The Journal The Authority on Global Business in Japan

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It used to be said that whisky was the drink of choice for weather-beaten Scotsmen or hardened cowboys in the Wild West. In Japan, whisky was thought to be the preserve of seasoned salarymen huddled in drinking dens, especially in Tokyo’s business districts.

That may be changing. In Japan, a growing number of customers—many of them Generation Xers and Millennials who are new to the world of spirits—are enjoying whisky. Some are even choosing it as a go-to thirst-quencher.

Moneyed tourists and consumers on the international market are also jumping on the bandwagon, especially that of premium Japanese brands. The upshot? Whisky production, sales, exports, and imports are on the rise.

Speaking to The Journal, industry experts say this rise is not too surprising.

“In true Japanese style, Japanese whiskey makers recognized the quality of single malt Scotch, and after importing and consuming it for many years, they made their own and produced products that could compete with the best in world,” said Paul Flint. Through Premium Beverages Inc., a company he co-founded, Flint distributes US craft spirits in the Asian market.

In such a climate, Japanese whisky producers are feeling bullish. In 2014, for example, esteemed US-based whisky manufacturer Beam Inc.—of Jim Beam and Makers Mark fame—was acquired by Japanese distilling and brewing company Suntory Holdings Limited.

GOOD TASTE
A number of factors account for the rise of Japanese whisky, the experts say. One of them may lie in the Japanese palate itself, which has always shown an appreciation for quality and variety.

But however keen Japanese taste buds may be, it only provides part of the answer. For Rachel Nelson, director of the Agricultural Trade Office (ATO) of the United States Embassy in Tokyo, both Japanese and Americans have a love for the new—and that extends to trendsetting or adoption of the latest thing. Whisky has become that thing.

“From sake and sushi in Japan to craft beer and popcorn in the United States, both countries love to launch new trends and spread them quickly around the country and the world. Not just delicious food and drinks, but in so many other areas the countries can adopt cutting-edge trends from one another and spread these trends in the marketplace,” Nelson said.

Quality is also highly prized in Japan, and customers are always interested in a product’s origin, added Paul Kraft, B2B director for Nestlé Nespresso K.K.

Kraft is also chair of the Food and Agriculture committee of the American Chamber of Commerce in Japan (ACCJ), where he leads the chamber’s advocacy positions in the food and beverages industry.

The Cavo wine bar in Ebisu has seen more young people choosing whisky.

The Cavo wine bar in Ebisu has seen more young people choosing whisky.

BRANDING IMAGE
Japanese food and drinks entrepreneur Shiniya Nakajima agrees with Flint, Nelson, and Kraft. Through his company EPLGA Co., Ltd, he manages a restaurant and a bar in Tokyo, namely Wanoba and The Platform. The latter serves Scottish, US, Canadian, and Japanese whiskies.

Nakajima points to a change in the way Japanese consume whisky, which involves creating new products and experiences; an increasing number of customers to his bar order a highball—a basic, often non-branded whisky consumed with tonic water as a mixer.

“The rapid increase of whisky consumption is partly due to the expansion and evolution of the ways to drink highball,” Nakajima told The Journal.

Though highball-type drinks can trace their origins to the traditional Scotch and soda, Nakajima has a point. Since 2008, Suntory has run a successful advertising campaign for highball. Some of the campaigns have featured social influencers such as the photogenic Millennial Yuriko Yoshitaka, an actress who was branded the “freshest female celebrity” in a 2009 poll.

The message has been clear: whisky—especially highball—is not just a drink for stuffy salarymen, but for younger, aspirational, and casual drinkers, too. Suntory also has launched highball offerings for the US market based on Jim Beam whisky.

Sales for Suntory’s highball—which include ready-to-drink (RTD) canned whisky drinks—grew 14 percent during 2014–2015, according to the US Embassy’s ATO.

Taking note of this cash cow, Suntory’s competitors are realizing their own versions of competitively priced RTD highball drinks—such as Nikka’s Black Clear—which can be bought in convenience stores at a low price.

UNIVERSAL TREND
While creative products and sleek advertising turned whisky into a hip drink, it was Massan—a TV drama series broadcast for some six months from the end of September 2014 by national broadcaster NHK—that breathed new life into a centuries-old tradition, making it relevant to a new generation in Japan.

Credited with boosting sales for premium Japanese whiskies, the popular program romanticizes the real-life story of Masataka Taketsuru and his Scottish wife Jessie Cowan.

