Insight – Finding Australia’s niche in Japan’s wine market
The Japanese market is currently experiencing its ‘seventh wine boom’[i] as a surge in affordable ‘new world wines’ fuels record levels of imports.[ii] In 2017, Japan was the sixth-largest wine importing country, totalling 284
million litres valued at A$2.2 billion.[iii]
Current trends suggest wine is becoming a mainstay consumption item of daily life in Japan [iv] [v] [vi], and is increasingly dominant on shelf space in supermarkets, convenience stores and izakaya (Japanese-style pubs).
Ienomi, or drinking at home, is also boosting wine sales through off-premise channels – particularly convenience stores – as the Japanese increasingly economise by consuming alcoholic beverages at home.[vii]
Encouraging signs in the market also stem from Japanese consumer tastes beginning to branch out to “organic, biodynamic and natural wines”, or wines with no artificial additives.[viii] [ix]
From 2006 to 2016, Australia enjoyed a stable position in the Japan market as the sixth most preferred source of wine.
However, in 2017, Australia took fifth position from the US and ranks only behind Chile, France, Italy and Spain [B(1] in terms of volume. These six countries alone account for 90 per cent of all wine imports into Japan.
During this period, Chilean still wines and French sparkling wines significantly expanded their market share.[x]
Australia did enjoy notable niche gains in sparkling wines, which grew by 77.8 per cent between 2012 and 2017, since the seventh wine boom (see graph below), but overall Australia’s share has remained broadly stable.
The seven wine booms in Japan's wine market [xi]
Characteristics of the Japan Wine Market
The Japanese wine market has a number of characteristics. Some 80 per cent of still wines sold in Japan are under A$18.40. In 2017, 56 per cent of still wines sold for less than ¥1,000 (A$12.30) per bottle while a further 24 per cent sold were in the ¥1,000 to ¥1,500 (A$12.30 to A$18.40) per bottle price range.
Countries that were able to increase their volume of still wine exports to Japan – namely, South Africa (+15 per cent), Chile (+11 per cent), Italy (+5 per cent) and Australia (+5 per cent) – did so because they could meet the demand for entry-level wines in the ¥500 to ¥999 price range.[xii]
In the sparkling wine category, French Champagne and Spanish sparkling wine dominate the market, accounting for 38 per cent and 25 per cent of sales, respectively, in 2017.
The most popular sparkling wines – 35 [B(1] per cent of off-premise market sales, and 23 per cent of on-premise market sales – are in the ¥5,000 to ¥10,000 (A$61.30 to A$122.70) per bottle price range. The majority share of the on-premise market – 26 per cent of the total – is in ¥1,000 to ¥1,500 (A$12.30 to A$18.40) price range.[xiii]
There is an emerging shift in Japan towards natural wine styles reminiscent of the 1970s to 1980s – characterised by minimal human intervention and a light taste, reflecting the flavour of the grape.
Market dynamics most likely to change include the following:
- Competition in the cheaper wine segments of the market is expected to intensify, particularly as tariffs are reduced for the European Union and Chile. As a result, competitor countries, other than Chile, are likely to shift their emphasis towards the middle to premium priced wines in the ¥1,000 to ¥1,500 (A$12.30 to A$18.40) range or even higher;
- Growth in demand for natural and organic wines – such as those with no artificial additives – and domestically produced wines which offer authenticity;
- Continuing popularity of sparkling wines at affordable price points from Spain, Italy and Australia;
- Major beer brewing companies (e.g. Asahi, Suntory), which are the main distributors of entry-level wines, have seen significant declines in
profitability in this sector, and will continue to shift their focus towards selling mid-priced wines in the ¥1,000 to ¥1,500 (A$12.30 to A$18.40) per bottle price range. They have also started importing mid-priced wines under the same brands to attract existing consumers of
entry-level wines to higher-priced categories.
Headwinds from 2019
Competition from 2019 will increase when tariffs on wines from the European Union and Chile are scheduled to be reduced to zero under their respective economic partnership agreements (EPAs) with Japan. [xiv] [xv]
The impact of tariff reductions was seen with the introduction of the Japan-Chile EPA in 2007. Chile’s market share for wine in Japan was approximately five per cent in the lead up to the EPA taking effect; that was converted to a market-leading 31 per cent share in 2017. [xvi]
Industry experts in Japan interviewed by Austrade forecast a surge in supply in 2019 from Chile and the EU that will likely focus on entry-level wines between ¥750 (A$9.20) and ¥1,000 (A$12.30) per bottle. These price points have been assessed as the “heart of the Japanese [wine] market” by the EU-Japan Centre for Industrial Cooperation. [xvii]
For Australia, the full benefits of the Japan-Australian Economic Partnership Agreement (JAEPA) will be realised in 2021 when all tariffs are eliminated.[xviii]
Finding Australia’s ‘sweet spot’ in the Japan market
As of 2017, Australian still and sparkling wines had the fifth-largest share of the Japan market in both categories. However, sales trends remain largely stagnant while competitor country wines, namely Chilean, Italian and Spanish daily wine and French Champagne, have significantly improved their market position.
