Japan: Non-alcoholic beer consumption up more than 20% since 2018 in Japan
Out of all the alternatives to alcohol, non-alcoholic beer has so far made the greatest inroads.
Whether its the rise of specialists like Athletic Brewing in the US or Big Drop in the UK, or the march of multinationals like Heineken or Asahi into the sector, alcohol-free beer, while still small, is eating into the sales of conventional brews in North America and Western Europe.
Yet, after Germany, the largest market for non-alcoholic beer is Japan. According to findings from GlobalData, Japan consumed more than 3m hectolitres in 2023, representing growth of more than 20% since 2018 (that compares to 47.7m hectolitres of beer last year).
The leading brands in Japans non-alcoholic beer market are owned by the local brewing giants Asahi, Kirin, Sapporo and Suntory. They have been producing non-alcoholic beer alternatives long before the category made headway in the West. Kirin launched its first 0.0% beer-flavoured beverage Kirin Free in 2009 and Suntorys All-Free hit shelves in 2010, Sapporo released Sapporo Premium Alcohol Free in 2011.
The growth of non-alcoholic beer in Japan comes against the backdrop of declining alcohol consumption in the country. GlobalData research shows that, between 2019 and 2023, beer and cider intake consumption nearly 12%. In 2021, the fall in demand even pushed Japans National Tax Agency to launch the Sake Viva! Campaign, where 20- to 39-year-olds were tasked with developing ideas to increase drinking among young consumers.
As global alcohol-free brands look for new markets, Japan appears enticing. In October, Heineken became the first foreign brand to launch its 0.0% product in the country, calling it the next step in the companys progress. But, if Japan appears to hold such potential, why havent more overseas non-alc beer brands set up shop?
Despite Japanese brewers having a stronghold in the market, there are several reasons as to why foreign non-alcoholic beer brands might see potential in selling in the country.
[Since] just before the pandemic, I think the interest in Japan has been on the increase, says Ken Masuno, account manager at Tokyoesque, a London and Amsterdam-based market research group set up in 2014 that helps European and Japanese companies enter each others markets.
For retail products, China and Japan has typically always been the main obvious choice, he adds. However, the political risks that come with exposure in China I think has [forced Western] companies to look to Japan as the gateway to Asia.
The countrys development as a holiday destination is also expected to drive an increase in the consumption of non-alcoholic drinks. If you look at Japan today, theyre expecting around 30m tourists [to visit] in a year, Masuno explains. Out of that figure, a majority will come from South Korea, Taiwan and South East Asian countries like Thailand, Indonesia, and Malaysia, he says. Indonesia and Malaysia for example are [majority] Muslim nations so non-alcoholic beverages are obvious [choices] here.
Japans focus on growing its alcohol-free sector is also unique in the Asian market. As Kevin Baker, head of global beer & cider research at GlobalData explains, you havent even got other Asian regional brewers like San Miguel having a significant share in that market. Its unusual in having quite a large alcohol-free market. [In] most markets in Asia the concept is somewhat alien.
The statistics speak for themselves. Japan far outweighs other Asian countries when it comes to volumes, with the second largest market for non-alcoholic beer production being China which hit just 235,340 hectolitres in 2023.
Unlike other markets in Asia, Japans focus on non-alcoholic beer is helped because of the heritage of brewing thats attached to the leading companies, adds Baker. Consequently, the country behaves a lot more like a European market, and much less like an Asian market, he says.
Despite rising consumption, some Japanese brands have reported slight dips in growth. Back in 2020, Kirin predicted its non-alcoholic beer unit would grow nearly twofold between 2019 and 2023.
Kirins non-alcoholic business is shrinking somewhat, Kengo Magi, senior manager of marketing at Kirin Brewery, concedes, influenced by competitors more aggressively increasing the number of products.
Suntorys experience is similar. A company spokesperson said sales of its All-Free non-alcoholic-beer brand fell 1% year-on-year to 8.4m cases.
However, the spokesperson said Suntory has still seen growth from the brand of more than 14% versus 2019. The spokesperson adds: The sales volume of our non-alcoholic beer category takes just over 10% of our alcoholic beer category, so we believe there is still room for us to expand the demand.
One trend contributing to the demand for non-alcoholic beer in Japan is the growing interest in added health benefits in beverages. The consumer interest in functional or better-for-you qualities in drinks is equally present in Japan as they are everywhere else, Baker says, with people wanting to cut down alcohol consumption [and] looking at their health and understanding the health-giving quality of hops. Thats a new category thats emerging.
Just a handful of brands have entered the functional space in non-alcoholic beer in the West. UK-based Fungtn, for example, produces alcohol-free lagers and IPAs with functional mushrooms-based at the centre of their recipes. In Belgium, Thrives non-alcoholic blondes contain protein and vitamins B and D.
This part of the market is also in its early stages in Japan but big drinks groups are showing interest. One of Suntorys most successful non-alcoholic beer brands in the country, according to GlobalData consumption figures, is its All-Free Ashita-wo-Omomo (meaning thinking of tomorrow in Japanese), which claims to be good for memory. Kirins Karada Free also carries health claims of helping to reduce levels of visceral fat in the body, while Asahi Healthy Style is marketed as a beer-taste drink that moderates the rise in blood triglyceride levels after meals.
While the functional focus is still a niche globally, it could prove a useful selling point for businesses considering a future in Japans non-alcoholic beer market.
