For all the growth put on by single malt in Japan within the past decade, the emergence of a new malt drinking young generation and the success of events like Whisky Live, the big picture showed a different picture. The whisky market in Japan, and specifically for blended Japanese whisky, was moribund. The high water mark in consumption had been reached in 1983 after which whisky sales went into steep decline for a quarter of a century. Japan was suffering the same set of circumstances that had similarly afflicted the UK and US markets: whisky’s unfashionability coupled with a shift to white spirits.
The difference between the Scotch and Japanese industries however is that Scotch has always been export led and while the situation in the 80s and 90s was tough for Scotch, at least there were some new(ish) markets which helped to take up some of the slack.
Japanese distillers had always relied on Japanese drinkers, an export strategy had never been needed.
The mini-revival in single malt, while heartening, was never going to kick-start Japanese blends. These new drinkers were hardly mass-market and were already convinced of the flawed paradigm of malts good, blends bad. Their contemporaries supped beer and shochu and scratched their heads as to why anyone should want to drink an old man’s drink. Whisky was irremediably unhip.
Then, in 2008, the unthinkable happened. The market began to grow, up 10 per cent in 2008/09, 20 per cent the year after. Last year, for the first time in a generation, whisky helped to boost Suntory’s operating profits which rose by 48 per cent for the first six months of the year, to a half-year record of Y41bn ($489m) the Financial Times reported, and the firm’s tabled bid for Tullamore Dew showed that it was once more becoming acquisitive.
What happened? Some say it was the last desperate throw of the dice, others prefer to see it as a careful rethinking of strategy which returned to the roots of Japanese whisky’s popularity and looked at liquid, occasion and serve. Whichever is right, the strategy was the brainchild of the ever-grinning, energetic Tetsu Mizutani who in 2008 had recently been appointed executive officer of Suntory Liquors, the firm’s Mr Whisky.
Mizutani’s strategy was to persuade (and it wasn’t that easy) 500 izakaya to serve Kakubin as a HiBall (mixed with soda). Enter the KakuHi. “One reason why whisky hadn’t been picked up was because it was thought that the market was only concerned with authentic/traditional bars and gentleman’s clubs,” he recalls. “The HiBall strategy could provide a place to drink whisky and also show people how to enjoy it,” He has now been appointed MD of Suntory Liquors. As he begins to speak, a colleague in PR leans over to ensure his company badge is straight.
What Mizutani appreciated was that with the arrival of a new generation had come a shift in Japan’s drinking culture. The target drinker wasn’t the white-shirted, black-suited salaryman drinking whisky with colleagues in the izakaya and then continuing onto another bars before grabbing a bowl of ramen and sleeping on the last train home.
“We had tried so many other strategies,” says Mizutani. “But the biggest reason that whisky wasn’t popular was that we had lost the places where people could enjoy whisky. People didn’t drink whisky at the end of the dinner, or go to that second bar after the meal. Nowadays, they just stay in one restaurant or izakaya and they drink alcohol during the meal. So we decided to change strategy and try to get the people to drink whisky at the first place.”
The HiBall caught the zeitgeist. Today, across Japan the HiBall generation is happily sipping ice-cold whisky and soda poured from draught dispensers, the Hiball Towers which surmount the problem of ensuring a perfect serve. There’s HiBalls in cans, dedicated KakuHi bars. Go into any bar, from the snootiest malt specialist to the most humble street stall and Hiball is the automatic choice, premium at the top and blend for the rest.
The issue now is two-fold. Maintain the momentum and also see if there are ways in which the HiBall drinker can become a whisky drinker. Mizutani is however wary about running before he can walk. His answer shows that for him this is just the first step and that he’s not falling into the trap of thinking that the job is done. “The issue I am thinking of now isn’t trying to change existing HiBall drinkers into whisky drinkers but selling more HiBall. I would still like to increase Hiball more and more. Why?Look at ChuHi [shochu and soda]. Whisky HiBall is 1/20th the size of that category, so our first priority is to expand the HiBall market and an important element of that is to emphasise that HiBall = whisky, it’s not made with another drink.”