According to industry experts interviewed for this report, there is robust demand for wines under 1,000 yen (A$12.30) through off-premise channels such as supermarkets and convenience stores. However, Australian wines are not cost competitive against Chilean wines in this category. Chilean wines are up to 30 per cent cheaper based on prices observed in supermarkets and convenience stores.
Value (A$) and volume (litres) of Australian wine exports to Japan 2008–2017
Australian quality sparkling wines could be competitive at the ¥2,000 (A$24.55) price point. Data provided by WANDS Magazine in Japan seems to confirm this view (see bar chart below).
Volume of Australian wine purchased in Japan by price range 2017 * [xx]
*Figures in the bar graph represent the number of nine-litre cases containing 12 x 750ml bottles.
Challenges and recommendations
Industry experts have observed to Austrade that the typical Japanese consumer does not associate Australia with wine due to a lack of well-established brands in the market.
Additional challenges for Australian wine exporters stem from the set number of importers in Japan and their limited ability to scale up. Timing can also impact chances of success in the market as identifying when importers are looking to expand their portfolio of wines can be difficult.
In response to the above challenges, Australian wine exporters can potentially better position themselves for success in the Japan market by:
- setting a price range that appeals to importers, which faithfully reflects the quality of wines;
- carefully ensuring the attractiveness of bottle design and labelling;
- arranging regular tasting events for the planning and merchandise divisions of distributors to increase the chances of importers coming into contact with new wines;
- suggesting entry-level wines below ¥1,000 (A$12.30) as a consistent base business, with the wine that reflects your winery’s story
- focusing on wines with individuality and highlighting the compatibility with certain types of food and cuisine; and
- re-investing in a unique selling proposition to counter the competitive advantage that EU and Chile will have over Australian wines when their EPAs come into force in 2019.
- opting for dry sparkling wines over sweet varieties for the Japan market as consumer data has signalled a preference for the former over the latter;
- selecting natural and/or organic wines to appeal to consumers looking for differentiation. These wines have the potential to stand out in view of competitor countries’ over-reliance on focusing on their wine’s history and quality; and
- building a long-term strategy and being prepared to invest heavily in marketing domestically and emphasising:
- overseas track record sales in major international cities such as New York, London, Shanghai and Hong Kong, which can provide added confidence for the importer;
- the wine’s specific or unique characteristics such as its story and background;
- international and/or third-party recognition (such as a 5-star rating from James Halliday or accolades/awards from international wine competitions) to establish immediate credibility with new wine importers in Japan; and
- branding that aligns with Australia’s image as a new world wine. To this end, eye-catching label designs that ‘pop’, have vivid colours and modern designs are recommended.
Contact Cheryl Stanilewicz,
Trade Commissioner, Austrade Tokyo for more information or read more about doing business in Japan.
[i] Kirin Company Limited, ワイン参考資料, 2018.
[ii] National Tax Agency, 酒類課税数量の推移(国税局分及び税関分の合計), 2017.
[iii] United Nations Comtrade, ITC calculations based on UN COMTRADE and ITC statistics, accessed on 28 September 2018.
[iv] MyVoice Enquete Library, ワインに関するアンケート調査(第7回), March 2017.
[v] Digital PR Platform, ワインに関するアンケート調査, 14 November 2017.
[vi] All Australian dollar figures in this report are based on 30 August 2018 exchange rates of A$1=¥81.40.
[vii] PR Times, 「家飲み」に関する意識調査を発表, 12 July 2017.
[viii] Sopexa, 2016 Wine Trade Monitor, August 2018.
[ix] Nihon Keizai Shimbun, Jancis Robinson’s Wine Report, 11 March 2018.
[x] WANDS誌, 輸入ワイン上位６か国の輸入量推移, 10 April 2018.
[xi] National Tax Agency, 酒類課税数量の推移(国税局分及び税関分の合計), 2017.
[xiii] WANDS誌, 特集 夏のスパークリングワイン, June 2018.
[xiv] European Commission, EU-Japan Economic Partnership Agreement, n.d.
[xv] Ministry of Finance, 酒類等に係る 大枠合意の内容, 6 July 2017.
[xvi] Nippon.com, お手頃チリワインが人気—EPAが追い風に : 発泡はスペイン「カヴァ」が健闘, 17 July 2018.
[xvii] EU-Japan Centre for Industrial Cooperation, Market opportunities for EU agribusinesses in the context of the EU-Japan EPA, November 2017. , 17 July 2018.
[xviii] DFAT, Factsheet: Agriculture and Processed Food, September 2017.
[xix] United Nations Comtrade, Japan Wine Imports HS Code 2204, accessed on 29 August 2018.
[xx] WANDS 誌,日本のワイン市場を読む, April 2018.