The Japanese Beer Industry INTRODUCTION In 1980, after two decades of phenomenal growth during Japan's “economic miracle” years, the Japanese beer industry appeared to have changed from growth toa mature industry. Beer consumption had leveled off; after increasing, Epetold from 1955 to 1965, and then doubling between 1965 and 1975, it grew by only 15 percent from 1975 to 1980. And with Japan's population growing at ‘a rate of onl sreent a year, demand was not expected to increase signifi- ‘cantly Tn che foreseeable fuure. ‘Virtually all the beer consumed by Japanese drinkers was produced by Japan's four brewers: Kirin, Asahi, Sapporo, and Suntory. These companies formed a profitable oligopoly protected by high entry barriers in distribution, advertising ‘costs, and government regulation. In 1980 Kirin dominated the industry with a GO-pls market share. The company slo acted as price Teader, setting prices at ‘high enough to allow the weakest two competitors, Asahi and Suntory, to ‘survive. This arrangement was tacitly supported by the Japanese government because ofthe hge taxrevenss that potable beer companies brought in. “THe Japanese brewers competed with eaci jer mainly through development and control of distribution channels and advertising. While there had | been a cer- tain amount of product innovation, Asahi, Sapporo, and Suntory had learned from experience that when one oF dem came oat with new product that threarened to take hare away from Kirin, the industry leader would ‘ate the innovation and use tage in reputation, distribution, and Gial clout to overwhelm the originator. Thus was a certain balance maintained; 7 ex brewers avoided directly attacking Kicin for fear of retaliation, while ici, for its part fearful thar fener ‘share. aime would put the company, in violation of Japan’s anti-monopoly law, restrained itself from doing anythi tat wool fara wen eda reed ae oe oes ere Ten year later, however, the industry presented quite a diferent picture. In the smid-1980s, beer consumption picked up again, jumping 37 percent from 1985; to 1990; Demand was expected to contiaue to grow at a rate of 5 percent a year during the first half ‘of the 1990s. Sales growth had not translated into higher; profits, though, as an expensive new product war had broken out in the mid-7 1980s and taken firm root. The new product war had attracted great public interest and helped stimulate demand, It also had dramatically reversed Asahi's fortunes and produced the biggest market share shake-up in industry history. By 1991, howeves, the new product sweepstakes appeared to have become a ) pega gamete igh cons of derlonig and eesng nev be had many in the industry longing for a return to the more stable and profitable competi nts ofthe pre-198 = “This case was prepared by Tom Cri Univers of Vicor. This cate wa pepe a bu for cass rcuion hr an ola effecve or aliecve banding of adinisiative stations, 03au Ct te ey is “Thee Jananese Bez INDUSTRY INDUSTRY HISTORY time Samuel Taylor Coleridge (1772-1834) was penning the line Nymec wte « eaivhere nor any drop (0 drink,” Bridsh and Dutch trading ships were off-loading kegs of beer in Japan. In 1870 Japan's first brewery, Spring Valley Brewery, was established by an American in Yokohama, and by the eatly ewenceth century the popularity of beer had grown to the point where ‘as many as 100 independent breweries were operating. ‘World War I proved to be a boon for Japanese brewers. Fueled bya consumer mack in Southeast Ae tht Eaopean_prod ees were tunable to supply use of the war, local breweries began exporting apd expen The buil ing of new plants was faclitared by the availabilty at bargain prices of brewing ‘and bottling equipment from America, where prohibition had shut down scores ‘of companies. Brands such as Sakura, Kabuto, Fuji, Union, and Cascade Beer flourished, along with today’s familiar Kirin,Sapporo, and