Suntory plans to push canned cocktails in US as young Japanese eschew booze

Suntory’s -196 Double Lemon canned cocktail is on sale at a store in Sydney, Australia September 2, 2022. REUTERS/Sam Holmes

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TOKYO, Sept 5 (Reuters) – Japanese drinks giant Suntory Inc launched a strong, lemony beer in Australia last year that has quickly become the best-selling canned cocktail market.

Today, the company aims to replicate that success in North America, critical to its goal of becoming the world leader in the fastest growing alcoholic beverage segment.

Overseas expansion is also a matter of survival for Japanese beverage companies faced with an aging domestic market and youth abandonment of alcohol.

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“Australia is a very important test market for the global strategy,” said Makoto Kitaura, senior managing director at Suntory.

“If we’re successful in Australia, then other Western countries like the US, UK might do well to try a new brand. And we can see huge potential for growth with the US market.”

The company used a localization team to adapt its Japanese bestseller Strong Zero to the Australian market: the lemony flavor was changed and the alcohol was reduced from 9% to 6% more drinkable.

It also scored the -196 Double Lemon canned cocktail in Australia, highlighting the extreme cold that Suntory claims to use to extract flavors from fresh fruit.

“It sold out almost immediately after launch,” said Alana House, editor of Sydney-based Drink Digest.

The drink, priced around AU$4.50 ($3.10) for an 11oz can, had the advantage of being considered a “cult” Japanese product, with a strong flavor profile and a higher alcohol content by volume (ABV), 6% compared to 4.5% for a typical beer in the country, she added.

The global canned cocktail market, which Japanese beverage companies created about 40 years ago with drinks known locally as “chu-his”, is now the fastest growing segment of alcoholic beverages. , as pandemic restrictions prompted more people to drink at home and cut back on higher-calorie drinks. like beer.

The market, known in the industry as ready-to-drink (RTD), has seen double-digit sales growth during the pandemic, and Suntory believes global canned cocktail sales will double again compared at 2020 levels to reach over $60 billion in 2030.

MARKET DIFFICULTY IN THE UNITED STATES

The next and biggest obstacle to Suntory’s global ambition is to tackle the huge US market. The company has already gained a foothold following its 2014 takeover of Beam Inc, makers of Jim Beam whisky. The company established a global canned cocktail division in March and its US-based team came to Tokyo in June to collaborate on strategy.

Hard seltzers dominate the U.S. sector, with top brands White Claw and Truly making about $10.8 billion in sales in the five years to 2021, said market research provider Euromonitor International.

Suntory has made small inroads into the US market through its Sauza cocktail collaboration with Boston Beer Co., which makes Truly.

The company has not specified which canned cocktails from its extensive catalog it hopes to bring to American shores. But Double Lemon would start out at a disadvantage to well-established competitor Mike’s Hard Lemonade, which costs around $2.50 for a 12oz can. Mike’s became a catwalk hit after its debut 20 years ago, with marketing that some critics said appealed to young underage drinkers.

But logistics and taxes remain the biggest challenges. Suntory’s historical strength is in spirits, and the US distribution networks for spirits are tighter than those for beer and other malt beverages.

Meanwhile, canned cocktails that use hard liquor like vodka or gin are taxed at about 45 cents a can, compared to about 8 cents for seltzers that use malt alcohol. Double Lemon, for example, uses shochu, a traditional Japanese liquor usually distilled from sweet potatoes.

Also complicating the strategy, the canned cocktail market is highly fragmented and finely tuned to local tastes, with differences in alcohol bases, flavors and drinking habits.

Yogurt-based drinks are popular in China, for example, while cider-type versions are sold in South Africa. The US market shifted to light berry flavored beers.

“What works in one market doesn’t always work in another,” said Brandy Rand, analyst at IWSR Drinks Market Analysis. “It’s a much harder category to translate across borders. It’s not like selling a Chardonnay or a vodka, categories that are known internationally.”

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Reporting by Rocky Swift; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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