Mainstream spirits in Japan remain sluggish as consumers continue to favour low alcohol alternatives. Although the total spirits market is growing, this is largely attributable to the increasing popularity of Asian Spirits and Flavoured Alcoholic Beverages. In contrast, sales of whisky, liqueurs and notably brandy all declined in 2002, according to research from analyst Canadean.

The trend has been driven by the relatively high unemployment and sustained deflation, which has seen the country's consumers continue to move towards lighter and less expensive drinks.

Asian Spirits, mainly Shochu, are by far the largest category accounting for almost three quarters of total sales. Shochu, a clear spirit boasting sweet potato, barley and buckwheat among its ingredients, remains the driver with a share approaching 99%. The product's pure, positive image and low price make it a favourite among younger consumers. But flavoured alcoholic beverages (FABs) are the fastest growing category recording an impressive 23% increase in 2002. "FABs enjoy a modern image, they are easy to drink, low in alcohol and inexpensive. Such attributes are much appreciated by recession-weary consumers," said Canadean.

Chu-hi, the most important sub-category has grown by an explosive 200% since 1998. The market is, however, crowded and the scene of extremely fierce competition, as major producers such as Kirin, Suntory and Asahi employ price as their main weapon in the battle for market share. The category faces the prospect of becoming unprofitable.

Liqueurs, cocktails and specialities, the third largest category, declined by a little over 4% in 2002. That said, the Lejay Lagoute liqueur range has given cause for celebration, growing by 27% in the last five years. Now an essential item on the menus of many restaurants, Cocktails may finally be about to take off in Japan.

With relatively high prices, brandy has struggled in the prolonged recession. Of the main categories, it has declined the sharpest - by 18% in 2002 and by a worrying 44% since 1998. Brandy's main problems are that it appeals to a fairly narrow age group in the over 50s and its reliance on sales through high-class establishments has been threatened by the serving of Shochu in these outlets. Furthermore, older brandy consumers are increasingly choosing white spirits instead. Canadean said it believes that sales of brandy will decline further in 2003.

The report also predicts that the total spirits market will advance by a modest 3.5% in 2003, with Asian Spirits and FABs again setting the pace.

"One word of warning though lies in the structure of Japan's population. With a large decline in 15-24 year olds, Japan has the fastest ageing consumers out of all the OECD nations. The implications of this remain to be seen," concluded Canadean