Asahi. "All was not a bed of hops, however. With the stock marker crash and world- wide depression ofthe late'1920s and 1930s, demand plummeted, eesulting in a period of brewery failures and consolidations. As Japan went to war in the late 1930s and 1940s, barley and hops became harder to obtain, there were short- ages'of needed electricity and coal, and beer taxes were raised continuously to provide war funds, By the end ofthe war only three brewers remained in Japan, and one ofthese went out of business in 1948. The wo tht cemsined were in Bees, a descendant of Spring Valley, and Grated over « Wiyeat perc riod through t ing of nu brewers, amor original Sa Asahi. ” “a 1949 Dai Nippon Breweries, whch eontrolled nealy three-quarters ofthe beer market, was declared to be in’ violation of Japan's anti-monopoly law, ‘which had been imposed by the United States in its postwar occupation of Japan for the purpose of dissolving Japan's zaibatsu (financial cliques). Dai Nip, was split ¥alo iphical Ties: its breweries and ae in. western Japan became present-day Beer, while it and distribution network in eastem Japan (including Tokyo) became Sapporo: __ Re the time of the breakup, Sapporo held 38.6 percent of the market, Asahi? ‘36.1 percent, and Kirin 25.3 percent, The next 30 years were a Kirin success sory a Kin seal inceaed es share ofthe make a the expense of ie and came to dominate the industry (sce Exhibit 1). Kirin is aka sy ( ). Kirin's success is attrib- {)) nationally recognized brand name and nationwide sales network, giv “i sale advantage in adverisi and, unl he others could expand tt Teor Ser YY 2- Kn amps prowing demand and in order to met, built ew produc SVG ENRON) \ oe 1. The breakup of Dai Nippon into Sapporo and Asahi left Kirin with che only we sah and Sapporo, by contrast, focused Om ket, in which they traditionally had been strong. , 4. The strong, bitter taste of Kicin' lager beer was right for the times. The diet 27 ' postwar Japan was poor and bland, and people craved strong tastes L444 42 EFF. easIwousray Hisrony 205 Exhibit 1 comperstnetiudet Er wn T Seppuro— SoMory share bp tee 1929-1990 1949 mame MN RH 50 Be ome st Bes ws. eos MS 1983 B.A 1954 Pi fi i SS vss yoy A 1956 foam 1997 at 72 OM st yo OSS OT re) oe eS 1960 “20 m2 wD 1361 iy ia) 8) Be So 0 MA AD v8 “sD 1364 2 BS 2a 1965 rea) | ay ag ae) 1966 go oat S 1967 ba oD v6 ia) oan a = 196 nse “3S 7 Ba 72 ao wn no i. wn @1 Mt oe 7 a3 36 ee on as a = 1975 ws 135 ss 1976 a mo oo 1977 a3 20 G2 7 a6 a 1979 ao 10 a 1990 as 10 7 vat as 03 a. 1982 aa 99 a 1983 #3102 a 1904 as UL 328s a 930 ie “396 103 93 = 1997 9a on 198 07.207 “wo 1989, 4a oo 1990 wa our el 17en 208 Case 12 Tae Jaranese Besx INDUSTIY “Through skilful advertising, Kirin eueceeded In teaching the public that \7Aitong biter beer equals delicious beer o firms ‘entered Japan's postwar béer industry. One is mis ser, wh ‘emered the Tee narket in 1957 and withdrew 11 atte afer fling ache viable position, Tre other is whiskey makexp Rantor}) which entered in 1963 and has survived, despite making a profit in berg peoar only, 1984, (There is also Orion, an Okinawa brewer whose beer ion et okinawa until 1990, when it began appearing on “mainland” Shelves in small quantities.) SERRE DEMAND For the first 10 years after the war, beer was a luxury product in Japans in 1950 4 single 633 milliliter bottle cost 132 yen, or about 2 percent of the average fronthly salary for a university graduate. With economic recovery and rising Jneomes, however, beer gradually came to be affordable by the average Japan i tse. By the 1960s beer was drunk regularly by a wide variety of people of ally y income levels in Japart, - ; a “Overall demand for beer in Japan grew steadily during the first 30 years of the . 