Over the past two decades, Japan’s per capita alcohol consumption has plunged by more than a quarter. Once a staple of workplace bonding and a steady stream of government revenue, alcohol is now falling out of favour in the country.
Japan’s ageing population is reshaping the local economy in far-reaching ways, from chronic labour shortages to waning demand for homes and vehicles. But one of the quieter, and more surprising, casualties of this demographic shift has been alcohol consumption. The decline has been so pronounced that it even triggered an unexpected government intervention in 2022 when Japan’s National Tax Agency launched a campaign with a provocative goal: to encourage young adults to drink more.
Behind the controversial plan lies a serious fiscal concern. Alcohol tax revenue, once a key pillar of government income, has been steadily declining. Per capita alcohol consumption fell from 100 litres in 1995 to just 74 litres in fiscal 2022, according to official data. A shrinking and ageing population has been a significant factor but more recently, cultural shifts and financial pressures have made nights out at bars less frequent for Japan’s younger generations.
Even the government campaign did little to boost alcohol consumption, with overall volume sales of alcoholic drinks declining further in the following year. This domestic contraction has weighed on the share prices of Japanese beverage giants, including Suntory Beverage & Food, Sapporo Holdings and Kirin Holdings, which have fallen more than a 10th from last year’s highs.
Unsurprisingly, they are shifting their sights abroad — and specifically to south-east Asia. Japanese alcohol groups have decades of experience in non-alcoholic beverages in the region. They have built up strong brand recognition through products like green tea and oolong. That foundation is now proving valuable as countries such as Vietnam and the Philippines emerge as fast-growing, high-potential markets for alcoholic drinks.
Suntory has been the latest to bet big on south-east Asia. Its international portfolio, including global brands such as Jim Beam, combined with its existing infrastructure and consumer base in south-east Asia, gives it a head start in capturing this expanding demand.
Japan’s alcohol industry offers a compelling example of how legacy sectors seek to adapt to the country’s demographic challenges. With strong fundamentals and a pivot to faster-growing markets, it may be too early to write off this sector’s stocks as lacking potential. The real value in Japan’s alcohol sector now lies not in domestic consumption, but in its capacity to scale abroad.
june.yoon@ft.com