Taketsuru is said to be the founder of Japan’s whisky industry; he not only began his apprenticeship at a distillery in Scotland in 1919, but established a distillery in a company that would later become Suntory, and followed that up by creating the Nikka brand.

Abroad, Japanese whiskies received a boost following a spate of international prizes, including 2015 World Whisky of the Year from the publishers of esteemed industry guide the World Whisky Bible.

Increased demand—which has mainly been for high-end Japanese whiskies—has resulted in greater domestic sales and exports of whisky in the last three years, with the greatest demand coming from the West and Asia.

WHISKY IN NUMBERS
While whisky accounts for less than 2 percent of the domestic alcoholic drinks market, its market share has grown from 1.1 percent in 2011 to 1.6 percent in 2016, says the US Embassy’s ATO.

Over the past five years, exports of Japanese whisky have increased by almost 180 percent. Japanese whisky exports in 2015 reached 4,693.7 kiloliters (up from 3,842.2 kiloliters in 2014), with France, Taiwan, the United States, and China, respectively, taking the top four spots.

In 2015, according to reports, Suntory alone increased exports by 256,000 cases, a year-on-year boost of 12 percent. As Japan’s leading whisky producer, the company owns the Yamazaki, Hakushu, and Chita distilleries.

Asahi Group Holdings Ltd.—Suntory’s main domestic competitor—also reported higher sales of their whisky and spirits products, with a nearly 25 percent rise in sales in 2015 compared with 2013. The Asahi Group owns Nikka Whisky Distilling Co. Ltd. and the Yoichi and Miyagikyo distilleries.

But Japanese are not just consuming and exporting domestic brands in greater numbers; they are drinking whisky products from abroad, too, and in growing volumes.

Whisky imports from the United States, for example, increased 21 percent between 2014 and 2015—from 9,807 to 11,854 kiloliters—according to figures from the Japanese Ministry of Finance.
While the United Kingdom topped the rankings, the United States was the second-largest exporter of whisky to Japan, capturing a healthy piece of the market at 38 percent.

The growing international and domestic market has spurred the likes of Suntory to make the strategic acquisition of brands such as Jim Beam, allowing the Japanese company to increase brand presence, market position, and distribution channels at home and abroad.

LOCAL FAVORITE
In parts of Tokyo, the number of non-Japanese who request Japanese whisky—mainly Hakushu Single Malt, Yamazaki Single Malt, or Nikka From the Barrel—is on the rise, Ken Nanaumi told The Journal. Nanaumi is a barman at Cavo, a French wine bar in Ebisu Ward that is popular with Japanese, expats, and visitors from abroad.

Conversely, Japanese clients wishing to drink foreign brands, such as The Macallan from Scotland or bourbon on the rocks, is also on the increase. “It may just be more exotic for Japanese to try a whisky from another part of the world,” Nanaumi added.

A Millennial himself, who has worked in France and Scotland, Nanaumi says the highball is more common in Japan than in Europe. Here, both Japanese and non-Japanese enjoy the drink, especially men in their thirties to fifties; but “you hardly find the highball in France or Scotland.”

There is a difference, too, in the way younger and older customers consume whisky. The former prefer low cost brands, while the latter go for premium ones. “Young people prefer drinks like Jack Daniel’s and cola or the three-year-old Yamazaki; but older ones prefer drinks like the Yoichi Single Malt by Nikka or the 12-year-old Yamazaki.”

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WHISKY REVISITED
While at first it may appear that a love of whisky is a new thing in Japan, history suggests otherwise. After all, the spirit has been made in Japan since the 1870s.

Drinking whisky was at its peak between the 1950s and 1980s, but it turns out that it has been enjoyed in Japan across generations and genders.

One patron of Cavo, a professional Japanese woman in her thirties who has lived in the United States, says she likes wine with her food when eating in a restaurant, but enjoys whisky (straight) after dinner when at home.

“It is more relaxing there, and I don’t have to worry if I drink a little too much,” she said. And how did she come to enjoy the drink? “My grandma and aunt used to enjoy a sip before bedtime.”

Although sales of whisky in Japan remained stagnant for a decade before its rebirth in 2008, recent form suggests the drink is getting a second wind. This time, it is the next generation—Japanese and non-Japanese—that is raising a cheer and quenching their thirst with the esteemed brew.

John Amari is a writer and editor from the UK who specializes in articles on startups, entrepreneurs, science, tech, and business.
Over the past five years, exports of Japanese whisky have increased by almost 180 percent.