division reprimanded me. ‘You can’t eat Japanese food with wine,’ he said. I replied: ‘Watch me’.”
There are still wine snobs scattered about, mostly males in their mid-30s who have some money hidden from wives. They stop off on the way home in expensive wine bars. Their motto remains: “If it ain’t French, if it ain’t red, it ain’t wine.”
But change is coming. Next year, import liquor laws will change, making it simpler and easier to import wine. Already, convenience stores (Lawsons, 7-11) are hustling to get licenses. They’ll be heading inexorably downwards to ensure market share.
Nick Collins, of the Japanese office of the old British House of Berry and Rudd, says 1998 import figures were up 119%. But retailer demand increased only 100%. Naturally, this lead to a worrying overstock situation, and early this year, distributors were scurrying to get rid of excess stock. In turn, this depressed demand from abroad. But what’s happening is not a drop in domestic demand, says Collins, rather a short term stock correction.
RELATED ARTICLE: A Trend Toward White
As the summer of ’99 dawned, a new fad flashed on the Tokyo wine bar horizon: White is back! A growing number of specialist wine publications and trendy lifestyle magazines have announced that it’s fashionable and smart to drink white wine.
Importers are tearing their hair out.
How come the white wine revival? Tokyo wine guru Sandra Shoji said that chemists at Suntory Laboratory put e-coli into a lot of sample dishes, along with whisky, vodka, sake, beer, antibiotics, gin, red wine, white wine. Voila! The white wine killed more bacteria, faster. In the humid heat of a Japanese summer when raw fish attracts bacteria, this is a powerful selling tool. Drink white and protect your tummy.
Overnight, red is out, white is in. Get on an aircraft these days taking off from Narita and every Japanese on board will be drinking white. Last month, it was red. (Think of the problems for the purchasing officers of large airlines, scrabbling to get their hands on palatable whites! Think of the opportunities for nimble winemakers and merchants!).
K.S.
COPYRIGHT 1999 Hiaring Company
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