Ken Research has recently announced its publication, “Failure Case Study: 1% Alcohol Drinks; The risk of innovation blurring the identity of alcoholic and soft drinks’’, which aims at providing in-depth market analysis of Japan’s alcoholic beverage market and deep understanding of consumer trends and attitudes that drive innovation. Further, it explains the product concept and positioning of 1% alcohol drinks and elucidates the causes of failure of such drinks in Japan. It also discusses the elements of alcoholic drinks that must be undertaken for future product development.
Japan has always been considered as a leading export nation of the world with immense prosperity and wealth. In 2011, Japan’s Gross Domestic Product (GDP) was USD5.8 trillion which was one of the highest in the world. This report seeks to provide a detailed analysis of Japan’s alcoholic beverage market and an understanding of consumer trends and attitudes that drive innovation. Further, it explains the product concept and positioning of 1% alcohol drinks and elucidates the causes of failure of such drinks in Japan. It also discusses the elements of alcoholic drinks that must be undertaken for future product development.
Japan’s flavored alcoholic beverage market witnessed record high in 2013 where the market volume hit a high of 2.5 billion liters which was 4.5 times larger than that in 2003. Market has been steady and major manufacturers have focused on flavored alcoholic beverages as one of the core categories. Major market players of Japan’s alcohol industry are Kirin Brewery Co. LTD, Asahi Breweries, LTD., Suntory and Sapporo Brewery, LTD. Major segments of alcohol beverage industry include beer, wine and spirits.
Influx of many global alcohol brands can also be observed in the market as a consequence of globalization and reduced tariffs. Japan’s import of alcoholic beverages has also shown an upward trend recently.
| Commodity | Imports 2011 – value USD millions | Imports 2011 – volume million liters | Compound annual growth rate (CAGR) 2006-11(value) | Compound annual growth rate (CAGR) 2006-11(volume) |
| Wine | 1,344 | 218 | 2.7% | 4.5% |
| Spirits | 1,163 | 712 | 5.9% | 1.4% |
| Cider | 271 | 241 | 32.0% | 41.6% |
| Beer | 68 | 42 | 5.2% | 2.4% |
| Alcoholic drinks | 2,846 | 1,213 | 5.6% | 2.4% |
(Source: Global Trade Atlas)
1% alcohol beverage fiasco
Kirin and Suntory released canned alcoholic drink with 1% alcohol content, both using slogans that they allow consumers to enjoy alcohol without getting too drunk. But this rather turned out to be biggest fiasco in alcohol industry of Japan and production of both brands terminated shortly after their launch. There are many reasons for the failure of these drinks such as:
- Such drinks blurred the distinction between other low alcohol beverages and adult soft drinks. Since product developers cannot wary the gap between alcoholic beverages and adult soft drinks such product innovation turned out to be perverse in the industry.
- Alcoholic drinks like beer, wine and spirits are more popular in Japan which leads to a lower acceptance of 1% alcohol drinks, leading to its failure.
Key Macroeconomic trends of the Japanese alcoholic market
Alcohol industry plays a crucial role in economy of Japan. Volume of alcoholic beverages is an important indicator of the overall consumer sentiment in the country. Following are key consumer and market trends that explain enormous demand for alcoholic beverages in Japan:
- Japan has highest per capita consumption of beer in Asia. Beer is the most popular alcoholic drink and tremendous amount of diversification can be seen in beer market- from malt beers to low malt and no malt beers. Beer accounts to half of the total alcohol beverages consumed.
- Japan is Asia Pacific’s largest importer of spirits and second largest importer of wine. Demand for high priced wine and organic wines is also increasing steadily. However, demand for low alcohol and 1% alcohol drinks are rather falling.
- Huge diversification is seen in alcohol beverage industry. Manufacturers are undertaking production of beverages for health conscious people who are looking for lighter and cleaner tastes. New flavors of alcoholic beverages are launched in market every year catering to extensive demand for such products.
However, many market and consumer trends also prove that though Japan still has a huge demand for alcohol but there is fading optimism associated to this industry. Many factors are responsible for steady decline in demand for alcohol:
- Falling consumption expenditure
Recession and falling Gross Domestic Product (GDP) of the nation attributing to global slowdown and global economic crisis. This has led to fall in expenditure of consumers on alcoholic beverages.
- Tsunami in Japan in 2011 was a serious blow to the economy which also contracted consumption demand.
- Shrinking population base
- Japan’s aging population and low birth rate is contracting its population base. Since large chunk of population is aged, they are limiting their alcohol consumption due to health concerns leading to sharp reduction in demand.
- Improved health awareness
- High taxes on alcohol and related beverages
High amount of taxes are levied on consumption of alcohol and related beverages which is reducing demand for such beverages.
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Ankur Gupta, Head Marketing & Communications
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