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CNN Live At Daybreak

High Prices Mean High Demand for Alternative Beverage in Japan

Aired July 16, 2002 - 06:50   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: It looks like beer, it tastes like beer, almost. But it's not beer. Japanese consumers have been drinking the brew to save cash.

But as CNN's Rebecca MacKinnon tells us, drinkers on a budget may be changing brands again.

(BEGIN VIDEOTAPE)

REBECCA MACKINNON, CNN CORRESPONDENT (voice-over): At the end of a hard day, people across the world like to crack open a cold one. This family is drinking something that looks like beer and tastes almost like beer. But it's not. It's a low malt drink called Happoshu.

Kiluyke Hosakawa (ph) says he prefers real beer, but Happoshu is better for his family's budget. In these lean economic times, Japan's Joe Six Pack still needs his supply, but wants it cheaper. Happoshu, meaning fizzy liquor in Japanese, is the beer company's answer. Mainly for the home market, it's rarely served in restaurants.

Some Happoshu even has the same alcohol content as beer, but costs half the price thanks to a tax loophole. By using less malt and more of other ingredients, like corn syrup, rice or sugar, Happoshu dodges Japan's legal definition of beer with a malt content of 66.7.

Discount store manager Uji Hiromoto (ph) expects his Happoshu sales to surpass beer this summer for the first time ever.

Nationwide, it's expected to grab 40 percent of this year's beer market, up from 22 percent two years ago. The cheaper price is complemented by aggressive advertising of new varieties. This commercial for Sapporo brand's diet Happoshu stars the hip, 23-year- old son of Prime Minister Junichiro Koizumi.

(on camera): But the reason for Happoshu's existence is not expected to last. The government is already discussing a tax increase that would eventually close the tax gap between Happoshu and beer.

(voice-over): Even so, analysts say a cutthroat price war and razor thin profit margins will keep Happoshu's price below real beer.

YOKO FUJII, J.P. MORGAN: The demand is there now so beer companies will have to stay in the market, even though it will be thought to make a profit.

MACKINNON: The flow may be downward, but Japan's beer companies have no choice other than to go with it.

Rebecca MacKinnon, CNN, Tokyo.

(END VIDEOTAPE)

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