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New Beer-Like Beverages Offer Low Price, Crisp Taste (July 15, 2005)

"Third beers" from Japan's four major brewers (Jiji)
Beer-like alcoholic beverages that have collectively been dubbed the "third beer" because they fall into neither the regular nor low-malt beer category, are a big hit in Japan right now. While beer is made with malt, "third beers" use such alternatives as pea protein, soy protein, or soy peptide. Because they do not use malt as a raw ingredient, these drinks fall into a lower tax category and therefore retail at a lower price than beer or low-malt beer (known as happoshu in Japanese). Besides their low price, their major selling point is the light, crisp taste favored by consumers in recent times. Sapporo and Suntory came out with "third beer" beverages in 2004, and Japan's two biggest brewers, Asahi and Kirin, followed suit in April 2005. Now that all four of the major brewers have released "third beer" drinks, the battle for summer sales is on.

A Taxing Matter
The "third beer" boom was sparked by Sapporo, which launched a beverage called Draft One in February 2004. Made with protein extracted from peas, Draft One's selling point is its light taste and drinkability. Meanwhile, Kirin's Nodogoshi Nama, made with soybean protein, touts its good flavor and crispness. Asahi's Shin Nama, which uses soy peptide and a yeast that the company also employs in beer making, offers a dry finish. And Suntory's Super Blue, which contains low-malt beer mixed with liquor distilled from wheat, has a crisp, refreshing taste.

Determined to avoid the high taxes imposed on beverages made using malt as a raw ingredient, the brewers went to a lot of trouble to find alternatives. Sapporo, the pioneer in this market, experimented for four years with a series of ingredients that included two types of millet and corn before hitting on pea protein as a raw ingredient.

But avoiding taxes was not the sole factor in the development of "third beers." In recent years, generations of consumers raised on soft drinks have become increasingly averse to beer's characteristic bitter taste. The brewers therefore set out to develop an alternative with a light refreshing taste.

Light On Both the Palate and the Wallet
A major factor behind the emergence of "third beers" is the complexity of the Japanese tax system. For the purposes of the liquor tax, beer is divided into four categories based on malt content. Beer, defined as having a malt content of 67% or more, is taxed at ¥77.7 ($0.71 at ¥110 to the dollar) per 350 ml. The drinks launched by Sapporo, Kirin, and Asahi all fall into the "other miscellaneous alcoholic beverages" category and are taxed at just ¥24.2 ($0.22) per 350 ml. Suntory's product, meanwhile, falls into the "liqueur type" category and is taxed at ¥27.78 ($0.25).

Naturally, this tax differential is reflected in the retail prices. The manufacturer's suggested retail price for beer averages around ¥218 ($1.98) for a 350 ml can, compared with about ¥145 ($1.32) for happoshu and about ¥125 ($1.14) for "third beers."

Consumers have taken to the low price and light taste of "third beers." In 2004, these drinks captured over 5% of the total market for beer and related beverages (which includes beer, happoshu, and "third beer"), and their share has climbed above the 8% mark this year. And this summer the competition is sure to heat up further. If the tax system remains as it is, this new category of beverage could grab a significant share of the total beer market.

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Copyright (c) 2005 Web Japan. Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.

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