Posts Tagged ‘alcohol’

European winemakers fret over competition from Chile

Monday, August 25th, 2014

The competition: Wines from Australia, Chile and France with retail prices below ¥1,000

The competition: Wines from Australia, Chile and France with retail prices below ¥1,000

During the first half of the year, sales of wine from Chile exceeded those of wines from Italy, thus making Chilean wine the second most popular imported wine in Japan, and apparently, Chile is now gaining rapidly on No. 1, France. The main reason is the Chile-Japan Economic Partnership Agreement signed in September 2007, after which the tariff on Chilean wine started to decrease gradually from the standard duty on foreign wines of either 15 percent of import price or ¥125 per liter. Right now the tariff rate for Chilean wines is 5.8 percent, and it will be zero in April 2019.

According to a Jiji Press report, the further the tariff drops, the more sales increase. More significantly, the amount of wine being imported has gone up. In 2007, when the EPA went into effect, Japan imported 10,517 kiloliters. But 2013, the volume was 36,435 kiloliters, which is an average annual growth rate of 20 percent. For the first half of this year alone, 17,349 kl entered Japan, and since the end of the year is the big season for wine, it’s clear that this year’s volume will exceed last year’s. And note that France exported 19,093 kl to Japan in the first six months of 2014.

Nevertheless, importers have told Jiji that the EPA isn’t as big an influence as it seems. One wine industry association said that Chile’s product is more suited to Japanese tastes, whatever that means. But the fact is that other wine-making countries and regions are paying close attention to the Japanese market and may be worried about Chile’s ascendance. For one thing, while sales of alcoholic beverages in general have been on the decline, the consumption of wine has been going up. At present, the average Japanese person consumes a little less than three bottles a year. Consequently, Japan signed another EPA with Australia in July. According to the terms of the agreement, the tariff on Australian wine will disappear in seven years, which is faster than the rate reduction with Chile.

So Europe is especially anxious to get its own EPA hammered out, since it’s losing ground to these New World winemakers. Wine and cheese are two of the main products under discussion.

It may already be too late. According to a report in the Hokkaido Shimbun, Hokkaido Prefecture’s most prominent convenient store chain, Seico Mart, has seen a 10 percent increase in the sale of Chilean wines over the past year, or one-fourth of the chain’s entire wine sales revenue. That’s even more than French wines. The newspaper narrows the appeal down better than Jiji, saying that Japanese people prefer the slightly sweeter flavor of Chilean wine. But the real reason is the price. The bestselling wine in the chain is a Chilean wine that goes for ¥480.

A common retail belief when it comes to selling wine to people who aren’t connoisseurs in Japan is that ¥1,000 tends to be the limit, and Chilean wine is consistently below that ceiling.

Tax structure encourages getting wasted

Monday, March 3rd, 2014

Zero's not in it: Selection of Suntory chuhai at discount store

Zero’s not in it: Selection of Suntory chuhai at discount store

There’s no end to speculation as to how the consumption tax increase in April will affect the country, socially as well as economically. Last week, Tokyo Shimbun published a conversation between a college professor and one of its reporters about the effect on beer prices and, in turn, beer consumption, which last year declined for the ninth year in a row.

When the reporter asks the professor about this effect the professor feigns amazement that the reporter, who specializes in tax matters, didn’t know that “42 percent of the price you pay for your beer is already tax.” He goes on to explain that the beer tax is a holdover from the 19th century, when beer was considered a luxury item. Since then it’s become much more the drink of common people thanks to improved and cheaper refrigeration, but the government liked the revenues too much and maintained the tax structure for beer. To the professor’s thinking, the tax should be pegged to alcoholic content, and since beer’s is relatively low the tax should also be lower than it is for other alcoholic beverages.

It’s easy to get people to pay the tax since it isn’t indicated on the package or even at the place of sale, unlike the consumption tax. For the sake of reference, when you buy a 350-ml can of beer you pay ¥77 in tax. If you bought the same volume of whiskey you’d pay ¥129 in tax; shochu ¥70, nihonshu ¥42 and wine ¥28.

Basically, that means the consumption tax is levied on a tax, since the consumption tax is determined by the price that the wholesaler and retailer pays for the product, which, by the time they receive it, already includes the alcohol tax that is levied at the manufacturing stage. “When the government said they’d increase the consumption tax, people got angry,” says the professor. “But no one says anything about the alcohol tax, because people don’t notice it.” The reporter thinks that a “tax on a tax” violates the principle of taxation. The professor doesn’t disagree, and adds that beer accounts for half the revenues brought in by the alcohol tax. Because beer makers are large companies with responsible accounting practices, it’s easy for the Finance Ministry to collect the tax. The reporter says, “Why don’t manufacturers get angry?”

Actually, that’s why they started making the “beer-like” happoshu in the late ’90s. Because the ingredients used in happoshu are different from those that define beer for tax purposes, the beer tax doesn’t apply, and so makers could sell it at a much lower price. The government, of course, didn’t like that and eventually raised the tax rate for happoshu, too, though not as high as it is for beer (¥46 for a 350-ml can). Makers came back again with dai-san (third type) beverages, which use fermented soybeans for flavor instead of hops, and that got around the happoshu tax (¥28 for 350-ml). But while these new, cheaper brews outsold “real” beer handily, sales for all three beverages have still decreased over time, due to the shrinking population and a younger generation of consumers who don’t drink as much as their parents did.