5 postwar period. From the 1970s through the mid 1980s, demand leveled off and” the industry was viewed by many as mature, with limited porential for further growth. Howeves, a boom in new bined wit avironmental? za changes (see be tk, and the outlook for the 1990s was for con _ tinue wn 1990 Nikko Research Center expected beér consump- on to increase by 5 percent annually over the next few years, Exhibit 2 and Figure 1 show Japanese beer shipments forthe postwar period. Exhibit 3 shows pet capita beer consumption in Japan and other countries. J Figure 1 6A Beer Sales Growth, 1950-1990 © © s . = © © © © © ©& & © e e & Seeeeeeee “Japanese Beer Shipments (unis: million kt) eosk a bb 3 LLL. 1960 1970 1980 1990 YearGOCb66666668 EE SEES ae ee ENE EVP PEOIIIOKTIO UGC OG Fehibie2 Japanese Beer Shipments, 1946-1990 (in Kileliters) Year 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 196 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Domestic 91,270 91,372 140,495 165434 261,007 275479 372,054 390,280 403,613 452,163 551,536 615,552 744947 919,313 1,232,663 1478,102. 1,685,916 1,991,648 1,989,147 2,416,910 2,410,602 2,525,975 2,730,637 2,972,253 3,052,746 3,433,426 3,811,156 3,612,043 3,955,519 3,665,370 4,131,678 4433141 44994156 4,539,799 4,638,889 4,763,444 4942317 4,680,770 4,785,328 4,970,028 5,340,047 5,749,828 6,054,120 6,550,914 Exports m sa98 94699 16,705 15,737 10278 7371 6,120 6,815 6970 6,843 6,104 7,064 71969 6,596 5,630 6,013 6,368 11,547, 13,809 12,569 15481 15,380 13,674 13,930 14056 13978 14,182 15,728 18,592 18,408 18,084 18,796 18,507 23,670 26,251 27,435, 27,972, 29,330 30,267 Deano 207 Tous s1a70 s1372 uaiz26 165,732 270,706 292,184 387,811 400,558 10.784 458,283, ($58,351 e252 751.790 s1s.17 19,727 1asa7t 1,692,512, 1,997,278 1,995,160 (2,123,278 2,422,149 2,539,784 2,743,206 2,987,734 3,068,126 3.447,100 325,086 3,626,099 3,969,497 (3,679,552 47406 4,449,733 4,517,564 4,557,883 4,657,685 ‘4,781,951. 4,965,987 4,707,021 4,812,763 4,998,000 $369,377 ‘5,780,095 na na208 Cxse12— Tare Jamuness Bezn INDUSTRY ee Percapie Beet Couey Lae Consumption for i beers Selected Counties 1987 ee”, 1300 Gn tnersperyen) Oe 1252 New Zzled ios owe 62 ‘Australia, 111.3, so us TA AS sus 43.8f Demand varied by seasoh, with more beer drunk in summer than in winter _ > \,\ (Gee Exhibit 4), in recent years the seasonality of demand has weakened, how- OO") cree Beer increasingly is sen asa yearcound beverage, thanks to promotional ae efforts by the brewers and the development of some beers “especially created for \s* drinking in cold weather” ‘TAXATION AND GOVERNMENT. REGULATION [Beer was the richest source of liquot tax in Japan, in 1989 providing 2.5 of sual Japanese govern total Japanese goverment tax revenues. Tax by volume Was 208-1 pen pet tite, which amounted to 44 percent ofthe retail price. Including sales tax, a total Snes 8 tee |< Percent of Yearly Salesby Mont Percent of sales ‘Month, 1879-1885 january a7 February $0 March 7s Apel 98 May 86 June 14 July 134 August 106 September Bi Ocrapee 68", November 58 December rey e a a Peg PP Dp Oe A ok “ih c. 2 —Pronuction aNp DisrainuTion —— C209 This compa any, 16.9 per er taxes not increased since 1984. and government tax receipts falling accordingly, within the next two o three years. ‘Because of the importance of beer taxes as 2 source of government revenue, the Japanese beer industry was strictly regulated by the government through licensing requirements. Licenses were issued to prod /holesalers, and retailers with the aim of avoiding “excess competition” which, it was feared, ‘might drive weaker operations out of business. 