SPECIAL REPORT: Shift in bar trends in Japan

While 2009 was mostly brutal for Japanese bar operators, whisky sales continued to surge amid strong demand for highballs, with the whisky-and-soda cocktail long seen as an old man's beverage experiencing a resurgence among consumers looking for easy-to-drink value, according to Euromonitor research.

The “highball boom” is indicative of a long-term shift in Japan's massive bar category, as older consumers make fewer trips to bars and companies have cut way back on the lavish expense accounts and corporate drinking outings that have long fuelled demand.

Among young people, value is key, while traditional bars face growing competition from specialist coffee shops and even fast food chains for a share of leisure spending which continues to shrink. While the long-term story remains one of overall decline, there is still money to be made, particularly among young people who continue to seek innovative, affordable alternatives to beer and traditional bar snacks.

A massive, highly fragmented category continues to retrench
The number of bars serving alcoholic beverages in Japan is nothing short of mind-boggling, with most estimates putting the total figure at around 300,000, which would give Japan a better 10% share of all the bars on Earth. Many of these are small, humble establishments, traditional izakaya with a small number of seats and a limited menu. Independents dominate, with just a handful of chains such as Monteroza or Watami holding any significant share.

Ongoing economic stagnation and an aging population have hit independent bar operators hard, with older consumers both drinking less overall compared to young people and entertaining at home more often in a bid to save money.

Likewise, Japan's famously hard-drinking corporate culture has shifted dramatically over the last decade, as tighter corporate budgets, growing numbers of women in the workforce, and other factors have combined to make regular group drinking binges less common. All of this has combined with the recession to wreak havoc on the bar category, with sales through independent other cafes/bars down 8% in 2009, while transactions fell by 6%.

Value, variety continues to rule
The overall forecast for Japanese bars is bleak – other cafes/bars, which includes both bars serving alcohol and as well as traditional coffee shops, is set to see outlets contract by more than 10% over the next five years, while sales are expected to fall nearly 20% in constant terms, as flagging demand and growing competition from other sectors drives more operators from the category.

Sales growth will continue to come solely through share gains, which will likely favour those outlets able to offer consistently low prices, ensuring the standing bar boom could persist for some time. As in other markets, like the UK, food could become more of a focus, with bar chains like Monteroza already investing heavily in menu design as a means of differentiating the brand from independent competition.

With an aging consumer base drinking less overall and spending less time going out, a wholesale rethinking of the bar category is likely underway, with smoky, beer-focused izakaya giving way to a more restaurant-like, food-forward experience.

1 November 2010 - Felicity Murray