Brewers face challenge as Japanese lose taste for beer

By Mari Saito

TOKYO (Reuters) - Times are tough for Japanese brewers as the country's increasingly health-conscious youth lose their taste for lager and cut back their drinking amid a gloomy economic outlook.

Young Japanese have become averse to spending their hard-earned cash on alcohol, helping push beer sales down by about 5 percent this year and forcing brewers to develop cheap brews and imitation beers to hold on to customers, as well as to look abroad for growth.

"I rarely ever drink. I don't like the taste of beer. I do a lot of sports and I think beer is fattening. I hate the way it settles in my stomach," said university student Keisuke Kato.

This is a worrying trend for brewers in Japan, which is the sixth-largest beer consuming country in the world. And it's not just beer consumption that is suffering.

Tax records show that alcohol intake in Japan had gradually declined to 9.4 million kilolitres in 2006 since peaking at 10.2 million kilolitres in 1999, a drop analysts pin to a variety factors such as the graying population and changing social norms.

The drop in consumption reflects a shift in consumer tastes to canned cocktails and less fattening drinks based on shochu, a distilled alcohol commonly made from barley, potatoes or rice.

Volume shipments of shochu drinks have surged 42 percent in the 10 years to 2006, even as beer shipments have fallen by more than 10 percent from a peak in 1994.

"Beer has been walloped by cheaper and perceivably healthier alcohol drinks," said Tokushi Yamasaki, an analyst at Daiwa Institute of Research. "Overall Japanese do not drink as much as they used to."

The lack of interest in alcohol among young Japanese is a sharp shift from the past when drinking bouts with colleagues were de rigueur and tipsy white-collar workers stumbling home late at night were a frequent sight in Tokyo's bar districts.

"Drinking in Japan was about bonding with your colleagues. But Japan's declining economy shifted corporate structure and it doesn't require workers to drink together any more," said Ron Carr, a professor at Temple University.

"When I first came here in the early '90s there were still so many drunken salarymen at the end of the year, drinking beer and spilling out on the streets. I've seen a huge decline in all that," he added.

That was before Japan's bubble economy burst in 1989, throwing the country into years of economic stagnation.

The period left its mark on young Japanese who, analysts say, tend to spend carefully after witnessing the 1980 bubble economy crumble, leaving their babyboomer parents' struggling as employers' instituted stringent cost-cutting.

This wariness of overspending is being exacerbated by a gloomy economic climate in Japan with growing concern that the world's second largest economy may be in recession.

Japan's Consumer Price Index is rising, and the country's core annual inflation hit a decade high in June, pressured by soaring energy costs and an uncertain economic outlook.