Navigating Tariffs, Rice Shortages, and Shifting Tastes

Sake, a potentially iconic Japanese alcoholic beverage, is facing a consumption crisis. Domestic consumption has plummeted to a third of its peak in the 1970s, largely due to an aging population and changing preferences among younger generations. The industry responded a decade ago with an ambitious export strategy.

However, this strategy has been disrupted by the imposition of tariffs by the US President. Concerns have been raised about the potential impact on US consumption, prompting a shift towards diversifying export markets to mitigate risk.

Sake, a rice wine, is crafted from fermented rice, water, yeast, and a unique mold called koji. The quality of sake is often determined by the degree to which the rice is polished, which removes impurities and influences flavor. The flavor profiles of sake can vary widely, and it can be served warm or cold. Unlike wine, its taste is generally not region-specific.

One prominent figure in the sake industry, the president of Dewazakura Sake Brewery, was a pioneer in exporting sake to the United States. He notes that sake, as a representative drink of Japan, is relatively late in its global debut. Exports experienced a boom alongside the rising popularity of Japanese cuisine. The United States has become the top destination for sake exports, accounting for over 10% of sales.

The recent tariff plan has caused exports to the US to stagnate. For brewers, exporting to the United States is crucial due to the decline in domestic demand. The goal is to increase exports further, but this is challenged by the fact that sake is becoming less familiar to young people, who are increasingly drawn to lower-strength, sweeter alcoholic beverages. The hope is that sake will achieve the brand recognition of other iconic alcoholic beverages, which could also encourage young people in Japan to return to the drink.

The trade situation is further complicated by a rice shortage in Japan, caused by poor harvests and a surge in international tourism. This has led to a significant increase in the price of sake rice, adding to the financial pressures on breweries. The chief director of the Yamagata trade body highlights the price of rice as the biggest concern for sake breweries, as it threatens the market competitiveness of sake.

During a recent trip to the US, a sake brewer observed that sake was being sold at significantly higher prices than wholesale. The aim is to make sake more accessible by driving down prices. However, with rice shortages and the current trade environment, this goal faces considerable challenges.