Scotch meets shochu : That's the
spirit By Hisane Masaki
TOKYO - It
would have been an inconceivable alliance just a
decade ago.
The Japan External Trade
Organization (JETRO), a quasi-governmental body,
has recently decided to help the association of
shochu distilled spirits makers in
Hitoyoshi City, Kumamoto Prefecture on the
southernmost major Japanese island of Kyushu, to
develop a new brand of liquor, blending local Kuma
shochu and Scotch whisky. Shochu is
a clear alcoholic beverage, a cousin to Korea's
soju.
For the unique project, JETRO
will provide up to 4 million yen (US$35,000) in
subsidies to the local shochu distillers'
association, and
British experts on whisky brewing will be invited.
The association is expected to start producing the
new brand of liquor on a commercial basis by
autumn next year for sale in both Japan and
Britain.
JETRO is assisting the liquor
project as part of its Region-to-Region Initiative
Program, which is aimed at invigorating regional
economies in Japan and abroad through the
program's two-way industrial exchanges. JETRO
offers consultations, conduct surveys and exchange
missions. Since its inception in 1996, the JETRO
program has covered some 250 projects.
JETRO's support for Hitoyoshi
shochu distillers is also part of broader
efforts to help makers of traditional Japanese
liquors, including sake (rice wine), make
inroads into overseas markets, especially in Asia,
North America and Europe.
Hitoyoshi is
often called the "little Kyoto of the Kyushu
region" for its scenic beauty, and is also well
known among Japanese people for its production of
Kuma shochu, which boasts a 700-year
history. Many distillers produce the liquor using
local rice and water from the Kumagawa River,
which runs through the area.
Although
shochu is not as well-known as China's
maotai (which has become a traditional
drink for making toasts at Chinese banquets),
Scotch whisky or French cognac, it is big among
many Japanese as a down-market liquor.
Foreign brewers once regarded
shochu as their main nemesis.
A
dispute settlement panel of the World Trade
Organization (WTO) in 1995 handed down a ruling in
favor of the European Union, as well as the United
States and Canada, in a dispute with Japan over
its taxes on liquor imports. The complainants
claimed the taxes were giving Japanese
shochu distillers an unfair competitive
advantage on the Japanese market. The panel's
decision was upheld several months later by the
Appellate Body, the WTO's highest court.
It was the first time the WTO had ruled on
Japanese trade practices. WTO is the Geneva-based
watchdog on global commerce that succeeded the
General Agreement on Tariffs and Trade (GATT) in
January 1995.
At issue was the huge gap in
liquor tax rates between shochu and
imported liquors. The EU, for example, complained
that taxes levied on whisky were higher than those
on shochu. The two competed in the Japanese
liquor market. The tax on both imported and
domestically produced whisky was 3.9 times higher
than that on shochu.
GATT in 1987
had handed down a ruling recommending that Japan
correct the tax gap between whisky and
shochu, and Japan narrowed the gap to the
3.9 to 1 ratio from the previous 15.5 to 1. The EU
took the Japanese tax system to the WTO again,
however, complaining that Japan had not done
enough to comply with the GATT verdict and that
the still-remaining gap was hampering its exports
of Scotch whisky to Japan. The US and Canada,
which wanted to boost their exports of bourbon and
Canadian whisky, respectively, also joined the WTO
legal battle against Japan.
In response to
the second WTO ruling, Japan gradually raised tax
rates for all types of shochu to make them
conform with the WTO rules by 2000. During the
same period, the tax rate for whisky and brandy
was lowered by 58%. In April 2002, Japan also
eliminated tariffs on whisky, brandy, vodka, rum,
liqueurs and gin, leveling the playing field
between domestic and foreign liquor producers on
the lucrative Japanese market, at least in tax and
tariff rates. Annual liquor sales in Japan are
estimated at about 6 trillion yen, or about US$54
billion.
The tax changes initially raised
concerns that the Japanese shochu industry
might suffer a severe loss of sales and even
become extinct. But that was not the case.
Ironically, Japanese consumption of whisky, as
well as sake, has been declining, while
that of shochu has been booming among
increasingly health-conscious Japanese drinkers.
