In early 2020, forecasts for the Japanese market were positive. Sales of Champagne and sparkling wines were soaring. The newly-signed Japan-EU Economic Partnership Agreement (EPA) paved the way for more competitively priced European wines. A record 32 million overseas tourists visited in 2019, a figure set to be eclipsed with the holding of the Tokyo Summer Olympics. A year later and the outlook is very different. Yet while the impact of Covid-19 cannot be understated, Japan has shown considerable resilience. There are also factors and trends beyond the pandemic which are influencing the market.
Japan is Asia’s second-largest wine consuming nation, and 6th largest importer worldwide with €1.6 billion of imports in 2019. Japan is also the 3rd largest importer of sparkling wines by value. The government has signed EPAs with many wine producing countries that abolish or reduce tariffs. With China and the USA raising tariffs, wineries are looking to Japan as a large and stable market. Furthermore, as Rebecca Lawrence of Vinitaly International Academy notes, this is a sophisticated market with an appreciation for quality which makes it ideal for promotion.
Effects of the crisis
Equally, producers’ expectations should be tempered by reality. Japan boasts the world’s third-largest GDP and a population of 126 million, but annual per capita consumption is only three litres. The last wine boom peaked in 2015, since when still wine imports have fluctuated at around 21 million cases. To stop the spread of Covid-19, a national State of Emergency was declared in April and May, and many restaurants, bars, and shops temporarily closed. The Olympics were postponed and borders closed to foreigners for much of the year. Consequently, imports of still wines were down 7% by volume to November 2020 while sparkling wines fell 20%. Further restrictions were announced in January 2021 in the wake of continued infections.
France ranks first
France dominates from a value perspective. In yen terms, still wine imports exceed the combined total for the next three countries, Italy, Chile and the USA. Reiko Otsuka, country manager for the Conseil Interprofessionel du Vin de Bordeaux (CIVB), reports that Japan is forecast to become their 5th largest export market. French customs’ figures show Bordeaux volumes up to November 2020 were ahead of 2019 although down by value. It helps that the CIVB was already promoting ie nomi or drinking at home, through key off-trade channels, and highlighting bottles in the ¥1,000 – 4,000 range, in line with the trend for casual wine drinking.
The USA, ranked fourth by value, has the highest average CIF price per bottle of any leading importer. California is positioned at the top-end of the market with 42% of wines sold in the on-trade against the industry average of 35%. Unsurprisingly, last year several importers noted difficulties selling mid-priced wines, although in dollar terms US imports were down only 7.86% up to October 2020. As California Wine Institute (CWI) Joint Directors Hiro Tejima and Madoka Ogiya note, California possesses many highly-recognised brands, such as Opus One and Matthiasson Wines, which support retail sales. Opus One is the sole non-French winery on Wine-Searcher’s list of ten most-searched-for wines. Despite the uncertainty the CWI held their Grand Tasting in Tokyo in October, giving a much-needed boost to the local market. Japan and the USA also signed an EPA in 2020, meaning tariffs will reduce in coming years. This will help Japan maintain its position as that state’s fourth-largest export market.
Italy, the second-largest country by value, is helped in part by 8,000 Italian restaurants spread throughout the archipelago. This was no advantage in 2020 and imports fell by 17% to November 2020. Thierry Cohen is President of Japan Europe Trading, respected importer of Italian wines and foods handling major brands such as Frescobaldi, Planeta, and Feudi di San Gregorio. He notes that 50% of all Italian wines are sold through the on-trade. Looking beyond Covid-19, Cohen comments that Japan is hampered by persistent deflation. This means importers are unable to pass on price rises to their customers. Retailers and restaurants source alternatives rather than pay more. In turn, wineries cannot expect to raise ex-cellar prices in the short-term. On a more positive note, Cohen believes that with a large proportion of organically-farmed grapes, Italy can tap into Japan’s growing demand for organic wines.
Importers are the key bridge to the market. Racines is a leading independent player and one of the pioneer importers of grower champagnes and low-intervention wines. Favouring elegantly crafted wines from artisanal producers Racine’s selections are emblematic of changes taking place over the past two decades. Founders Yasuko Goda and Masaaki Tsukahara note that restaurant business fell sharply in April and May. The market recovered over late summer and autumn, however, with concerns over a third wave of infections sales slowed again in December. Goda comments that the price of grower champagnes is supported by strong demand and limited supply at a time when many Grand Marques and low-priced sparklers from other regions are engaged in price competition to maintain sales. She remains optimistic, seeing a younger generation of wine drinkers entering the market catered to by a new wave of committed retailers such as Inoshishiya in Nagano.
