Japan's Thirst for Beer Quashed By High Cost of Imports

Julian Ryall in Tokyo
for National Geographic News

June 3, 2008

Part five of a special series that explores the local faces of the world's worst food crisis in decades.

The poster on the wall in the Footnik bar in Tokyo's busy Ebisu district is brief but apologetic. Addressed to owner Yuji Imai's loyal clientele, it says beer prices were raised 5 percent as of April 1, 2008, but that management hopes customers will continue to drink at the pub.

"We mainly serve Sapporo beer, and they told us that from the start of April prices would be rising because their costs had also risen," said Imai, 46.

"We have been very fortunate because people understand the situation, and we told them about the increase as soon as we knew, so we have not noticed any decline in the number of customers."

His regulars may have swallowed the price hike this time around, but with the cost of many basic foodstuffs increasing—including the malt used to brew beer—and Japan's economy showing signs of stagnation, the owners of Japan's bars and restaurants have good reason to worry.

Even in affluent Japan, luxuries such as a night out are the first to go during an economic contraction, so Imai cannot afford to ask drinkers to fork out too much more too soon.

Malting Away

Yoshiki Yamashita works in the communications department of Kirin Brewery Company.

"We cannot say whether the situation will improve or worsen in the future, but if we look at the cost of ingredients and raw materials over the last year it is clear that prices are going up," Yamashita said.

Of the four main Japanese beer makers—Kirin, Asahi, Sapporo and Suntory—Kirin became the first to raise its prices, in February.

Market demand for malt doubled between 2006 and 2007 for Kirin, and hops cost 30 percent extra in the fall of 2007 than they had one year previously, according to Yamashita.

In total, the cost of ingredients for the company's beer climbed to 7.2 billion yen (U.S. $69.23 million) in 2007, he said. In 2008, that figure is expected to hit 10 billion yen ($96.13 million).

"The economies of the BRICs nations [Brazil, Russia, India, and China] are getting stronger and creating more demand for resources, which is having an impact on demand and our business," Yamashita said.

Empty Shelves

And it is not only Japan's beer firms that have reason to worry.

With little useful agricultural land, Japan can only produce around 40 percent of the food that its 128 million people consume every year—the lowest among industrialized nations.

That means the country is especially hard hit by fuel costs, which make importing a larger burden than in other developed nations.

In the past year, the cost of instant noodles has risen 17 percent, spaghetti is up 13 percent, and mayonnaise 10 percent. In April, butter practically disappeared from supermarket shelves as surging global grain prices made it impossible for Japan's dairy farmers to import enough feed to increase milk production.

For the first time since the oil shock of the early 1970s, stores had to post notices apologizing for not having stocks of basic foodstuffs, sending a shiver through consumers.

According to a survey in April by the economic daily the Nihon Keizai Shimbun, 76 percent of food firms were considering increasing prices, with the majority expecting the price of wheat, soya bean, oilseed, and other key ingredients to continue to rise throughout the year.

It has only been three months since Kirin raised the prices of its beer products, and it is too early to determine whether there has been an impact on overall sales, Yamashita said.

The company estimates that Japan's shrinking population will reduce sales one percent and the price rise will hit total sales to the tune of another one percent.

"The main reason we were forced to raise prices in February was that, despite our best cost-cutting efforts, we could not fully cover the cost of the soaring price of ingredients," Yamashita said.

"But prices still continue to rise. We are very concerned about the situation now and in the future."