Shochu saw continued strong growth
in sales volume in 2004, with an increase of
nearly 6%. Sales of shochu exceeded those
of sake in volume in 2003. According to
analyses by many shochu distillers and
medical experts, besides its lower unit price,
shochu offers a variety of benefits. In
comparison with sake, shochu is said
to be less likely to give drinkers hangovers or
cause them to gain weight.
The late
Shigechiyo Izumi, a male resident of Kyushu's
Kagoshima Prefecture, was recognized as the
world's oldest-living person at 114 by the 1980
Guinness Book of World Records. After being
recorded, Izumi became a popular household name
among Japanese people. He often made TV viewers
laugh with funny remarks such as, "My type is an
older woman than I." While he was alive, Izumi
made shochu part of his daily dietary
regimen, leading many Japanese to believe that
shochu is not only healthy but can actually
aid longevity. Izumi once said: "Without
shochu, there would be no pleasure in life.
I would rather die than give up drinking." Izumi
died in 1986 at the age of 120.
There are
two types of shochu - ko and otsu. Ko is
made mainly from molasses and distilled several
times, while otsu can be made from sweet potatoes,
barley, rice or brown sugar and is distilled only
once. Ko-type shochu is flavorless and
odorless, while the flavor of ingredients remains
in otsu-type shochu. The alcohol content of
ko-type shochu is limited to less than 36%,
while that of otsu-type shochu is 45% or
less. Otsu-type shochu, also dubbed
"full-blown shochu", is becoming
particularly popular.
Most otsu-type
shochu distillers, such as those in
Hitoyoshi City, are small- and medium-size makers,
especially in the Kyushu region, though major
Japanese liquor brewers have begun to produce
otsu-type shochu in recent years.
Japan's oldest distilled spirit is awamori
produced on the tropical island group of Okinawa,
further south of Kyushu. Many experts say that the
distilling methods of awamori originally came to
Ryukyu Kingdom (now Okinawa) from Siam Kingdom
(now Thailand) between the 14th and 15th
centuries. Awamori is made using long-grain indica
rice imported even today from Thailand. Ryukyu
Kingdom was then actively trading with China and
Southeast Asian countries, especially with Siam
Kingdom. Distilling techniques were then
introduced into the southernmost major Japanese
island of Kyushu in the early 16th century, many
experts say.
To be sure, while the overall
Japanese consumption of liquors, including beer,
has remained flat or even declined in recent
years, consumption of shochu is continuing
to barrel ahead. But the alcohol industry has
already become saturated. Japan's population is
expected to begin shrinking as early as this year
amid a declining birth rate. Also worrying
Japanese brewers is the rapid aging of society.
Analyses of Japanese consumers' behavior show that
people age 65 or older spend much less on
alcoholic beverages than their younger
compatriots.
Even shochu distillers
cannot afford to remain intoxicated by their
current good performance. They are not sure how
long the current shochu boom will last.
Like other alcoholic beverage makers,
shochu distillers cannot continue to depend
for long on the domestic market alone for profits.
They are increasingly turning to overseas markets,
especially Japan's rapidly growing Asian
neighbors, in case the domestic market goes stale.
Japan imports several times more liquor
than what it exports in terms of volume. According
to trade statistics compiled by JETRO, Japan's
imports of wine, the biggest import item among
liquors, increased 3% in 2004 over 2003, totaling
167,900 kiloliters. But imports of whisky plunged
28.4% to 19,728 kiloliters. Imports of beer and
brandy also dropped, 32,928 kiloliters (down
14.3%) and 6,106 kiloliters (off 10.2%),
respectively.
Meanwhile, Japan's exports
of sake rose 6.4% to 8,796 kiloliters in 2004. But
exports of beer, wine, brandy and whisky all
declined. Exports of beer shrank 20.3% to 20,253
kiloliters, wine 7.7% to 413 kiloliters, brandy
73.4% to 3 kiloliters, and whisky 36.3% to 1,074
kiloliters.
The JETRO-compiled data does
not cover shochu trade. But according to
news reports and industry people, Japan in 2003
exported 1,800 kiloliters of shochu to
overseas markets, nearly half of it to the US and
Europe. The 2004 figure was not available
immediately. But industry people say that
shochu exports are on the rise and will be
further accelerated in the years to come.