3 “Permits to produce beer were especially difficult to obtain; they were issued only for a specific piece of land, and in order to get one, a producer had to make ) at least 2,000 kiloliters of beer annually. The purpose of this regulation was to keep the number of beer companies to a handful, as it was easier to collect tax from a few large brewers than from many small ones scattered throughot fou juse of the minimum production requirement, there were virtually ino independent microbreweries or brew pubs in Japan. In the United States, by ‘contrast, there were over 200 microbreweries, many putting out just 90 kiloliters Lia year. A consultant specializing in Japan's beer market calculated that reducing -Y che minimum production requirement to 200 kiloliters would boost Japanese beer sales by around 2 percent, but there were io signs in 1990 that the govern- ‘ment was considering changing its regulation. ‘The government also had traditionally limited the number of retail liquor licenses issued, again on the theory that this offered the best way to fully collect liquor taxes at minimal expense. In June 1989, however, the National Tax Administration Agency announced that 6,000 new regular licenses and 250 new. Iicenses to large retailers (such as supermarkets and convenience store chains) ‘would be issued to new entrants between 1990 and 1994'in an effort to promote greater com; the alcoholic beverage market. The priority given to large-scale retail in part a response to foreign pressure, as the larger stores generally carry a higher proportion of imported products. ‘These changes were seen by many asthe beginning of a major restructuring of the retailing of alcoholic beverages in Japan: In 1988 Japan had 122,000 men and-pop retail liquor outlets, most of which were tiny stores with an average ‘unover of 30 million yen and gross profits of 6 million yen annually. An ana tye for Morgan Staley International estimated that by 1998 the number of liquor stores woul to around 60,000, while the i ‘would ris from 6,000 (in 1991) ro about 30,000, tnber of large retailers tionally were raised about once every four years, but they had ith Japan entering an economic slowdown in 1991 tax increase was seen as likely PRODUCTION AND DISTRIBUTION Beer was defined under Jpanese lw aber malt, hops, and water, Other grains such as rice or corn could al prac one nee pe acral ao beaded ‘ment sugar present in the primary materials. Most of the raw materials were importgd from Europe, North Ametica, and Australia? ‘age brewed by fermentation of the |210 Case 12 THE JAPANESE BEER INDUSTRY ‘white al the Japanese brewers used the same basic ingredients and German production eos, within “hee parameters lay a number of technical complex: Prod Drefons that produced tangible taste differences from bee! to beer. ‘The most imporeant determinant of taste was said to be the particular yeast Tae wath diferent strains producing slightly diferent favor and bouauet. The sae es maintained yore banks consedning inandreds a etcsine nad were constantly developing and teiting new ones. Other brewing variations included the choice, quality, and combination of ingredients, the use of hulled versus welled saat, and temperature and degree of fermentation. It generally took from One oir yeas to develop and put on the market a new bect# The mursber tnd geographic datibution of brewing plants was shaped by scale and transportation considerations, There were ‘considerable.economi of scale iirbect production; thanks to large outdoor tanks which were invented in the late 1960s. Beer is heavy and transportation costs considerable, so the com- panies had located their breweries fairly evenly around the country near major Population centers. In 1991 Kirin had 14 breweries; Sapporo, 10; Asabi 75 andi Suntory, 3.4 ‘Beer was sold in botdles, cans, and kegs of various sizes (See Exhibit 5). The ‘most common bottle was the returnable 633 milliliter bottle. Twenty 633 milli- liter bottles made up one case, the standard measuring unit for beer sales. The ‘most common cans were the 350 and 500 milliliter sizes. The smaller kegs were __ take-home containers sold directly to consumers, while the larger kegs went to ‘commercial operations such as bars and restaurants. tn 1988, 67 exons of