Japan: So-called third beer products-Sapporo Breweries Ltd.'s Draft One and Suntory Ltd.'s Super Blue-are enjoying brisk sales, largely because of the low liquor taxes, which keep the prices down, The Asahi Shimbun commented last month. : The drinks that look like beer, taste like beer but aren't taxed as heavily as beer because of their ingredients have avoided the taxman's attention long enough, say government officials working on tax revisions for the coming fiscal year.

Up until the end of November this year, Japan’s top five breweries have seen regular and low-malt beer shipments slide by 4.8% year-on-year. Including the ‘third beer’ category, however, shipments remained nearly flat for the period. Both Sapporo and Suntory expect the ‘third beer’ category to grow more popular going forward.

Draft One and Super Blue retail for 125 yen, excluding consumption tax, for one 350-milliliter can. By comparison, a similar sized can of beer sells for about 218 yen, while happoshu low-malt beer sells for 145 yen.

Happoshu was the industry's first attempt at skirting the high beer taxes through differences in ingredients, in this case a much lower malt content.

Finance Ministry officials say their guiding principle is to levy the same tax rate on merchandise of the same kind. For that reason, they argue, higher taxes must be levied on third beers. Sapporo says the ministry is unfairly singling out the company for taxation. Tatsushi Iwama, president of parent Sapporo Holdings Ltd., says Draft One is ``completely different'' from beer and happoshu.

“The product is the result of four years of development,'' he said. ``If they decide to raise taxes, the tax authorities will be making light of such hard work.'' Draft One is made from peas and classified as ``a miscellaneous alcoholic drink'' for taxation purposes. It has become a major profit earner for the brewer.

Since its debut in February, 15 million cases, or the equivalent of 300 million 633ml bottles, have been sold. The product now represents about 25 percent of the company's combined unit sales of beer and beer substitutes. Suntory's response has been more subdued than Sapporo's, mainly because the brewer does not depend on Super Blue for sales as much as Sapporo does on Draft One. Super Blue is a happoshu mixed with shochu spirits and is classified as a ``liqueur.'' The Tax Commission is scheduled to finalize its recommendations for revisions by mid-December.

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