FOR the beancounters at Asahi Breweries, Japan’s biggest beer company, soaring August temperatures are a wonderful thing. Uncomfortably hot and sticky weather may ruin a good business shirt but it also means huge sales of beer, and big profits.
As Shinsaku Kiichi, an equity trader at Nomura, the investment bank, explains from behind his frosty glass of Asahi Super Dry: “I shouldn’t say this but judging the drinks industry is simple. Just look out of the window and you can practically see the cashflow outlook for yourself.”
For investors following Asahi Breweries, however, even the simple window test may soon become highly complicated, requiring weather forecasts in far flung places. The company, in a desperate quest for growth now that Japan’s beer market is saturated, is looking around the world for other thirsty punters. It is part way through a drive into China, which already consumes 20 billion litres of beer a year and is expected by next year to become the world’s biggest beer market. Next on Asahi’s list is the UK, where it has laid the groundwork for a major assault.
Shigeo Fukuchi, the chairman and chief executive of Asahi Breweries, has masterminded the success from his top-floor office of the Asahi Beer Tower in Tokyo. Built to resemble a frothy beer mug, it cosies up to the flagship beer hall, which is topped by the Phillipe Starck-designed Flaming Ornament, meant to symbolise the brewery’s “heart of dynamism”.
Fukuchi is clear about where he wants to take his company. “Asahi Super Dry has globally become the beer brand of Japan and that is what we want to be selling into the British and European market. Drinking has become a global industry and we own a global brand now. Like Budweiser is seen as all-American and Corona is seen as all-Mexican, Super Dry has gained the image of an all-Asian beer.”
Unfortunately, the blazing heat in Tokyo has not been the pattern of the past three months. An unusually mild summer and long rainy season have played havoc with beer and soft-drink sales and last week Asahi unveiled a dismal set of quarterly numbers, accompanied by a profit forecast downgrade and a nasty tumble for the shares.
Despite this blip, Asahi is still revered as the company that transformed the Japanese beer industry when it launched Super Dry in the late 1980s. It now towers over its older rivals, Kirin, Suntory and Sapporo. As the Japanese economy rumbles deeper into deflationary downturn, there is an underlying expectation that Asahi will come up with some new stroke of genius. It needs to think fast: Japan’s younger population is dwindling quickly, taking with it a crucial section of the domestic market.
In Japanese business circles the Asahi Super Dry story has achieved legendary status. Invented in 1987, the country’s first karakuchi (dry) beer became an overnight success and hauled the struggling Asahi back from the brink. Super Dry shifted 13 million cases in its first year on sale and quickly became the country’s most popular beer. Sixteen years from its launch, it has now achieved a near 50 per cent share of the Japanese lager market and in 2001 propelled Asahi past Kirin to become the country’s biggest brewery. When fiscal 2002 ended, Super Dry had given Asahi its second year in the top slot.
That 16-year triumph has become Japan’s shining example of business success. Harvard Business School has devoted a teaching module to studying the Super Dry model and several Japanese universities have made Asahi Studies part of their management courses. The message is that, with the proper treatment, a new brand can dominate a market, even a market as well established as beer. Japanese academics have pored over the 16 years and produced lengthy tomes, with titles like The Super Dry Miracle, explaining Asahi’s shrewd reading of the market and the power of innovation.
The attention leaves Fukuchi a little nervous. “Of course we’re scared that someone will come along and do the same. The performance of Super Dry proves how quickly a new product can dominate the market and beat the competition.”
Asahi takes academic research seriously. In May the University of Tokyo’s Institute of Oriental Culture announced the launch of a ten-year sociological survey of 20 Asian nations. Hidden away in the long list of areas the survey would be covering was “consumption patterns”. Asahi is a sponsor of the project. The quid pro quo will be a first look at the results.
For Asahi, using sociological research is one of its “key secrets”. As Fukuchi explains, one of the secrets of Super Dry’s success is that it was tailored to suit the Japanese market. Before a pint of the stuff was brewed, Asahi people visited pubs, restaurants and parks asking drinkers what they wanted from a beer. As well as discovering that they mainly wanted something to drink with food, Fukuchi received a resounding message: people wanted a beer that was both nodogoshi (easy to drink) and had a bit of a dry bite to it. “People were sick of having to make an ‘either/or’ choice. So we gave them an ‘and’,” he says.
Fukuchi cannot resist a dig at his rivals, particularly Kirin. The second secret of Super Dry’s success, he says, is that it was the first new taste in the Japanese beer market since the war. Before that, companies merely repackaged the same old beer during the “bottle wars” of the early 1980s.
“What Asahi is all about is the pioneering spirit,” Fukuchi says. “We were the first to sell beer in cans, the first to sell three-litre jerrycans and the first to put together seasonal gift packs of beer. Kirin and the others never actually released a new beer – it was just the same stuff in different-shaped bottles. Asahi Super Dry was unique because it was actually a new type of beer.”
The third and most important secret was the marketing. Under Fukuchi’s guidance the company devoted its entire attention to Super Dry and ran a campaign that Japan had never seen before. He had armies of salesmen and women handing out beer on the street and broke the mould by running television advertisements all year round, rather than just in the summer.
The adverts broke new ground too. Until Super Dry, the form had always been to advertise beer by showing elderly men gazing pensively over Japanese landscapes. Asahi’s strategy concentrated on good-looking young throats gulping down Super Dry.
The effect of all this was that the Super Dry managed something that other Japanese companies had never quite succeeded in doing. It achieved a greater cachet in Japan than imported foreign brands.
That took quite some doing. From 1988 Japanese alcohol consumption broke new records every year. The big foreign brewers spotted an opportunity ripe for their Western marketing knowhow. Heineken set up its Dutch beer gardens, Corona sent actors round Tokyo bars dressed as Mexican desperados and even the British players took a shot at selling the cosy image of sawdust-strewn taverns.
But they could not snatch Japanese drinkers away from their beloved Super Dry. It quickly dawned on foreign brewers that they were not going to make a lasting impact and they began to pull out of Japan. At 25 million litres a year, beer imports to Japan are currently less than 10 per cent of what they were in 1995.
For all the power of Super Dry, however, Asahi remains in dire need of a new blockbuster in case the domestic success does not translate to the world stage. As the Morgan Stanley drinks analyst Taizo Demura explains: “Beer is the mainstay of profits so low business demand implies ongoing weak results. But unlike Kirin, Asahi has no other businesses to offset this weakness.”
Fukuchi, meanwhile, is confident of one thing. “People drink,” he says. “They may change their taste and they may become selective about what they drink in a particular situation. But people always drink and we sell drinks.”
Sales by Japan’s Big Four brewers (2002)
Asahi Super Dry ...... 2,100 million litresKirin Ichiban ........ 632 million litresSapporo Black Label .. 445 million litresSuntory Malts ........ 224 million litres
