Alcohol-free World #4: Market Insights
What's happening in Japan and what could work on the Japanese market?
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Three factors behind the non-alcoholic beer market growth: consumption, manufacturers, and taste.
Globally, the non-alcoholic beverage category was limited to a few significant key markets, such as Germany, where the share of non-alcoholic beer is historically high. But in Japan, if you had a few brands available on the market for quite a long time, the entry into daily consumption is relatively recent. The expansion of non-alcoholic beverage drinking occasions is a significant driver behind this trend.
Manufacturers stand as a second driver behind the trends, investing in their brands and communicating more on drinking occasions to educate the consumers. The non-alcoholic category is a profitable business—contrary to alcoholic beverages, it isn’t taxed.
Like in overseas markets, the non-alcoholic beverage category’s primary challenge is providing a convincing taste to consumers. People weren’t naturally turning to non-alcoholic options for their qualities, but they had to compromise between their safety (driving, for example) and taste.
The beer category expansion opened the door to convincing Japanese consumers with non-alcoholic beverages propositions. However, the other categories remain largely niche by comparison. Next to beer, you can perhaps count the growing RTDs led by the historic Suntory brand Non Aru Banshaku Lemon Sour. Non-alcoholic spirits are almost negligible, even if a handful of Japanese brands and foreign brands are available on the market. The non-alcoholic wine category is nascent, and while some brands are coming in, the market is tiny. There’s almost no alternative in the Japanese traditional drink market. So far, the non-alcoholic beverage market in Japan is mostly a ‘beer’ market.
What’s going to happen across the RTD category?
The RTD market follows the footsteps of the non-alcoholic beer market. Manufacturers first tested the water by building the low-alcohol category. Suntory was successful with its brand Horoyoi (3% ABV, launched in 2011), but other manufacturers weren’t so lucky. In 2015, Kirin launched Butterfly 1% but retreated within six months. Aside from the historical brand Horoyoi (ABV 3%), the low-alcoholic RTDs disappeared rather quickly.
Choya’s strategy with its non-alcoholic brand matches what manufacturers are trying to achieve across the RTDs to the letter. Their consumer target was women and the occasion, daytime drinking, alone at home. They built the whole advertising around the image of a relaxing time for yourself, and it was a success reinforced by the sweet flavor and the proximity with a plum soda.
For non-alcoholic RTDs, the challenge was—still is today, to find its way to people’s shopping carts. Compared to non-alcoholic beer, the market size is entirely different. The non-alcoholic RTDs mostly fits the need of consumers who skip alcohol for health reasons or by choice, but who like RTDs. While the numbers vary from age group, there’s always a proportion of people who skip alcohol, either for health reasons or by choice—they don’t need alcohol.
The taste is another factor differentiating the massive success of non-alcoholic beer compared to the late-blooming RTD category. Non-alcoholic beer brands manage to taste just like beer. So, the drinking experience is similar and enjoyable for consumers: they do not hesitate to pick the option because it tastes good. But RTDs taste, or at least are perceived as tasting just like a regular soda, limited to special occasions.
Beyond its seemingly alcoholic taste, Suntory’s Non Aru Banshaku Lemon Sour also owes its success to consumer health awareness. The product doesn’t contact much sugar compared to its competitors. So while it will make the category more robust, there might not be space for many brands.
More than health claims, brand concepts could play in favor of more non-alcoholic beverages recognition.
As we discovered with our Shelf Sweep, many non-alcoholic beverages in Japan add an extra ‘health’ value to their proposition. On top of keeping you sober, they can help with reducing the absorption of fat, keeping your gut or your skin healthy. But how far can brands play with the health effect to convince consumers to ditch their favorite drink once in a while?
But what brands can play with are the benefits perceived by consumers from offering a traditional production process. Breweries are at a definite advantage here, with people favorably appreciating the brewing process as natural.
What’s sure is that depending on the image and the benefits, drinking occasions can vary from social gatherings, drinking alone, to after sports. The non-alcoholic category can have a broader range of opportunities. After a meal, a drink helping with digestion would be a perfect choice, while a nutritious non-alcoholic beer such as So-Beer is a good reward after a physical effort. In the future, non-alcoholic beverages could even have relaxing benefits—a trend we can foresee with the popularity of CBD.
The non-alcoholic category’s strength is to be more inclusive, so if you have more consumers ditching alcohol, the category will capture their attention. Today, society, at least in Japan, progressed quite a lot when it comes to sobriety. The peer pressure in social gatherings, soft forcing people to toast with a glass of beer or mocking others into drinking, isn’t the same as 20 years ago.
Are consumers changing their drinking habits with the recognition of the non-alcoholic categories? Perhaps not so fast. The majority still drink the regular beer, and whenever the occasion pops up to switch to an alternative, before driving or on the train, they have the optional non-alcoholic beer. But so far, the non-alcoholic beer spread didn’t create ‘new’ drinking habits—or at least not visibly enough to tilt the market.
The non-alcoholic wine category could grow a lot.
Like with the beer category, innovation in production and taste can support the extension of the non-alcoholic wine market. Today’s products taste better and are more authentic. With the first few products launched on the market, consumers felt they had to compromise for something somewhat waterish, close to a juice. Then like beer, it will be all about the occasions.
A lot of social reasons motivate people to make a purchase. They often pick a choice, not for themselves, but to please people or at least to be seen as caring for people. Along with premium options, the pandemic in Japan changed the game, too. As hotels, restaurants, and bars were deprived of serving alcohol to their clients, they had to find a way not to lose their sales.
Consumers who picked up the habit are likely to keep the option on the table because non-alcoholic wines became good. They now know they can enjoy a glass while avoiding the harmful effects of alcohol.
If the market appears profitable, with enough volume sales, the industry will be more motivated to invest and promote their brands. Like with the beer, they will build new occasions. The story is always a balance between the offer and the demand. They fuel each other.
Is there a market for non-alcoholic spirits in Japan?
If there is room to grow, the market is bound to be niche—which is fine for many brands, providing the opportunity to take leadership. In Japan, consumers mostly drink shochu or whisky. However, the spirit connoisseurs are unlikely to settle for an alternative to their favorite drink. As for other spirits, the consumption in Japan is nowhere near what it is in other markets.
If a few entrepreneurs may take up the challenge of developing non-alcoholic spirits, the market is unlikely to grow. As for bartenders familiar with the sober-curiosity trends, they’ve opened a small number of mocktail dedicated bars.
Maybe there will be a non-alcoholic proposition in premium bars and international hotel bars—they’ll get the famous brands. However, the cost is likely to prevent any further growth. So in the future, we may perhaps see two or three leading brands—most likely provided by the same companies.
If the categories grow, major players will start pushing their brands.
Most manufacturers are currently not fighting very hard for their brands. However, if a volume increase shows there’s profit to be made, they will go full steam ahead.
See you next Tuesday!
Next week, we sit down with Eriko Suzuki, Brand Manager at Pacific Yoko, the sole distributor of Opia, a French non-alcoholic wine, on the Japanese market.
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