Japan’s alcohol industry is being compelled to revamp its business model as the sober curious trend gains more strength among young drinkers.

The drinking culture has been entwined into Japanese community-driven society and lifestyle since ancient times. Even in modern times, hosts politely serve alcohol at meals, social gatherings, celebrations, and religious rites, and the guests oblige to avoid offending the hosts. ‘Nomikai’, or post-work drinking sessions with colleagues, are deemed desirable for team bonding and securing promotions. Consequently, in a country known for its strict social etiquette, the laws and moral code on drinking are so relaxed that alcohol is sold in grocery stores and vending machines across the country. Also, while drink-driving is banned, there are no curbs on drinking in public transportation or public areas.

Despite this, alcohol consumption in Japan is stagnating, with the heavy-drinking older generation cohorts shrinking and fewer new drinkers coming up due to low birth rates. Moreover, in line with Western trends, Japanese Millennials and Gen Z cohorts are growing more averse to the binge drinking habits of their predecessors. This ties in with the findings of GlobalData’s Q4 2022 survey, wherein only 41% of Gen Z respondents and 49% of Gen Y respondents said that they drink regularly, compared to 61% of Gen X consumers.

Many have alcohol only on special occasions or are switching to low-/no-alcohol drinks. Besides citing health and cost-of-living concerns, young consumers say they are diverting the time meant for drinking occasions to other activities. Accordingly, GlobalData’s research reveals that the overall volume sales of alcoholic beverages inched up by just 0.3% compound annual growth rate (CAGR) over 2010–20.

The Covid-19 outbreak dealt a heavy blow to the industry, as socialising was banned, and restaurants, bars, and nightclubs were closed for long durations. With the surge in at-home drinking failing to offset the decline in on-premise consumption, overall alcohol volumes plunged in 2020. While the pandemic control measures were eased and foodservice outlets reopened in 2021, authorities mandated operators to observe social distancing and curfews, and at times even prohibited them from serving alcohol. Moreover, most consumers worked remotely and avoided dining out as they feared the contagion. Amid sporadic Omicron outbreaks in 2022, company managements discouraged nomikai to reduce the rise of Covid-19 infections among their employees. In effect, the pandemic has brought nomikai to a near standstill.

Faced with plummeting liquor tax revenues, Japan’s National Tax Agency launched the ‘Sake Viva!’ campaign competition in August 2022, soliciting ideas from 20-39-year-olds to popularise alcohol consumption among the younger generations. Though the campaign was intended to support the local alcoholic beverages industry, it received criticism for promoting a vice for monetary gains.

The big four liquor manufacturers, Asahi, Suntory, Kirin, and Sapporo, are adapting to this rise in mindful drinking by rolling out low-/no-alcohol beers, wines, canned/bottled cocktails, and traditional drinks. Retailers are allocating more shelf space for such products, many of which are hot sellers. For instance, GlobalData’s research reveals that the consumption of no-alcohol beers with an ABV between 0% and 0.5% surged by approximately 8% CAGR over 2017–22, even as volume sales of regular beers with an ABV between 3.5% and 5.5% declined. Many domestic producers are diversifying to overseas markets to offset the lull in the domestic market.

More recently, foodservice operators are transforming their operations to target these new-age ‘smart/slow drinkers’ and teetotalers with special offerings and non-drinker zones. Also, non-alcoholic bars and beer gardens, such as the Sumadori Bar and Maruku Café, which offer low-alcohol drinks, are popping up in cities like Tokyo and Osaka, where regular bars can be found in every nook and corner.

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