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Is Japan’s Beer Market Set to Fizz on Abenomics?

August 5, 2013, 9:22 AM

Is Japan’s Beer Market Set to Fizz on Abenomics?

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By Hiroyuki Kachi

Japan’s long-stagnant beer market may have finally started picking up in the wake of Prime Minister Shinzo Abe’s pro-growth economic policies, known as “Abenomics.” But it’s hard to be sure just yet, given that shipments actually fell in the first half of 2013. The first true test of whether Abenomics is putting a head of foam on the beer industry will be when figures for the peak beer-drinking month of July come out Aug. 12. From January to June, overall beer shipments for Japan’s five top brewers declined 0.9% from a year earlier. Shipments have languished more than 20% off their 1994 peak as the population ages and consumer demand has diversified. Still, the country’s two biggest brewers, Asahi Group Holdings 2502.TO -0.90% andKirin Holdings Co. 2503.TO -0.26%, last week reported solid operating profit gains for the first six months of the year. But most of the gains were attributable to the weaker yen, which lifted the value of their overseas operations. Weak beer sales at home failed to put any extra fizz in their bottom lines.The companies hope Abenomics will spur domestic demand ahead, however, pointing to subtle hints that consumption may be picking up.

“There are signs of a slight recovery in terms of people having beer as their first drink” on a night out, Kirin President Senji Miyake said at a recent news conference on the company’s earnings.

Over the past few years, price-conscious consumers have favored cheaper, beer-like beverages with lower malt content that brewers developed to take advantage of a tax loopholes–and that doesn’t look like it will change any time soon.

“If you consider the household market, the trend of buying cheaper beers to drink at home still prevails,” Mr. Miyake said.

On weekends and special occasions, however, demand for more expensive products has been rising, suggesting consumers are starting to drink higher-end stuff at home too.

Asahi director Yoshihide Okuda said demand has been hardy for more expensive products like premium beer gifts sets.

As a result, Asahi has more than doubled its annual sales target of Super Dry Premium gift boxes to 2.8 million. The beverage is priced about 15% higher per can than the company’s flagship brew, Super Dry.

But it is the upcoming figures for July that will give a truer picture of whether Abenomics really is a cure for the industry’s long hangover.

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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