In that regard, beer makers don’t see much of an impact of the consumption tax hike on beer and beer-like beverage sales; or, at least, they don’t see any point in trying to offset the hike. But they are modifying their lines of canned drinks that contain shochu, colloquially called chuhai. As the price of chuhai goes up thanks to the consumption tax, they are increasing the alcohol content. In fact, many companies have already added more alcohol to their chuhai products.

Kirin Beer increased its Hyoketsu Strong from 8 percent to 9 percent alcohol, and in April it will boost its Hon-shibori Lime chuhai drink from 6 to 8 percent.

Asahi Beer is already advertising its new Karakuchi Shochu Highball, which is 8 percent, in a bid to persuade normal fans of high balls — whiskey and soda — to switch to shochu and soda. That’s a full 5 percentage points higher than Asahi’s other chuhai, Slat, and both beverages will be sold for the same price. (Note: Slat is aimed at young women and the word suggests slimness, though an English speaker may be forgiven for thinking the name an unfortunate choice for such a target group.)

Suntory’s chuhai product, -196 Degrees C Strong, which enjoyed a 22 percent share of the chuhai market in 2012 thanks to its already hefty alcohol content, will be strengthened from 8 to 9 percent. The company told Asahi Shimbun that it expects sales to grow by 8 percent.

The target is middle-aged and elderly men, the main demographic for alcoholic beverages anyway. Makers think they will be attracted to the cost effectiveness, according to the Asahi, which means they can “get drunk more easily” for the same amount of money. In many countries, tax on alcohol is referred to as a “sin tax,” since it has a double-edged purpose: raising revenues on a product or service that may be harmful to society, on the one hand, and on the other checking consumption of the harmful product or service by making it more expensive.

This latter purpose doesn’t seem to apply in Japan, where alcohol companies have figured out a way to use the tax structure to their advantage. There’s no sin in that.

Somebody has to pay for cheap beer

Friday, August 3rd, 2012

Aeon’s beer case: Does this look cheap to you?

Late last month, the Fair Trade Commission issued a warning to three liquor wholesalers whom the commission suspected of violating the Antimonopoly Law by selling beer to the supermarket chain Aeon at below cost. It was the first time the FTC ever made such a warning about dumping for alcoholic beverages, and while the media is reporting that the commission apparently does not have enough evidence to prove a clear violation of the law, the FTC has made an exception and issued the warning anyway, which would seem to indicate that it strongly believes some hanky-panky is going on.

The main reason for the warning in this instance is to protect smaller liquor retailers located near Aeon outlets who can’t hope to compete with such low prices. In fact, a closer reading of the coverage would seem to indicate that it is really Aeon who is bending the rules to its advantage rather than the three wholesalers — Mitsubishi Shokuhin, Nihon Shurui Hanbai, Itochu Shokuhin — but in any case the warning was mainly directed at them. Nevertheless, Aeon decided that the adverse publicity attached to the warning was serious enough for it to hold a press conference on July 23. A representative stated that the company made no such demand to the three suppliers to sell them beer at below cost.

Apparently, the FTC was suspicious of dumping as long ago as 2005, when it heard that 10 brands of beer and happoshu (malt liquor) were being sold to Aeon at prices that were below the price they paid to the manufacturers, even with ancillary costs like transportation factored in. Aeon would then add its own margin and, supposedly, still undersell competitors. For instance, the wholesaler would buy a case of beer from a manufacturer for ¥3,800 and then sell it to Aeon for ¥3,700. The wholesaler would supposedly make up for the beer loss by carrying out a business practice known in Japan as arari-mikusu, which means jacking up the prices of other alcoholic beverages they sold to Aeon. Consumers would pay more for these products than they normally would. Such a practice violates National Tax Agency guidelines for fair trade.

Continue reading about cheap beer in Japan →

Annals of cheap: Daigoro

Thursday, November 5th, 2009

You can buy Daigoro anywhere, even in drug stores like this one

You can buy Daigoro anywhere, even in drug stores like this one

Like many people, I had many surprises when I first arrived in Japan, and one of them was the sight of men (always men) drinking openly on the street. Often it was canned beer, but if any one product was ubiquitous it was One Cup Ozeki, which for years I assumed was actually marketed with street drinking in mind. Actually, it was developed for the 1964 Tokyo Olympics as an all-in-one package for nihonshu-lovers. The packaging itself is a sturdy glass “cup” with a metal pull top and a plastic replaceable cover, meaning you can enjoy it without having to provide your own container. This was just the sort of thing that street drinkers, a class of recreationists that includes a good portion of day workers, chronic alcoholics and homeless, were waiting for, so to speak, especially since a 180-ml portion was less than ¥220. In fact, Ozeki, the major sake brewer behind the brand, had to contend with an image that associated One Cup with the indigent. For a while, the company actually embraced this image indirectly with award-winning TV commercials that showed how the cups could double as flower vases and containers for household items, a utility to which the homeless had been putting discarded One Cup Ozeki containers for years.

Continue reading about Daigoro shochu →

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