Japanese Wine Industry

  1. General knowledge of Japan
  2. Japanese wine production
    • 2.1 History
    • 2.2 Viticulture
    • 2.3 Industries
    • 2.4 Future
  3. Japanese wine consumption
    • 3.1 Background
    • 3.2 Export market
  4. Japanese wine market in 1999 to 2000
  5. Japanese wine market in the future
    • Examples of Korean and Chinese market

1. General knowledge of Japan

Japan is located eastern fringe of China and runs across north-east to south-west over a distance of some 3000km. Northern part of Japan belongs to the Frigid Zone, and southern part of which belongs to the Tropical Zone. In spite of its lengthy, width is very narrow, then land is only 370 thousand sq m. Population of Japan is 120 million, making the 6th largest nation. Population density of Japan is not far from UK, but most of Japan is mountainous and the area of available land is extremely limited. Then actual density is more than 1700/sq km. This makes incredible land prices, in recent report, residential land price in Tokyo is about A$4900/sq m, 45 times as New York and 14 times as London. Actually this crazy price is only limited metropolitan area, but even in country, land prices is expensive and moreover, available land is extremely limited.
Japan is monocultural country. It makes you easy to understand consumer behaviour. Preference of Japanese also follows in narrow range. Therefore, it can easy to make a boom of something. But the boom cools down easily, too.

Major religion is Buddhism. But it is not as strict as other Buddhism country such as Thailand and India. We also celebrate Christmas, Valentines day.

Japanese speak only Japanese. Although we learn English in school, few Japanese can speak it frequently. Actually, in a trading company, they use English in business but sometimes, you would realize that it is difficult to communicate with Japanese in English.

2. Japanese wine production

2.1. History

Legend has it that grape-growing began at Yamanashi, where is major wine and grape produce region now. Wine may have been made from local grapes in Yamanashi in early times and consumed very locally. Yamanashi has the least rainfall and less fatalities soil, therefore rice can not be grown in Yamanashi. It is not difficult to assume that people live in Yamanshi compelled to drink wine instead of rice wine called "sake" which is more popular alcohol beverage.

In 1875, the first commercial winery was established in Katsunuma, Yamanashi, which is now a part of Mercian winery which is the second largest company in Japan.

2.2 Viticulture

Japan is not naturally suited to viticulture and successful viticulture has always been a struggle. There are 3 major problems in Japanese viticulture.

High humidity and rainfall during growing season,
acidic and fertile soil and
limitation of lands.

Climate and Geography

Major grape growing region belongs to monsoonal climate. As Mt Fuji provide rain shadow effects in Kofu Valley, Yamanshi has the least rainfall in Japan. But it still has excess 1000mm annual and 800mm rainfall during growing season. Especially, flowering season, in June and early in July is a monsoon season, this causes serious downy and powdery mildew problems. Worthily, just before harvesting, in September, we have typhoon season, sometimes it causes wind damage as well as bunch rot problems.
Excess water and fertile soils makes vine vigorously, grape quality can be reduced without careful yield control.  
The high number of rainy days make reduce sunshine hours. Wide daily and seasonal temperature range and enough temperature summation indicate the availability of full maturation. However, the lack of sunshine hours causes unbalance for growing. Usually we should pick up grapes at Baume 9 to 11. After this level, flavour increases and acidity is reduced but Baume cannot be increased moreover, bunch rot and rain damage could be aware. Japanese law states that wine can be chaptalized and acidified. Usually we do not need to add acid but use a large amount of sugar in winemaking.

Traditional Japanese vineyard is trellised with overhead system to avoid excess humidity from soil and get good spray precipitation. This is specially important for table grapes to avoid scratch and get uniform ripening but not necessary for wine grapes. The overhead trellis is labour intensive and need trained skill for pruning. Planting density tends to low and this increases vigour to vines. New vineyard was trellised narrow T or Layre and get better results with high density planting. We should to try various trellis and planting materials to find the most suitable conditions in our own vineyards.

This will require major alternations to vineyard practices. But the structure of industry militates against rapid progress. There are more than 80,000 grape growers in Japan. The average vineyard size is around 0.25 hr in Yamanashi. Even in Hokkaido, where the scale of viticulture is greatest, the average vineyard is only slightly more than 0.5ha. Many grape growers are old and difficult to try something new. Recently some wineries encouraged vineyard reconstruction. Small wineries such as us grown grapes, make and sell our own wine. Some have been responsible for seriously interesting possibilities for Japanese wine quality and , as small scale operations, our outcomes are more readily visible.

