"US brewers think about pricing, never about the beer" - Interview, Sapporo Holdings president Tsutomu Kamijo - Part II

In part II of just-drinks' exclusive interview with Tsutomu Kamijo, the Sapporo Holdings president talks about the burgeoning craft beer scene in Japan, the current state of play with incoming tax code changes and his impending departure for the company boardroom. To read part I of this interview, click here.

It is 40 years since Tsutomu Kamijo walked in the door at Sapporo, but he remembers it like it was yesterday.

It was 1 April and there was an opening ceremony for the building we are sitting in, the company's HQ built on the site of its old Tokyo brewery. 

"It was April 1 but it wasn't a day for joking," Kamijo recalls with a laugh. "We always have cherry blossom during those periods, and we had lots of trees around. It was so gorgeous and a really nice day."

I ask if the area has changed much since then. He turns to look out the window at the skyscrapers and luxury apartment blocks, for a moment lost in the past. "Oh, yes, a lot of change. They had the brewery and old-style housing here. Now it looks so different."

We can forgive Kamijo the fleeting reverie, as he himself is set for a big change. After six years as Sapporo Holdings president he is passing the baton to the company's next generation. In January, he will be replaced by current Sapporo Breweries president, Masaki Oga. In turn, Kamijo takes over as the new chairman of the board. A promotion, yes, but one that comes with a lot more free time, perhaps spent on the golf course working on his 17 handicap.

"Maybe I'll go to Edinburgh," Kamijo says with a smile. "Several times I've been to Edinburgh but never had the time to play golf."

It is a good time to bow out. The craft beer scene, which has buffeted the big brewers in North America and Europe, is a few years behind the curve in Japan, partly due to strict minimum production limits that had blocked any small brewers from starting up until the limits were lifted in 1994.

But brewers such as Baird Beer and Yo-Ho Brewing are starting to make their presence felt. Yo-Ho, which Kirin bought into in 2014, has its brands in Japan's ubiquitous convenience stores - a major encroachment into the mass market. Meanwhile, Baird - up to now a bottled beer and draught company - is looking to move to canned formats so it can follow suit. 

This brings the brewing industry to an intriguing crossroads. US brewers such as Anheuser-Busch and Molson Coors have taken retroactive flack for being slow to respond to the rising tide of craft brewers back when craft still represented a small slice of the market. Now, with craft beer accounting for more than 10% of all beers sold in the US, big brewers have been forced to respond with the one advantage they have - money. AB InBev, and to a lesser extent Molson Coors and Heineken, has gone on a spending spree, buying up some of the country's more successful craft labels. But this has come at a cost. Constellation, for example, paid US$1bn for San Diego brewer Ballast Point, while Heineken paid a reported US$500m for a half share in Lagunitas.

Yet Kamijo's not too concerned about Japan's craft brewers just yet. It is, he says, a question of culture.

"When we compare Japan with the US or the UK, even including the imported brands in Japan, craft beer, I believe is 1% or less in Japan. People in the US accept so many different types of beer but in Japan... I'm not sure how much Japanese people like these types of expensive beer.

"But the younger generation is drinking it, and that kind of thing is happening in Tokyo. That may increase market share for craft beer."

Kamijo says that Sapporo's restaurant businesses, which includes Japan's oldest beer hall in the glitzy Ginza district in central Tokyo, is currently finding plump margins through selling craft beer to the city's monied youth. Indeed, he seems slightly incredulous by just how much people are willing to spend.

"One beer is the equivalent of GBP7 (US$9)," he says, looking surprised. "I say to them, you don't have any complaints about the pricing? They say, no!"

"We are in the beer business, we're not in the banker business" - Tsutomu Kamijo, Part I

But these healthy returns have yet to propel Sapporo down the craft beer route in any meaningful sense. What could change its mind, however, is Japan's diminishing appetite for beer. 

In its ten-year plan, announced earlier this month, the company talked about aligning better with the lifestyles of its consumer base. 

This, says, Kamijo, is all about the company learning to look outwards instead of in, and in turn is Sapporo's attempt to embrace the craft ethos.

"This is the 40th year for me [at Sapporo], Kamijo says. "For almost 30 years of that, we were talking about next door - what Kirin is doing, what Asahi is doing. I never heard about what the consumer is expecting. But now we can start to support the consumer in how they enjoy their lives.

"That is how we help the consumer. So we keep continuing to supply our different types of beer and let them know how to enjoy the beer."

He continues: "US brewers, they think about the pricing, they never think about the beer itself. That is key, and we have to. The trend is changing, and people are spending money if they like the product."

But while pricing may not be at the front of Sapporo's mind, it is for the Japanese government. Last year, authorities announced plans to overhaul the country's tax code on beer in a bid to increase revenues from an industry that had, to an extent, learned to work the system.

Beer in Japan is taxed on its malt content, which 12 years ago led to the introduction by all of the major brewers of low malt "happoshu" beer, a motley collection of quasi-beer beverages that succeeded mainly by virtue of being cheaper than "real" beer. There's also the so-called "third category" or "new genre" drinks, which have even lower malt content and a correspondingly lower price tag.

This three-tier system is what the government wants to change, proposing a unification of the code that would lower the price of beer and raise the price on happoshu. The problem is, the changes are currently caught up in the Japanese government's equivalent of development hell. In November last year, authorities announced that tax reforms were being shelved until at least 2017.

For Kamijo, uncertainty reigns, with the political waters further muddied by the possibility of 2017 being an election year in Japan ("If that happens then they won't care about the tax," he predicts).

What he is sure of, however, is that taxes on beer are too high - according to Kamijo, nearly ten times more than in the US and 20 times more than in Germany. And while he concedes that a single tax rate would simplify the tax issue he doesn't hold out much hope for a quick resolution. "They are just talking," he says of the government. "Not deciding."

Because the new tax code is now a political football destined to be kick around for a bit longer, dealing with its implementation will likely not be Kamijo's problem, moving, as he is, to the boardroom.

He, of course, pledges his full support to Oga, his successor. Just don't suggest he's become too old for the rough and tumble of the business he has served for 40 years.

"The younger generation, the papers call him," he says of Oga with a smile. "But he's the same age I was when promoted to president. That was just six years ago!"

To read part I of this interview, click here.

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