In many respects, Japan stands out as an ideal place for a non-alcoholic beer business brewer to expand into Asia. That said, the country isnt the easiest market for international brands to navigate.
One significant difference is, in Japan, non-alcoholic beer is not described as beer but a beer-like beverage.
Specifically in Japan, you have this issue that they cant call it beer, Baker explains. By law
beer has a definition, and the definition says its an alcoholic product made from the brewing of malt. Suntory All-Free for example is described as sparkling malt and hops beverage.
Another contrast with Western markets is the one-month focused campaigns around abstaining from alcohol like Dry January or Sober October. These dont play a role in marketing strategies for non-alcoholic beverages in Japan, says Jeanie Chen, senior analyst at financial services group Morningstar.
Premiumisation has also yet to shape consumption trends to the same degree, she says. This trend of drink less, drink better is not as popular in Japan as a lot of the Western market. Japanese consumers are still very price conscious.
Heineken was one of the first foreign companies to launch a 0% version of its alcoholic beer in Japan in October. While still in its early stages, the brand has received largely positive reviews so far, insists Tony Wheeler, general manager at Heineken Japan.
Wheeler concedes the Dutch brewing giant has faced some challenges with supply, specifically relating to low distribution
in supermarkets and convenience stores due to a lack of shelf space that could accommodate the size of the Heineken 0% can. This has forced the company to develop an additional packaging of standard-sized cans this April exclusively for [convenience store] chains, Wheeler says.
Baker says Heineken has been battling against the market. The local brewers are so entrenched in terms of distribution networks, shelf space, bar space, he explains. Japanese consumers tend to go with Japanese brands by and large. It would be a tricky market for anyone to get into.
Heineken is confident consumer interest in Japan in a healthier lifestyle will support the growth of its non-alcoholic brand in the country. Ultimately, the trend amongst Japanese consumers is to seek healthier lifestyles and adopt moderate levels of alcohol consumption, which will work to the benefit of Heineken 0.0s expansion in Japan, Wheeler says.
While smaller non-alcoholic beer brands have done carved out footholds in markets in North America and Europe, analysts dont expect them to see a similar reception in Japan.
There are craft brewers there but it hasnt taken off the way it has in other markets, explains Baker. If you think of someone like Big Drop, or Athletic Brewing and Lucky Saint
Theres a lot of companies of the sort in Europe and the US that have done well coming from that small entrepreneurial craft beer space. Thats very unlikely to play in Japan because its a very small space.
Chen echoes Bakers sentiments. Craft beer is not really popular in Japan, she says. The volume remains below 2% and its partly because the Japanese [alcoholic] beer has a very high quality, so the difference between craft and the regular mainstream beers is not so big. People are not willing to pay a big premium
for craft.
Another factor to consider is not all local brands are developing alcohol-free versions of their bestselling beers. For example, Kirins marketing strategy for non-alcoholic beer is focused on establishing stand-alone alcohol-free brands.
As Magi explains, the brewers approach is characterised by the fact that we are nurturing our own non-alcoholic brands at the core, rather than brands that are based on endorsement of existing beer in the Japanese market.
On the other hand, Asahi is partly focused on developing non-alcoholic versions of its alcoholic beers, such as Asahi Dry Zero, which promotes the same dry finish as its alcoholic Super Dry brand.
Since 2021 in Japan, it has also been building a new category of 0.5% beers and improving its 0.0% selection, using a similar production process as alcohol-free beer manufacturers in the West, where the alcohol is removed after brewing.
Commenting on the success of Asahis non-alcoholic portfolio (this includes four non-alcoholic beer products and one non-alcoholic RTD), Mizuho Kajiura, head of marketing at Asahi Breweries, says the company expects the position of its low-and-no products to [continue] to rise in the future.
He adds the company achieved a record-breaking Y42.8bn ($289m) in sales from its non-alcohol beverages in Japan in 2023, representing a substantial increase of approximately 70%.
When it comes to the companys non-alcoholic beer segment and specifically its 0.5% products however, some analysts argue that the product is not gaining momentum. Chen, who works with Asahi, argues the product hasnt really gained much traction with consumers yet.
Even if sales from certain brands are patchy, what Asahi and its Japanese peers benefit from is the fact they can make money from a varied portfolio.
As Masuno at Tokyoesque explains: Asahi, Suntory, Kirin, from tea to alcoholic beverages to non-alcoholic, they cover everything. As long as they can provide what the audience is demanding, they can still benefit from it.
Thats a huge difference compared to the Western market, and I think that makes it easier for the companies to commit [to alcohol-free beer].
If an overseas non-alcoholic beer brand is serious about tackling Japan, it seems that being a well-established brand is essential. Heineken 0% tends to do well in all markets [because] it rides on the coattails of the parent Heineken brand. Heineken is known for quality, and it is widely recognised, Baker says. A companys credentials and international brand recognition are crucial, he adds.
But, in addition to having an established name, businesses need to prepare for partnerships. The key is to find the right partner for the market, Masuno says. In Japan, there are already [local] established companies who are willing to go into a partnership and already have the distribution lines. They know the market inside out.
Matching up with a major Japanese drinks company might not be a suitable option for every business, especially if they already have an international presence. Regardless of that fact, Masuno stresses: Its a balance [and] you have to consider what is most important. If you want to open the gate to Asia, you might have to give up something of your own pride.
E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .