In Japan, the term “beer” is reserved for alcoholic beverages made from at least 65 percent malted barley, with the remainder of the grains being rice and corn (including cornstarch). Plus the requisite hops, yeast and water. If it contains anything else, it is classified as something else, usually happoshu, which literally means “sparkling alcoholic beverage.”
To most consumers, happoshu is that foamy yellow drink that’s kind of like beer, but carries a lower price tag.
Beverages like these make up the vast majority of happoshu sold today, so a better translation might be “low-malt beer.” Not only is happoshu taxed at a lower rate than beer, it is also made with cheaper ingredients. Various sugars and starches are used in place of more expensive ingredients like malted barley, which is the major flavor constituent of beer.
But not all happoshu is necessarily low in barley content.
In a typical stout, such as Guinness, the key ingredient is barley, but rather than malted, it is roasted, like coffee. This gives the brew a dark color and different flavor profile. This means that according to Japanese regulations, stout — including Guinness — is technically not beer.
The tax on beverages made using malted barley is determined by how much malt is used in relation to other fermentable materials like grains and sugars. The tax rate on beverages with a malt percentage of 50 or greater is 222 yen per liter, or about 74 yen per regular-size can.
For beverages containing less than 50 percent but more than 25 percent malt, the rate is about 125 yen per liter (about 42 yen per can). Beverages containing less than 25 percent malt (which includes virtually all of the happoshu made by Asahi, Kirin, Sapporo and Suntory) have a rate of just 80 yen per liter, or about 27 yen per can.
Back in 1994, Suntory spotted the wrinkle in the law and launched the first low-malt happoshu. Consumer demand was so high that the Tax Agency swiftly moved to raise the tax rates. The move was understandable in light of the fact that while only 4 percent of all tax revenues are derived from liquor, some 68 percent of that is from beer.
By 2001, low-malt beerlike beverages accounted for more than 30 percent of total beer sales. Kirin lost its leading market-share position in beer because it chose to invest in happoshu. Asahi, which then claimed the beer top-spot with Super Dry, resisted making a happoshu to compete with Kirin, Sapporo and Suntory, but it finally joined the fray two years ago with its Hon-Nama product.
At this point, it appears that the government plans to raise the rate on happoshu and lower the rate on beer so that consumers will have no reason to choose happoshu unless they just happen to like how it tastes.
It is still not clear whether the happoshu category for non-beer malt beverages will be maintained, but it certainly looks like consumers will lose the option to buy low-malt beverages which are cheaper by virtue of a lower tax rate.
As a small brewer in Fukushima Prefecture, I applied for a license to brew happoshu for a number of reasons, none of them to do with taxes.
One reason is that the minimum production volume for qualifying for a license to brew happoshu is only 6,000 liters per year, compared to the beer license requirement of 60,000 liters per year, which is about twice as much as our equipment can produce.
But the main reason has to do with being able to brew traditional and unique beer styles, which call for a broader variety of ingredients such as roasted barley, honey, maple syrup and more.
These ingredients are not allowed in what is classified as beer, while the happoshu category carries no restrictions on ingredients.
My license to brew happoshu gives me more freedom on a smaller scale, which is what the microbrewing movement is all about.