Japanese shochu distillers, both
large and small, have begun to cultivate overseas
markets in earnest in the past couple of years or
so, though the amount of their exports still pales
in comparison with that of beer, the biggest
export item among liquors. The major brewers,
Asahi and Suntory, last year began full-scale
shochu exports to Britain and the US,
taking advantage of a boom in Japanese foods
there. Japanese foods have become increasingly
popular as healthy diet, especially in the US and
Europe.
Earlier this year, the Asahi and
Kirin breweries tried to take over South Korea's
largest soju, or shochu, maker, Jinro.
Although experts said initially that the
capital-rich Japanese brewers had an advantage
over Korean rivals in the takeover battle, they
lost, and Korea's Hite Brewery acquired Jinro.
Asahi made inroads into the Korean market
by acquiring a 21% share in Haitai Beverage last
year. It has also taken over Chinese beer and
beverage companies. But Asahi and Kirin also
wanted Jinro because Jinro is the most popular
among imported shochu brands in Japan.
Asahi Chairman Shigeo Fukuchi reportedly said in
the initial state of the Jinro takeover battle
that buying Jinro was far easier than establishing
a new brand.
The Japanese brewers' loss to
Korean rivals over Jinro was seen by some as
reflecting strained political relations between
Japan and South Korea over Japanese textbooks
authored by rightwing scholars for use at high
schools, a simmering territorial dispute and other
issues.
Meanwhile, smaller shochu
distillers in the Kyushu region have also set
their sights on rapidly growing China and
Southeast Asian countries as promising markets,
with some having already begun exports while
others prepare to do so. Although exports are
still largely intended for Japanese businesspeople
and their families stationed in those countries,
more and more locals are getting a taste of
shochu, industry people say.
Kagura
Shuzo, a distiller in Kyushu's Miyazaki
Prefecture, is already exporting shochu
made from barley to Singapore and other countries.
The distiller's general manager in charge of
overseas business, Kenji Aramaki, was quoted
earlier this year in an article published by the
Asahi national daily: "The Japanese market will
shrink due to the declining birth rate. Now is the
time to make an anticipatory investment so that we
can make our products a top brand on overseas
markets in the future."
JETRO is backing
up efforts by domestic shochu distillers to
penetrate overseas markets. For example,JETRO took
part in an international food fair in Beijing in
October 2004 and put on display shochu as
well as fruits and other processed foods. JETRO
participated in similar fairs - in Singapore in
April and in Taiwan in June that year.
JETRO's Shanghai Center also held a
one-month event for the tasting and sales of
shochu and sake at a department store in
China's commercial center between February and
March. During that event, a total of 60 brands of
shochu and sake produced by 41 companies
from 20 of Japan's 47 prefectures were sold on the
spot, the largest such sale of Japanese liquors on
mainland China.
Sakebunka Institute, a
Tokyo-based research company specializing in
Japanese liquor culture, says that now is the best
time for Japanese brewers to begin or expand
business abroad. In an article posted on its
website, the company gives three reasons.
1) The web of bilateral free trade
agreements, or FTAs, is rapidly spreading in Asia
and the rest of the world. A huge regionwide
free-trade area may be created in Asia in the not
so-distant future. This prospect will create a
more favorable environment for Japan to export
liquors.
2) The Japanese government has
set a goal of doubling the number of foreign
visitors - now only a third of Japanese travelers
abroad - to 10 million by 2010 to promote Japan as
a tourism nation. To achieve that goal, the
government has launched a "Visit Japan" campaign.
This government campaign will also be of great
help for the domestic liquor industry to promote
Japanese products among foreign consumers.
3) With Japanese pop culture, like
animation and computer-game software, sweeping
through the world, the so-called "Japanese Cool"
phenomenon is increasingly gaining momentum,
especially among youths in Asia. Those youths who
have become familiar with Japanese pop culture are
more likely to get a taste of Japanese liquors as
adults.
Hisane Masaki is a
Tokyo-based journalist, commentator and scholar on
international politics and economy. Masaki's
e-mail address is yiu45535@nifty.com
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