Industry leaders against tax lawsAt the end of the 19th century, the domestic beer production started with the founding of the predecessors of the current market leaders Kirin Brewery Company, Sapporo Brewery, Asahi Breweries, and Suntory Beer. While the corporations have since then expanded their business portfolios, the manufacturing of alcoholic beverages remain their core business segments. Especially Asahi Group Holdings, Japan’s largest beer manufacturer, which generates the lion’s share of its revenue within the alcoholic beverages segment through the distribution of beer and beer-like beverages. To circumvent progressive tax hikes and liquor tax reforms, the industry leaders have been continuously expanding their product lines.
According to Japanese liquor tax laws, products classified as ‘beer’ refer to beverages with a malt content of 50 percent or more. Permitted additives during production are limited to rice, corn, sugar, and starches. Consequently, to avoid the higher tax rate on beverages categorized as ‘beer’, Suntory produced the first low-malt beer (happoshu) with a malt content below the threshold of general beers. As lawmakers followed up with tax hikes on beer-like malt beverages, happoshu shipments dropped and ‘new genre beer’ was introduced as a new alternative. Typically referred to as ‘third beer’ (daisan beer), the beverage is produced without malt and is therefore exempted from higher taxes on malt beverages.
Opportunities of microbreweriesWhile beer-like beverages remain the liquor of choice among consumers, inexpensive and commercially available products cater to the demand of the wide mass. Within the straightforward market, microbreweries struggle to assert their positions. However, unlike the downward trend in beer sales at major manufacturers, total sales of craft beers have been showing an upward trend in recent years. The many flavor profiles of craft beers appealing to consumers is contrasted by the consistent taste of products manufactured by large breweries. Furthermore, successful ventures expanded their product lines to the happoshu segment by adding fruits and herbs to the brewing process. This allows them to build up their individualized product lines and signature flavor combinations.
Despite the opportunities for microbrewers to appeal to a wider audience, the distribution of happoshu-style craft beers fell in recent years. To reform the liquor tax system and align the tax rates of beer and beer-like beverages, the Japanese government raised tax rates on happoshu in 2018. This measure effectively hampered the growth of the domestic craft beer market, widening the gap between microbreweries and market leaders once again.