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Any publicity is good news for beer firms

by Philip Brasor

Special To The Japan Times

At a Tokyo news conference on June 4, Sapporo Beer President Masaki Oga announced his company would halt sales of its Goku Zero alcoholic beverage after current inventory was shipped. The parent company, Sapporo Holdings, had been contacted by the National Tax Agency in January regarding the manufacturing process for Goku Zero, which is classified for tax purposes as something commonly referred to as daisan (No. 3) beer, meaning a fermented drink made with something other than malted barley and fortified with grain spirits. This recipe gets around the tax for happoshu, another beerlike beverage that itself was created in the 1990s to get around the beer tax.

The government thinks that Goku Zero is happoshu, whose tax levy is higher than daisan’s, and so Sapporo owes the agency money. Oga said the company would stop making the product and then reintroduce it later this summer as happoshu, maintaining that Goku Zero really is daisan beer but Sapporo cannot publicly reveal its manufacturing process because that’s a secret. This is considered a blow for the company, which until the end of April had sold the equivalent of 200 million 350-ml cans of Goku Zero, making it one of the most popular daisan beers on the market. Retroactively, it means an added tax bill of at least ¥11.6 billion. Sapporo Beer’s projected profit for the year is ¥5 billion, so they can definitely kiss that goodbye. When the company resumes sales of Goku Zero the price of a can will be ¥20 more than it is now, and since the tax on happoshu for that size can is about ¥48 and for daisan a bit more than ¥20, margins will be reduced.

Sapporo Holdings’ stock price dropped by 6.6 percent the next day, so it’s definitely an important news story for shareholders, but for everyone else it probably isn’t, especially given the incoherence of the alcohol tax, which has nothing to do with alcohol content, usually the yardstick in other countries. The price of a 350-ml can of beer typically includes ¥77 in taxes, while the same amount of whiskey will have ¥129 in tax, nihonshu (sake) ¥42, shōchū (distilled spirits) ¥70 and wine ¥28. The alcohol tax is a throwback to a time when certain types of liquor were considered luxuries. Beer wasn’t always associated with the hoi polloi.

Now, daisan beer is what the masses drink. Beer and happoshu consumption has been dropping for the past decade. Daisan is the only sector besides the specialized premium beer market where breweries are seeing any growth, and for one reason: it’s a cheap buzz. But even people who drink daisan beer as a habit admit that if you’ve drunk one you’ve drunk them all, so the chief criteria for selecting a particular brand comes down to price, alcohol content and incidentals like Goku Zero’s claim that it contains no sugar and thus is lower in calories. But as with most products that can’t be clearly distinguished from brand to brand in terms of quality or cost, the consumer makes a choice based on curiosity. The turnover rate for daisan is high. Japan’s four major beer makers come out with a dozen new brands every year, and an equal number vanish into memory. When there’s no real choice you experiment with something that’s new, because there’s nothing to lose.

That’s why these companies spend so much on advertising for daisan beer. They have to push the name of the product all the time, so when consumers go to the store they’ll pick up that brand. It’s also why the press pays such close attention. Asahi Shimbun covered the Goku Zero news conference twice in the same issue, on the business page and on the social page. Moreover, the photo of a can of Goku Zero was larger than the photo of Oga. The media rely on advertising from alcohol makers, and while Sapporo’s tax problem could qualify as bad publicity, it also keeps the company’s name and its product out there. Sales of Goku Zero will probably benefit, at least in the short run, since the brand is suddenly topical and temporarily unavailable.

Media-manufacturer symbiosis is a function of the market, but that doesn’t mean it always makes sense. In Japanese advertising there is something whisperingly referred to as the “Kao shock.” Soapmaker Kao reduced its advertising budget by more than half in 2003 and as a result enjoyed record profits that year without actually selling any more merchandise. Broadcasters were understandably aghast because Kao has always been a big buyer of air time.

Other companies noted the Kao shock and reconsidered the effectiveness of their own advertising, which explains the sudden prevalence of pachinko and consumer credit ads over the past decade. In the past, TV stations often refused such commercials because they didn’t want to be seen as profiting from businesses that exploited bad behavior (gambling and running up debt, respectively), but now they were desperate. After the Great East Japan Earthquake it was considered poor form to promote anything that might be construed as adding enjoyment to one’s life while others were suffering, so alcohol companies suspended advertising for several months. Beer shipments for the first half of 2011 dipped by 3.5 percent, but the industry on average enjoyed a 20 percent boost in operating profits.

That’s why media do their best to keep beer companies happy and ad companies encourage them to make new products that need to be promoted repeatedly if they’re going to be successful. Two weeks ago Asahi Shimbun ran a full-page feature on how the economic recovery has improved sales of ochūgen (summer gifts). The article credits the boost to premium beer brands, which have seen a year-on-year 48 percent rise in sales on the gift market. The article doesn’t technically count as publicity since the paper didn’t receive money for it directly from beer companies, but that’s basically what it was. Half the space was taken up by pictures of beer in handsome gift boxes. It’s called customer service.