Variety

Since last century, many grape varieties were introduced from Europe and US and tried to grow, select and propagate. As American varieties tended to tolerate to rain and diseases, they have been increasing. Cross hybridization between American varieties and European varieties were also proceeded and several cultivers were widely spread.
In 1995, total vineyard in Japan is 23,000 ha and produce about 250,000 t grapes. Only 8% of them was used for winemaking.
The most significant of these, and most important variety in winemaking is Kosyu, which is widely believed for the first cultiver in Japan. Kosyu is a Vitis venifela variety and has adapted our climate. It bears big round pink berries and is produced white wine. Almost Kosyu wine is designed dry to semi dry and medium to light body style. Commonly we made Kosyu as aromatic style, without oak. Because Kosyu has high phenolic contents in the skin, it tends to be overfined and become less body and simple style. Some of winemaker hate Kosyu because of its simplicity, but personally, we believe Kosyu is the original Japanese variety just like Kelner in German, Shiraz in Australia, and want to try many way of winemaking and viticulture techniques to Kosyu. Some of young winemakers try to lees contact, oak fermentation, oak maturation and success to get more complexity in Kosyu wine.
Another white wine grape is Delaware, which is an American variety and gives foxy flavour in wine. The wine is aromatic and sweet style. After fermentation, it is fined and bottled immediately then placed on the market in a few month after harvesting. They wish to be sold out this in several months. While we did not have significant red varieties. Traditional variety is Muscat Bailey A which is an American hybrid and more suits for table grape. Most wineries produce light bodied sometimes even semi-sweet style fruity red and rose wine from Muscat Bailey A. Carbonic maceration is sometimes used for it. Of course such wines should be consumed without aging.
In spite of many difficulties, since last decade, we have been trying to grow European varieties, such as Chardonnay, Cabernet sauvignon, Cabernet Franc and Merlot, with new trellis system. I have tasted some of their wines last year, and found that Cabernet Franc and Merlot showed good balance in fruits flavour and tannin structure.
In Hokkaiodo, they can grow good quality Muller-Thurgau and Riesling, and produces German style dry white wine.

2.3 Industries

Only holders of license issued by the Ministry of Finance are permitted to make wine. Now there are about 230 wineries in Japan. Top 3 wineries are MERCIAN, SUNTORY and SAPPORO.

Since 1980' when Japanese wine consumption increases rapidly, many of the large wine companies have concerned to improve the quality of wine, in order to keep their market share against imported wine.
Initially, they had focused on investment in modern wine making equipment and on training their winemakers in the methods used in the major wine producing nations. Suntory bought Ch. Lagrange in St Julien and Robert Weil in German. Some other companies bought Californian wineries as well. The domestic industry has also tried to hold its ground by using imported grape concentre even blend domestic wine with imported bulk wine to extend and improve its quality. Here is a trick in the label law. The definition of Japanese "Domestic wine" is the wine which bottled in Japan. Then it can be divided into three categories, Wine made from only domestic materials-kokunaisan, wine fermented in Japan using imported materials-kokusan and bottled in Japan using imported wine-yunyu. If theses 2 or three entitles are blended, then the exact proportions of each have to be shown on the label. Japan Winery Association adopted to remove ambiguity , yunu wine should be declared to the origin of them.

These labeling law may make consumers confuse, and small winemakers has proposed that the only wine made from domestic materials can state Domestic Wine and others should not use Domestic on the label. However, large companies refuse it. In turn, we have adopted a Certificate of Origin for the limited regional wines. This system seems well working and small producers wine become differentiated by consumers.

3. Japanese wine consumption

3.1 Background

There are several occasion when we drink alcohol, but some is different from Australia and sometimes difficult to understand. Especially, business man's overtime work drinking, which is a kind of negotiation techniques in Japanese business. A few business people took their clients to a bar such as a karaoke-bar, and let them drunk and relax resulting to make a good relationship even in business. In this occasion, kind of alcohol is not important, and the stronger alcohol and the quicker drunk is the better. The large part of Japanese brandy and whisky consumption is made at the business drink. My father was a typical Japanese business man, and he still loves whisky and drinks it every night.
The comparison of change in consumption of several kinds of beverage shows that wine consumption has been increasing from 1997. Several reasons why wine consumption is so rapidly increased, could be considered. The major change could be leaded by mass media. In 1995, a Japanese Sommelier, Mr. Tasaki won in the International Sommelier Competition. Since then he became as say Japanese James Halliday or Hue Johnson. Television, radio, magazine and newspaper treated about wine daily. More than 10000 people study about wine in the wine schools. More than 30 new wine books were published in every month. Wine becomes one of the cultures in Japanese life.
Although such a crazy wine boom was cooled down in an year or so, wine is now an important daily beverage in ハJapanese life.