bebe sold in ‘Japan came in bottles, 26 percent in cas ad pcm in ks A wend ward canned bers sand away from boned fen under way for some time. In 1983 canned beer had account 13 percent of total sales. et had sesounted for only There were two Basic beer markets in Japan: the home-use market an commercial market. The home-use market included home delivery sales er cally, a consumer would have a retil shop deliver a case of beer to his home codically; the gift market (smarty packaged gift sets of beer were sold through department stores duting Japan's two major gift-giving seasons in July and December) and sales through iqur shops, food stores, and vending machin ‘The commercial market included sales through restaurants, bats, andi hotels, In 1990 the home-use market accounted for around 75 percent of sal om ‘mercial market for 25 percent. The home-use market had grown steadily in si slave tothe commercial matt oer the power period ies Exhbie). Bottles Cons a 1,957 ml 4,000 mi 633 ml 700 ral 25,000 mi 500 mal $00 al 15,000 ml 334 mi 350 mi 10,000 mi 250 mi 3,000 mt 200 mi 2,000 mi 135 ml 1,200 mi PP PPP PP PPP PPS FEEFEREERLLIDTVVVVALLSExhibit 6 ‘Commercial Markets (Percent of Total ‘Consumption) Figure 2 Beer Distribution System Cosr Sraucrune 214 ee Year Home Market (Commercial Market 1950 25% 75% 1962 53% 47% 1978 70% 30% 1987 71.3% 28.7% Figure 2 shows Japan's beer distribution system. There were two kinds of dis tribtrors, the exclusive distributor, which handled only one or a limited number 1 ‘Sf brands, and the general distributor, which handled all four brands: Exclusive istributecs were more common. The distribution system worked as an impor- J tant hae to ent? The inability to establish ‘rong distribution channels is Often cited as the main reason for the failure in beer of Takara, a distillery that ‘entered the beer market in 1957 but withdrew 10 years later without ever gain- ing more than a 2 percent share. Suntory’s 1963 entry into the beer market was facilitated ae aT Kea which-allowed Suntory to share A sribution network, “There were approximately 173,000 retail outlets for beer in Japan in 1988, most of which were liquor stores that sold to both consumers and commercial ‘establishments. Retailers independent chose which brands to sell, a COST. STRUCTURE Production costs were roughly the same for all the brewers? accounting for about 58 percent of the producers’ share of the retail cost of a bottle of beer. Fixed costs made up a significant portion of the brewers’ spending; which meant that the smaller the firme the Tower profit rofit margins tended to be. In particular, the 5 ee, advertising, God promote were maney fed, varying ite with volume. This gave marke r scale advantage! For example, because Kirin could spread its advertising costs over a larger volume, General distributor reesei) 6 Executh ‘ [~ sxx, |-——_ Retailer Consumerscaz— Case 12 THe Janvese Bex INDUSTRY Exhibit 7 Cost Analysis per Average 633 Mililiter Bottle of Beer for Kirin, Sapporo, and Asahl 1991 Kiria “e ¥320 ¥320 ¥320 i 1319 1d 131.9 mae 63.5 63.5 Retailer and wholesales margin Ca icant 493 459 ve 87 77 E oe 14, 18.2 ATA ns 7 70.3 Rae eon 76 99 936 “Teansportation 73 76 83 Salaries and wages 57 81 7a Advertising expenses ss 134 11.9 ‘Other administrative expenses _14.7 156 1576 rd SAS S2AE ‘Operating income 109 (La) 17 its advertising cost per bottle was only about 5.5 yen, compared to more than double that for its competitors. Exhibit 7 shows the cost makeup of the retail Price of a bottle of beer. PRICING standard producer price, a standard wholesale price, and a il pri for bee, with Kicia, due tits dominant market shave, acting ee ee PE Apel 1988, foi example, Kira suddenly announced a 10 ye er cans forthe stated reason of passing on to consumers gains ne, ‘predation ofthe yen (which reduced the cot of imported bailey and Hoge ‘and the other three