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E-Malt.com News article: 3229

Japan: A new battle appears to be brewing the third-beer market segment, a beer of a lower-price than happoshu. The former conflict has been largely brought under control by the Fair Trade Commission, which has been keeping a close eye on brewers to ensure their rebate policies are aboveboard. Makers of happoshu low-malt beer had provided retailers with hefty rebates, meaning shops often sold the drinks for less than the wholesale price. Just as the bad habits of an industry inclined to ignore profits on its low-price products were expected to come to an end, a third segment of even lower-price, beer-like beverages sprouted up, The Asahi Shimbun posted on September 10.

The fear now is that the price war will spill over into the new segment, whose third beer retails for about 100 yen per 350-milliliter can, including tax. By comparison, happoshu sells for between 115 yen and 125 yen.

Sapporo Breweries Ltd.'s Draft One, a third-beer made from peas, went on sale nationwide in February. More than 10 million cases of Draft One have already been sold. One case contains the equivalent of 20 663-ml bottles. So far, Draft One's only competition at the low end of the price scale is Suntory Ltd.'s Super Blue, a happoshu mixed with barley shochu spirits. Taxes on the third-beer products are about 20 yen less per 350 ml than those on happoshu.

Under liquor tax laws, Draft One, which does not use malt, is classified as a miscellaneous liquor, and Super Blue as a liqueur. The two industry giants, Asahi Breweries Ltd. and Kirin Brewery Co., have yet to enter the third-beer market. “If one or both of these companies were to wade into the battle, the overall market of alcoholic beverages would resemble a full-scale nuclear war,'' one industry source said. “At present, the market is in a Cold War state of uncanny parity.''

In January, an FTC official said the price war over happoshu that began in 2001 was at last disappearing. The nation's four major brewers used happoshu as a loss leader and tried to recover profits through sales of other alcoholic beverages. But signs are pointing to a renewed price war. Overall demand for regular beer, happoshu and third-beer products has been shrinking by 2 to 3 percent year on year in recent months, as consumers have been largely unwilling to spend despite the economic recovery. “Once summer demand comes to an end, it will not be a surprise to see a revival of the price war,'' said a major liquor wholesaler.

10 September, 2004

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