Market segmentation

Wine drinking habits are also changing rapidly. The result of 279 Japanese females' drinking habits of 1997 shows as follows. This survey conduced to limited subjects as their customers. The result was compared with a similar survey in 1993. 42.3% of them drink wine once or more than week. This contrasts 13.2 % in 1993. 6.1% of them are drinking wine every day. Same survey indicates the preference moves more white to red and sparkling wine. And more dry preferences.
Mercian expected the segmentation of their domestic bottled wine as Red: White: Rose=3:4:3 in daily range and Red:White=4.5:5.5 in mid price range.
Mercian analyzed that statistical average wine consumption of Japanese is 1.4L/head, however, still majority of them chooses not drink at all. Therefore, those who drink wine frequently can drink as much as the average of Australian and even French and Italy. These Japanese may have knowledge about wine and choose wine by its quality.
Here is price segmentation of wine. The much growth in 94 to 95 showed only increasing the under 500 yen segment. Although, there were no major change in 96, growth segmentation moved from under 500yen segment to the above 2000 yen segment. This middle to high price range is shared by 66% of imported wine.

3.2 Export market

In 1995 domestic wine sales was 73,000 kL and the imported one was 86,000 kL. In 1996, it is expected that about 80,000 kL domestic and 90,000 kL imported. Although the growth of domestic wine sales will be 110% and imported one will be 106 %, Japanese wine market share is still imported wine dominant since in 1994. In spite of demand growth, domestic grape cannot be expected to increase. The Domestic wine is also included imported bulk wine and short of domestic grapes results difficulty of growth in domestic wine share. The dominance of imported wine should be stable.
Australia was the 6th largest exporter in 1995, but in 1996, Chile increases its sales more than 5 times and exceed Australia. In 1996, Japan imports 1,550 kL of wine and it showed 104% growth from the pervious year. In terms of average CIF price, Australian wine was second only to France and 522yen/L. The retail price of Australian wine is around 1000 to 2500 yen per bottle. For example Orland's Jacbs Creek series is sold at 980 yen. I think these prices are very good value. French wine such as AOC Bordeaux range also prices around 1000 yen but quality of J Creek is.....!!

4. Japanese wine market in 1999 to 2000

From the casual report of Japanese wine statistics, total consumption compared with 1998 was dropped by 36%. Especially imported wine that experienced significance growth from 1996 to 1998, dropped more than 43%. Relatively new producer such as Chile and Argentina has suffered larger decline (dropped by more than 70%). While European countries imports dropped by around 50%. We believe that the big boom is over but Japanese consumption of wine have slowed but positive. The rapid increase of wine consumption in 1998 owed mainly cheaper red wine. All decline has been in red wine sales. Many importers who have little knowledge of wine began to treat red wine and actually had imported too much wine. In early 1999, they clear their stocks with discount then quitted their wine business. Now reliable new importers and 'old hands' had considerable wine stock surplus. Most retailers have increased their shelf space for wine. Japanese wine market might continue steady expansion especially middle price range.

5. Japanese wine market in the future

As I mentioned before, domestic/import share will not change easily. Moreover, increasing demand for the high quality wine access import of mid to high price range wine from New World.
Because many Japanese wine enthusiasts desire to try something new, Australian wine has more opportunity to get reputation in Japanese market. Especially, I recommend more regional approach, such as Coonawarra Cabernet, Barossa Shiraz and Clare Reasling, and individual bland image sales. Already Penfolds have established their identity in Japanese market through the reputation of Grange. Only a few brands in the New World have done so, such as Robert Mondavi of the US, Santa Carolina of Chile. While French and German wineries had stable their identity.

1995 was the great year in terms of wine market in Japan. I do not think this is only a boom such as Beaujolais boom in 1980. Through this boom, Japanese people were much interested in wine and went into action to study and drink wine. This can be a good example of Korean and other Asian market. There are many opportunities to come the year 1998 of Japan to these markets.