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

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Sapporo Holdings is one of Japan's biggest alcohol and soft drinks producers and the country's oldest brewer. This month, Andy Morton met with its president, Tsutomu Kamijo, to discuss why he'd like to get his hands on Anheuser-Busch InBev's Pilsner Urquell, the state of play in Vietnam and why even BrewDog's founder gets excited about Sapporo's beer.

Sapporo president Tsutomu Kamijo is keen to expand his companys overseas presence

Sapporo president Tsutomu Kamijo is keen to expand his company's overseas presence

For Tsutomu Kamijo, the president of Sapporo Holdings, it was a pat on the back from one brewer to another.

Last month, during a visit to Tokyo, BrewDog founder James Watt told Japanese reporters that he was a big fan of Sapporo's main beer brand Black Label. "Why do you drink Budweiser, Heineken or Gold Star?" Watt asked Japan. "Sapporo is the best."

Recounting the story in a top-floor meeting room at Sapporo's HQ in Tokyo's plush Ebishu district earlier this month, Kamijo delights in Watt's support: "I didn't meet him but I have to say, 'thank you'."

It would be an odd occasion if the pair ever were to meet. Watt, the modern craft beer movement's self-styled rabble rouser who - judging from his Twitter feed - would rather chop off a hand than drink "boring" commercial beer. And Kamijo - the Sapporo lifer who rose through the ranks of Japan's oldest brewery to head a conglomerate that, alongside Asahi, Kirin and Suntory, dominates the domestic alcohol and soft drinks market.

The pair, however, do share two important things that suggest they would get on.

First, Kamijo has a desire to be known foremost for the quality of the beer his company produces. If some don't like it, that's not his problem; BrewDog's punk brewing ethos, Japanese-style.

And the second? A generous antipathy to all things Anheuser-Busch InBev.

"I don't like the beers purchased by AB InBev," Kamijo says of the brewing giant's recent acquisitions. "They have totally changed their product since ABI bought them."

Also: "[AB InBev's Belgium brand] Stella Artois is not a very good type of beer. It's just a beer."

And during a conversation about AB InBev's craft beer buys: "We are in the beer business, we're not in the banker business or the machinery business."

It is a frankness that Watt, who refuses to sell AB InBev-owned craft beers in his chain of bars and who once said he'd rather "shoot himself in the head" than sell out to "big beer", would surely find refreshing.

There is, however, one thing about AB InBev that Kamijo covets - Pilsner Urquell.

The Czech beer brand is something of a hot potato at the moment as it transfers ownership to AB InBev as part of the company's takeover of SABMiller. The new owners are keen to sell it on and a host of interested buyers - including Sapporo's domestic rival Asahi - are reportedly lining up. But AB InBev has suggested that it will only sell Pilsner Urquell as a package deal along with the other Eastern and Central European brands it acquired through SABMiller.

For Kamijo, this is far from ideal.

"Personally, I want to have Pilsner Urquell, but the other brands I don't need them," he says. "It [Pilsner Urquell] is a good brand. It fits our culture as beer lovers."

Kamijo talks glowingly about a visit to the Pilsner Urquell brewery last year, where he saw parallels with Sapporo's long heritage, dating back to 1876. There's a more recent connection, too. Sapporo - which over the years has discovered some of Japan's most popular hop styles and still runs a hop research centre in Hokkaido - rescued Czech brewers when a disease threatened their hop yields. "They had very similar diseases to ours but now they are covered, I'm proud to say," Kamijo says.

Domestic decline

It has been a truism of the Japanese beer industry of the last few years that the four big brewers - Sapporo, Asahi, Kirin and Suntory - have been forced to look overseas for growth as the domestic market stagnates. According to Euromonitor, volumes slipped 1% last year and are estimated to fall again by the same amount this year. In the past decade, beer volumes in Japan have fallen by 9% to 6.04bn litres, Euromonitor says, in what has been a steady decline.

Meanwhile, Sapporo, which has a 10% share of the Japanese beer market, has seen alcoholic beverage sales decline over the past half-decade, from JPY279.3bn (US$2.51bn) in 2010 to JPY273.7bn last year. Profits in the category have barely shifted over the same period.

The company is keen to jump-start growth. It has already designated 2016 the "first year of a new period of growth in the beer business" and earlier this month unveiled plans to accelerate that growth with a new four-year plan. 

A central tenet of the outlook is ambitious new targets for overseas expansion that Sapporo predicts will double international operating profits over the next four years. The move, if achieved, would see Sapporo's international unit account for 15% of operating profits compared to 10% today.

According to Kamijo, natural areas for overseas growth include the North America, where the company bought Canada's Sleeman Breweries in 2006 and is now breaking into the soft drinks B2B market through a focus on school-friendly beverages. ("It's a nice business to be in and to expand in the future," Kamijo says.)

But it is to Vietnam that most hopes are pinned. Sapporo was one of the first international brewers to see the potential in the country, which has an affection for beer that is attracting a lot of attention. Sapporo's Vietnam brewery was opened in 2011, but has since been followed by plants from Carlsberg, AB InBev and others. (Heineken's entry preceded Sapporo's but was made through its minority stake in Asia Pacific Beverages.)

According to Kamijo, however, Sapporo's early entry gives it the edge over rivals.

"They don't know about the Vietnam market," he explains. "They just know how to buy or how to use money. We are there, and we have a relationship with the government. We know much more compared to players like Asahi and Kirin."

Is Sapporo interested in buying the Vietnamese government's majority stakes in the country's two major domestic breweries, Saigon Beer Alcohol and Beverages Corp (Sabeco) and Hanoi Beer Alcohol & Beverage Corp (Habeco)? 

"I believe we have a chance to think about it," says Kamijo, refusing to be drawn on a sale that has attracted the attention of international brewers including Carlsberg. "We're not sure what the Government is thinking about. They are on the way to releasing the government shares in Sabeco and Habeco, but they haven't yet announced how or when. I don't know if they'd like a foreign investor or a domestic investor."

Of the other brewers reportedly interested in the stakes, Kamijo has varying opinions.

"Carlsberg is a brewer but they only do investment," he says. "They are an investing company right now, not a brewer. Heineken, however, is doing quite a good and big business over there."
Sapporo's long-term faith in the Vietnamese market and its generous demographics, however, remains firm, a point emphatically underlined by Kamijo.

"I asked an insurance company if the population there has reached a maximum," he says. "I was told that for the next two generations - almost 40 years - we can expect the population to keep increasing. They are beer lovers. Why shouldn't we invest over there? I love Vietnamese people."

Read part II of this exclusive interview here

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