By Samuel Arnold-Parra
In this article, Samuel Arnold-Parra discusses the Japan’s sake market. He gives an overview of the sector’s consumer trends while highlighting some key advice on how to export sake from Japan.
What is the appeal of sake?
Sake (often referred to as nihonshu in Japan) is a cornerstone of Japan’s cultural and gastronomic heritage, and one which is progressively more well-known and appreciated internationally. The history of sake is arguably as old as that of Japan itself; various theories of sake’s origins exist, with some believing that it originated over 2000 years ago in the Yayoi period. Sake, like wine, is a complex drink which can vary due to factors including the cultivar of rice used and the extent of rice polishing or filtration carried out during the production process.
As a result of its typically subtle flavours, suited to seafood and fine dining, sake has become more common on the menus of upscale restaurants across the globe. Nowadays breweries are paying greater attention to regionality and experimenting with new styles and production techniques, taking influence from the wine industry. The development of sparkling sake is a prominent example of this trend. As this trend continues, it’s likely that more people outside Japan will gain exposure to the increasingly diverse world of sake.
A shift in demand
Japan’s sake industry has had mixed fortunes over the years. On one hand, sake has gained popularity in foreign markets like China and the United States in recent years. On the other hand, sake has struggled within Japan, losing market share to drinks like beer and whisky since the 1970s. Domestic shipments of sake peaked in 1973 when 1.7 million kilolitres were produced. By comparison, in 2020 only around 420,000 kilolitres were produced, representing a decline of around 75% over that 47 year period.
Nevertheless, increasing international interest in Japanese food and drink in the last decade has been a welcome trend for the sake industry. The value of Japan’s sake exports grew year-on-year between 2010 and 2020, climbing by roughly 184% from 8.5 million JPY to 24.1 billion JPY over the course of the decade. Most of the sake Japan exports is destined for nearby Asian countries like China, Taiwan and Singapore. In 2020, Hong Kong was the single largest importer of Japanese sake by value, accounting for 25.6% of the year’s exports. Mainland China followed close behind at 24%, while the United States occupied third place at 21%.
Despite the impressive growth in sake exports in recent years, the volume exported remains low as a proportion of total sake production. As of 2020, exports accounted for only around 5% of sake produced that year. It is also worth bearing in mind that most sake produced is not premium sake, which is the target of demand. Taking into account the trend in growing demand for sake outside Japan, it is safe to say that the international demand for high quality sake exceeds supply. Demand has the potential to increase in regions like Europe where, despite continuing growth, sake imports remain low in comparison with North America or the Asia Pacific region.
Why has domestic demand fallen?
The domestic decline in Japan’s sake production is symptomatic of falling demand, which can be attributed to a variety of factors. In the short term, sake has found itself at a disadvantage against more readily available alternatives like beer and ready to drink (RTD) packaged beverages like cocktails. Sake has also been affected by COVID-related restrictions on restaurant opening times and is less available in vending machines or convenience stores than these competitors.
However, over the longer term, sake’s falling share of the market is likely due to broader changes in Japanese food and drink habits. As the Japanese public have grown fonder of and more familiar with a wider variety of food, ranging from Italian to Indian, the drinks consumed alongside these meals have also changed. Consequently, wine and beer consumption have grown. Similarly, since the peak of sake consumption in the 70s, the number of alternatives to sake has increased; whisky, shōchū, wine and RTD drinks have all become more prevalent and popular in Japan since the 1990s, contributing to sake’s demand decline. Price is also likely to be a significant factor.
In general, high quality beer and other alternatives are comparatively cheaper than high quality sake. As disposable incomes in Japan have stagnated or even decreased over the past two decades, it is probable that consumers have less room for sake in their budgets. Moreover, cheaper sake runs the risk of being lower quality, and thus risks creating a negative perception of sake which might also discourage people from seeking it out.
As international demand flourishes and Japanese sake breweries seek to mitigate declining domestic demand, the scope for overseas firms to connect with Japanese breweries and distributors is likely to increase. Foreign businesses interested in the sake market’s potential would be best served by a focus on premium grade sake, such as the ginjo or daiginjo classifications, due to its high demand.
These businesses may also wish to consider seeking out breweries which produce their sake using local ingredients, in order to be able to promote the product’s regionality as a selling point. A number of organisations exist which international business people interested in the sake market may find valuable for learning more about sake and getting in touch with breweries in Japan.
Firstly, the Japan External Trade Organization (JETRO) has offices worldwide and can assist with trade tie-ups and translation or interpretation. Secondly, the Japan Sake and Shochu Makers Association (JSS) provides a variety of informative resources regarding sake production and the industry, including a database of breweries across Japan and distributors within the UK. These and other organizations are helping to reduce the barriers of knowledge and communication between Japanese exporters and enterprising importers, making it increasingly viable to exploit the opportunity presented by growing demand for Japanese food and drink.
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