companies immediately followed suit. Similarty. hier 1930 all four companies raised prices in concert, citing increasing material and \abor costs and distribution sector demands for higher profs anc his pe {oked public disapproval and an investigation by Japan's Fair Teen Coa on header of a > a was found, but the commission sked ee ewers to take action to liberalize prices. The f i ‘unaing a joint newspaper adverdement in October 1380 e PonaeS BY Price of beer is supposed to be set independently by sore me that “the Spokesman noted that produce inne to kegp pice i Nat ce 2 Ese any coer verano ok Pie ES “The Tack oF price pesides favoring the brewers; reflected the Lona financially healthy = ‘ + : ¢ ¢ + : POL PEP IV ORD TILLNatuator Commermion 215, was also under way in the way beer was bought and sold. Fast dis- apoeuigs Wate the days when Grandpa would call the local liquor shop and Simply say, "Send over a caze of beer.” With more singles and young couples living in urban apartments and fewer traditional homes with three generations Unde one rook, there was offen no space fora case of beer Instead, more and nore people were buying, a few cans at a time.from convenience stores, super~ markets, and vending machines. This led to more active choice making on the. part of the consumer: Standing infront ofa vending machine or reachvin display ase in a store, the buyer had an array of labels spread before him or her, which ‘encouraged experimenting with different brands. “There was also new variety in the marketplace’ By 1985 foreign beers such as Budweiser and Heineken had worked their way into Japanese stores and vending machines and, although not capturing significant market share, were being widely advertised. More telling was the chu-bai boom of 1985. Chuchai, alight cocktail made from shochu (a potato-based wine similar to vodka), soda, and fruit lavor- ing was invented that year and became an instant hit. It was easy to drink, which ‘made it particularly popular among inexperienced drinkers such as students and women. The success of the chu-hai and the accompanying rise in shochu sales” ‘came at che direct expense of the beér companies and drove home the poiat that’ “The four brewers responded similarly to these changes, interpreting them as a call for increased development and marketing of newer products to meet con- ‘sumers* growing desice for different beers and greater variety. The result was a’ new product boom which began in the eacly and mid-1980s and then took off in: carnest in 1987 with the unprecedented success of Asahi’s “Super Dry? “The new product boom falls into two distinct phases. The first was the ? ‘pre-Super Dry period, roughly from 1983 to 1987, Because no single new prod- tier had ever had a dramatic effect on marker share in the industry, the aim of ost new product development at this time was to create and fll a new niche. “Many varieties, small volume” was the watchword, and the accepted industry definition of a “hie” new product was one that sold 1 million cases in a year, Kirin, Sapporo, and Suntory all developed and marketed “light” and all-male beers, and Asahi reformulated its main product, Asahi draft, Among the success stories were Suntory's “Males” (an all-male introduced in 1986, which sold 2 million eases its fist year, and Asahi's new draft in 1986, which helped the com- ‘pany gain market share for the fist time in several years. ‘While the level of new product competition in the pre-Super Dry period was sgreatec than that at any previous time, ic was stil relatively moderate in terms of ew product introduction frequency, sales targets, and perceived stakes. This ‘was in sharp contrast to the more ambitious goals and perceived higher stakes that were created in 1987 by the appearance and unprecedented success of Asahi Dey. ‘Cie Sarch 1987 Asahi pon the marker new bes, Ashi Super Dry, charec- «Sted