Rice wine producers look to profit from sushi boom
The increasing appeal of Japanese food in many countries is fuelling international sales of sake, though the market is declining in Japan itself. The rice wine category is also benefiting from premiumisation in the massive Chinese market on the back of economic growth and rising personal incomes. Catherine Mars of Euromonitor International assesses the opportunities on offer in the sake sector.
Despite the lacklustre performance of non-grape wine globally, with both volume and value sales up by just 1% in CAGR terms between 2002 and 2007, the growing popularity of Asian cuisine offers opportunities for growth of rice wine outside traditional markets. Additionally, in more mature markets there are opportunities for producers to boost sales by increasing penetration and offering more premium variants.
Although types of non-grape wines vary tremendously with rice wine in Asia and fruit-based wines in Eastern Europe, by and large these are traditional drinks in their domestic markets, all of which suffer from an old-fashioned image among younger generations. As a result, volume sales of non-grape wine are diminishing and this has constrained growth of the category globally.
In Japan, the second largest market for non-grape wine accounting for 15% of the global market in volume terms, volumes of non-grape wine declined by a 5% CAGR between 2002 and 2007 according to Euromonitor International, as younger consumers opt for other types of alcoholic drinks rather than the traditional sake.
However, in China and South Korea, which account for 50% and 18% of global non-grape wine volumes respectively, sales continue to grow, increasing by around a 5% CAGR between 2002 and 2007. While producers in China are focusing on developing more premium products, in South Korea takju (a cheaper variant of rice wine) is fuelling volume growth of non-grape wine.
In China, where rice wine is a traditional alcoholic drink for local consumers, some leading rice wine producers are attempting to penetrate areas outside the key East China region which currently accounts for over 50% of rice wine volume sales. Others, such as Zhejiang Guyue Longshan Shaoxing Wine Co, introduced lighter-tasting and bright-looking rice wine in 2005 in an attempt to target younger consumers.
However, as this consumer group tends to favour beer and imported spirits, the majority of industry players are focusing on developing premium products targeted at middle-aged male consumers. With rising disposable incomes, consumers are expected to trade up to higher-priced, quality rice wines with Euromonitor International expecting a 6% CAGR in volume terms between 2007 and 2012.
While the cheapest rice wines (under RMB10 per litre) have seen the least growth in China over the past five years, in South Korea its cheaper variant of rice wine, takju, is fuelling volume growth of non-grape wine. Meanwhile, while cheongju and yakju (the other more expensive types of rice wine) have seen sales decline over the review period due to increasing competition from alternative alcoholic drinks including still light grape wine and reduced-alcohol, smoother-tasting Shochu/Soju.
Growth of takju was partly driven by taste improvements as manufacturers used 100% rice and appealed to consumer nostalgia. In addition to the revival of traditional alcoholic drinks, the increased consumption of takju is strongly related to the growing number of consumer foodservice players serving this alcoholic drink. Consumers are moving towards more affordable on-trade beverages and most on-trade operators that serve takju offer low-priced traditional side dishes as accompaniments.
Although China and South Korea have seen strong growth in actual terms, it is surprisingly Brazil - a market with no tradition for non-grape wine - which has seen the strongest volume growth of non-grape wine over the 2002 to 2007 period, at 30% CAGR compared with a global CAGR of 1%.
Brazil is home to the largest Japanese population outside of Japan following an influx of immigrants early last century. However, it is not only Brazilians of Japanese ethnic origin who are fuelling the growth of the sake sector. The Japanese population in Brazil has had an impact on consumer tastes in the country as a whole in much the same way as the large and growing presence of Hispanics in the US has raised the profile of Tequila and Mexican beers. The number of full-service Japanese restaurants in Brazil almost doubled between 1999 and 2006, and an increasing appreciation of Japanese cuisine has prompted Brazilian consumers to try the Japanese rice brew too. In fact, total volume sales of sake in Brazil grew at a CAGR of 30% between 2002 and 2007.
Although the sake sector remains small in Brazil, accounting for less than 1% of total wine sales by volume in 2007, it is nonetheless a dynamic category and Euromonitor International expects Brazil to overtake Taiwan as the second largest market for sake behind Japan, by 2012.
Euromonitor expects sake sales in Brazil will continue to be driven by the growing popularity of Japanese food, particularly as it is considered to be a healthy option. Consumption of sake is also spreading beyond Japanese restaurants. The sakérinha, a smooth variation of the traditional Brazilian cocktail made with sake instead of cachaca, is becoming increasingly popular among Brazilian consumers. Following this trend, Japanese companies are expected to increase exports of premium sake to Brazil in the short term.
The US is another market which offers interesting opportunities to sake producers faced with declining sales in their domestic Japanese market. Although rice wine remains a niche product in the US, it enjoyed the strongest sales growth of any wine type in 2007, aided by expanded distribution.
Sake is still primarily sold through on-trade outlets in the US, and has benefited greatly from the increased popularity of sushi bars in metropolitan areas. As with other wines, consumers are migrating to more premium sake brands, underlined by value growth in rice wine of 11% in 2007 against 8% volume growth.
As has already been seen in Brazil and the US, growing interest in exotic foods is expected to aid in the globalisation of local drinks, including rice wine in the medium to long term. Although sales of non-grape wine are currently negligible in Argentina and South Africa, these countries may well be the next to catch onto the sake craze seeing as Japanese restaurants account for over 50% of full-service restaurant outlets in these countries.
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