Department stores cater to affluent consumers in finely curated settings. Tokyu Honten in Shibuya stocks a broad range from daily to fine wines including many classics; their average bottle price is ¥5,600. Experienced Chef Sommelier Akira Fujimaki noticed that since Covid-19 customers reassessed purchase decisions and are willing to explore wines they may not have tried before. On the other hand, trends evident before 2020 continue, including demand for lighter, less oaked styles and lower alcohol wines. Interest in natural and organic wines persists. The market for Burgundy remains strong despite steep price rises. Also demand continues unabated for both Champagne and lower-priced sparkling wines in the ¥1,000 range.
55% of retail sales by volume are through supermarkets, mostly priced below ¥1,000. Chilean wines are ubiquitous in this entry-level and mid-market sector where the range is often quite limited. Olympic CELLAR, the specialised liquor section of Olympic Supermarkets, offers a wider selection than many. Mitsuaki Sato who works in the Musashi Urawa store in northwest Tokyo comments that many consumers have little knowledge about grape varieties or differing styles. Yet they are receptive to suggestions from experienced staff in whom they trust. Better selling items in the store include Pierre Chavin’s Viognier from Vaucluse and Mount Rozier’s Cape South red and white.
Many online retailers saw dramatic increases in sales during April and May. According to online specialists Y’NS Tokyo and Wineholic these have since levelled off. Takeo Imai, who founded Wineholic in 2009, notes that during the 1980s bubble era people did not choose so carefully, while in a recession they are much more selective. In the past five years customers no longer stick to classic names and are willing to try new producers. Since June there is strong demand for wines that are ‘reasonably priced and delicious’ irrespective of where they come.
The drive to increase ie nomi extends to packaging and formats. Yamaya, a leading retailer with 325 stores nationwide, reports strong demand for sales of bag-in-box. Retailers at all levels report an increase in sales of wine sets, based around a theme or region making the purchase decision easier for the consumer. There are parallels with popular wine-pairing menus at restaurants where guests leave decision-making to the sommelier.
The on-trade suffered a tough year. The Japan Times estimated over 800 restaurant bankruptcies in 2020, an increase of 8% over the previous year. However, the speed with which customers returned, after the State of Emergency was lifted, bodes well for the post-vaccine era. Dupree, a wine-focused bistro in Kyoto serving locally sourced game, reported higher bookings for the second half of the year compared to 2019. It is owned by Masanobu Egami who has a thriving wholesale business and retail shop dealing in artisanal and low-intervention wines. Dupree serves both natural and ‘classic’ wines in a casual, elegant setting that purposely avoids pigeonholing both the wines and the guests. Nogizaka Shin, a Michelin-starred kaiseki restaurant in Tokyo, also has a strong wine focus. Co-owner and sommelier Yasuhide Tobita is keen to expand beyond traditional favourites of Champagne and Burgundy. He reports that guests respond very positively to the international offerings included in wine pairings. While Dupree and Nogizaka Shin are completely different restaurants their open-minded, inclusive approach to wine is very much in tune with current trends.
Education demand increases
Education is key to expanding the market and Japan is well placed in this sector. The Japan Sommelier Association (JSA) has a registered membership of 14,500 sommeliers and more than 4,300 ‘wine experts’, the title granted to non-professionals who pass the JSA exams. These constitute a substantial cohort of influencers with industry standard qualifications. Furthermore, WSET qualifications are increasingly in demand from professionals and enthusiasts. The number of student registrations rose from 810 in 2014-2015 to 2,110 in 2019-2020; there are also 250 Diploma alumni. Eiji Nakamura is Head of Caplan Wine Academy, one of four approved providers, offering classes in Tokyo, Nagoya and Osaka. He notes that Kenichi Ohashi M.W., DipWSET is very supportive and after he became a Master of Wine in 2015, interest in WSET courses burgeoned.
The short-term outlook is uncertain for all sectors. However, looking beyond Covid-19, more exporters are taking stock of a market that is of key importance to countries such as France, Italy, USA and Chile. There is also a willingness among consumers to experiment and look beyond classic regions. Moreover, experienced and confident wine professionals are adapting to and fashioning trends to sustain the wine market.