by «get lok conten (een compared to th waa 4S pe ) ess sugar, and a smooth taste, Although originally designed no to head the Asahi lineup but to complement the previous year's new draft beer, the product surpassed all expectations and became the biggest hit in industry history. Asahi’s inital sales target of 1 million cases had to be revised upward Bs nes within si mont and by the ed ofthe yeu, 13.5 lin exes of super Dry had been sold. Super Dry created a new “dey” sich wabto be inated by Wewerrall ver the woah) on™ A bees?a6 228 case 12 ‘Tuts JAPANESE BEER INDUSTRY ie as far greater ‘of Super Dry on Asahi's position in the industry was shan anyone could have nicpated. The company more than doubled is mar- ‘ke share from 10.3 percent in 1986 to 12.9 percent in 1987, 20.7 percent in 1988, and 24.8 percent in 1989. Super Dry allowed Asahi to establish importa ew distribution channels and sles outlets and for the first time in 28 years, ‘Asahi passed Sappoto to reach second place in marker share. By 1989 Super Dry sccounted for more than 20 percent of all bet consumed in Japan. | As the popularity of Super Dry became evident, Kirin, Sapporo, and a mi all came out with their own versions of “dey" beet None ofthese proved suct cessful, however, Thanks to its fist-mover advantage, creative and continual promotion, and, in the opinion of many, simply better taste, Super Dry became firmly rooted in beer drinkers’ minds as the dry beet. ‘The scale of Super Dry’s succes revolutionized thinking in the Japanese brew- ing industry, At the very least, it confirmed the belief that Japanese drinkers were ‘open to new and “modern” beers with fresh images and tastes that matched the times. Equally important, Super Dry demonstrated that what was at stake was! ‘ot just the loyalty of any particular niche, such as the fashion-conscious young, 2 “home run,” and it further boosted the level of new product competition as ach company sought to be the next to hit « home run. The aim of new product development changed from “many varieties, small volume” to “many varieties, medium os large volume,” and the accepted definition of a hit product jumped from {millon to 10 milion cass ‘The success of Super Dry also changed consumer expectations about beet, The Super Dry story was widely told in the media, generating high public interest ia the “beer wart” (as the competition was called) and further increasing con. ‘sumess’ expectations for new products. Super Dry, the number of new beers introduced per year jumped again# asit was ced imposible fora brewer fo compete in the industry with ‘artcipating aggressively in the new product race. Each yeas, one dics ely popular among consumers, and a company ‘ne put new products on the mark Day. The company announced a “ful-line” strategy in 1989 and by 1990 hedrs less than 15 brands in its produc lineup. Kirin's Use hit wes Pan Shibori (literally frst extract”; the name sounds much better in Japanese), brought out £1220 Starting with a first-year sales target of 10 million cases, ehiben Sur bork ended up selling 35 milion cases in 1990, and by mid-year 1991 eran gc ekapnets expected to hit 70 million. Combined with stll-strong kia [eBes,lehiban Shibor! gave Kirin two sold pillars around which vo eosin es arent ad helped th company galn 1990 forthe fs time ine rears sapporo brought out large number of new beers, both before wef ote fabet Des bue not many of them sold well. One of those that did cae Japan's EES" “Seasonal” beer, Fuyu Monogatari ("Winter Tale") « $$ percent alcohol beer made to be drunk with the kinds of foods eaten in winter, sold only from * through February each year, and featuring a wintry quowe fe Shake- Pte HF 2 HT] Pere J } TH FeeD aa TT LLP P 1 hf 4 Gidiss if aNumber of New Beers Ii iE 64 65 66 67 Nature or Cosmetiion C217 speare on the label. (The seasonal conespt would later be used by Suntory with spear