What though of the premium variants that are appearing? Can this not be exploited as far as the single malts are concerned? “We simply promote the existing HiBall strategy, but naturally some people want to look further than just Kakubin and test the HiBall with Yamazaki or Hakushu. This is market driven rather than part of the core strategy.”
Neither are there any plans to roll out the HiBall strategy globally. “Yamazaki sits at the top of our pyramid of brands, so we’re not really thinking about using HiBall in terms of export. To begin with we have to establish the whole Japanese category, so we have to convince people that Japanese whisky is one separate category and Hiball would just confuse that. The only time we would use it would be to demonstrate how Japanese whisky can be enjoyed during a meal.”
But surely this is an opportunity for you to steal a march on your Scotch colleagues who have long struggled to get blended whisky consumed in mature markets? Why restrict it to Japan? “The first condition is for whisky to be in good health in Japan. If we can show that to be the case then we can benefit internationally because we can show it is enjoyed by many people at home. We are very different to Macallan for example, because they don’t think their domestic market is important for them.
“At the same time, HiBall could be used in Asia, so maybe we will trial it there. Because China is moving so fast we should do trials there and although the strategy is focusing on key markets it could be that China may become a very different market very quickly, so rather than doing nothing we may do some trials, including seeing if HiBall might be acceptable.”
So, rather than HiBall being the thrust, a malt-focused luxury strategy is beginning to take shape in Suntory’s three major export markets, all underpinned by Mizutani’s perceived need for Japanese whisky to acquire credibility. “Our most important market is the UK, because we have learned how to make whisky from Scotland. The fact that our whisky has a high reputation in the UK and wins awards there is important for our credibility. We also see France as important because people are so used to seeing luxury brands from this market. If our products are accepted by those who work within luxury then its important for our credibility too.”
This idea of the right people being seen drinking the right drink was first unveiled last year at a glitzy reception at the Japanese ambassador’s residence last year, while the firm is also actively aligning itself with contemporary art; while in Mizutani’s third target market, America, specifically New York and San Francisco, the strategy is to work with mixologists.
Any luxury-based strategy needs to be carefully managed, it can easily tip into self-parody and brands have to be careful not to be too eager or too keen to be seen with the lords of luxe, lest they are perceived to either be buying their place at the table and be dismissed as arrivistes.
There is another issue however. The 25 year decline in sales also brought an inevitable slowing in production, meaning that all Japanese distillers are currently having to allocate stock - and cherry pick markets. There’s a bitter irony that the rise in interest globally in Japanese malt coincides with low stock levels. In addition, the rise in blend sales now means that stock which may have been tagged for single malt may be needed elsewhere, to stop demand for Kakubin overheating, a campaign for the lower priced Tory’s blend has been rolled out. The ability to manage these limited liquid assets successfully in the next few years will be the biggest single issue facing the long-term success of Japanese whisky.
Mizutani is perfectly open about this, accepting that stock is on allocation, which may limit the number of markets able to be built in the short-term.
“Because of stock issues any plans for expansion have to be in the mid- to long-term because rather than going to China or Asian countries right away we will concentrate on the four [Japan, UK, France, US] and establish the brands there. Rather than increasing volume we have to increase the perceived value –not in price but in image.” It is a classic whisky dilemma – but better to have people demanding your whisky than having no-one wanting to buy it. No drink has the divine right to be the most popular - and whisky has paid the price for this arrogant belief.
The HiBall revolution may just be one way out of the old mindset, give people a taste they like in a serve which they enjoy. It is, and Mizutani realises this, just the start of a long road back to credibility. “Once the HiBall category is established in Japan it will become the entrance to whisky,” he says. And after that the world? He grins.