amer Beet Nouveau and Kicin with "Aki Aji, or Autumn Taste.) After @ period of slipping market share sad uncertainty with regard to its product lineup ped positioning, Sapporo's product strat-By in 1991 had settled around four an Pond a few niche beers. The four main ‘beers were: (1) Sapporo’s mainstay eae Black Label; (2) Ebisu (e cich-tasting, & ‘malt with a strong following aevong beer “connoisseurs”); (3) Fuyu Monogate still a strong seller in its Frneat year); and (4) the smooth-tasting Cit ikomi (made using hulled malt), toro ost successful new beet. nearly 1991 Sapporo's president stated, “Even if ehe economy tums bad, we will continue ‘developing and marketing new prod~ tacts; that's what the market wants,” “With the exception of Malt’, which in 1991 was the top brand in the all-malt ne the marker, Suntory had not had much luck in ‘the new product race. Xefumber of new Suntory beers had enjoyed good first-year sales but bad then fallen off. In 1991 the company discontinued four recent ‘brands and concentrated Gn Malt’ the 1991 draft Beer Ginjo, and the seasonal Beer Nouveat,, which came fe both a summer and an autumn version. A Suny light beer—no light beer had yet sold well in Japan—was due out neatly 1992. In 1990 Suntory’s vice presi- ree sold wel epee the ew podoct maker no et mars an tt eat i ld gone to aggresive create and market now bess ane hom Ge sumbet and names of ew bees ioe per year. Figure 4 shows the changes in market share that occurred before and cece the new product boom, including the dramatic shift that occurred when ‘Asahi Super Dry was introduced. By 199 not everyone was happy with the continuing new product boom and te compere dynamics it ereaed. The head of R8&cD in Sapporo's Production vision said: weep 70 7172 TS 74 75 76 77:78 79 80 BI 82 83 84 BS 86 87 88 69 90 91 Yearele mae ce A a case case12 THe Jamnese Bern INDUSTRY L X Yer No Ashi o i wet Ex: 19650 eo ae . ee fun Nae > 19671 a . 1968-2 Hon Nama Black , we 1 Sapporo Light e ‘ im 0 wa 1 Bhim et . wn 0 wo e . wu 0 = 1975 o a b 197% «1 Mainburoi a En wo Bin Name unsven 3) ; wn 0 . 1979 o ee : 1980 1 Kirin Light Beer — mao Kun Name eR 11 KuroName - 19833 (Lowenbeau) Karo Nama ‘Nama Merutsven | nal ; Ebi Dat et ek (nck) Penguin's Bar ' (badwelsee — 19856 Ranta Mild News Ber ‘Next One ; Kabel Ge 1986 5—(NamaKokutire Ex Qialiy Males e a a oust (Carlsberg), 19877 100% Male Edehil ‘New Sun, Nama ~ al Spee (Miler) a 1988 9 (CoocsLight) Kirin Dry Bara Dry Suntory Dey oy Fae Mak Mair108 bast —_ Hale Hal On The Rocks oa Pape Moogeel - , 199 12, SuperYan —” FneDeat Sapporo Draft a a tac, OE MairDry Coal ry ; : Cook Black Lael 1900-7 ne | — Ichiban Sibert Hokkaido ie Mild Lager Byakuya Monoga, eR : Cn Frenism Ginjtkom ee areas a : Fmt Boas a fous Sum. ag Te ato Sam, Sent cee ec fl set ieee nee ‘thond bec cides tw peer he et condced pew sane caeaiaermee mare urate(Market Share Shifts In the Japanese Beer Industry, Naruns oF Comrermon C219 “ 60 Kirin 56 2 48 ‘Market Share (%) 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1590 Year ‘The current level of new product development is quite expensive. It takes a lot of money to develop an original new beer, and on top of that many of the recent new ‘brands require materials or production methods that are more costly than those used to brew the old standards, Plu, to give a new product a chance to become hit, you suced to advertise i heavily and that costs money. We seem to be caught in this cycle where if one company tries to dtferentiate itself, say by developing a ceraia type of sini-beg spout, then the three others also Have to doit, The originator gets a tempo- rary advantage, but it's copled quickly, and the industry as a whole ends up hurting, itself by having to do all these extra things that cost more but give no advantage over the competition, The results that consumers end up drinking expensive beer.