Sapporo Breweries, Ltd.

views updated Jun 27 2018

Sapporo Breweries, Ltd.

10-1, Ginza 7-chome
Chuo-ku, Tokyo 104
Japan
(03) 572-6111

Public Company
Incorporated: September 1949 as Nippon Breweries, Ltd.
Employees: 3,819
Sales: ¥379.9 billion (US$2.386 billion)
Market Value: ¥365.7 billion (US$2.297 billion)
Stock Index: Tokyo Osaka Nagoya Sapporo

The American largely responsible for renewing trade relations with Japan, Commodore Matthew Perry, brought several cases of beer to Japan as a gift for the Tokugawa Shogunate. The beverage was so well liked that the Japanese government soon decided to establish a brewing industry. After an extensive search for a suitable area, wild hops were found growing on the island of Hokkaido, the northernmost island in the Japanese archipelago. As a result, in 1876 the Commissioner-General for the development of Hokkaido founded Japan’s first brewery in the town of Sapporo.

The original government facility was designed by the brewmaster Seibei Nakagawa who had returned to Japan after studying beer-making techniques in Germany. The first product brewed in the factory was called Sapporo cold beer or German beer, and even some of the early labels were printed in German as well as in Japanese.

In 1886 the brewery was sold by the government to Okura-Gumi, a private limited partnership. Two years later, Okura-Gumi itself was purchased by a group of Japanese businessmen, who then reorganized the brewing operations under the name Sapporo Brewery Ltd. A number of other breweries, which would soon figure prominently in Sapporo’s development, were also started during this time, including Nippon Brewing Company Ltd., Osaka Brewery, Kirin Brewery Company Ltd., and the Nippon Beer Kosen Brewery.

In the first decade of the 20th century, the Sapporo Brewery, the Nippon Brewing Company, and the Osaka Brewery was amalgamated into the Dai Nippon Brewery Company Ltd. This process of amalgamation and consolidation continued for 20 years until, in 1933, the Nippon Beer Kosen Brewery was also absorbed by Dai Nippon.

During the 1920’s and 1930’s Japanese militarists, implementing their plan to make Japan the dominant economic power in Asia, began to centralize the brewing industry. By 1943, the merger of all Japanese breweries was virtually complete: Dai Nippon and Kirin were the only two brewing companies left in Japan. In fact, the militarists were powerful enough to force the Sapporo division of Dai Nippon to establish joint ventures in the occupied territories of Korea and Manchuria.

At this stage, local markets were dominated by particular brands. Dai Nippon sold Sapporo beer in the region north of the Kanto district, primarily in Hokkaido. The company also manufactured Yebisu and Asahi brand beers; the former was popular in the Tokyo area and the latter in the Kansai area. Not surprisingly, because of the increased demand for beer (it was rapidly superseding the traditional drink sake), its production continued throughout the war.

The current structure of Japan’s brewing industry originated after World War II during the U.S. occupation. In 1949 the Dai Nippon Brewery, which had cornered nearly 70% of the beer market in Japan, was divided into Nippon Breweries Ltd. and Asahi Breweries Ltd. Initially, Nippon Breweries marketed beer exclusively under its own brand name; it was not until 1957 that beer displaying the Sapporo label was reintroduced.

Nippon’s growth during the postwar was impressive, primarily because of an expanding product line; from 1951 to 1981 production at the company’s facilities increased by a factor of 15. During that same period, the brewery’s sales increased from ¥20 billion to ¥330 billion, and its capitalization from ¥100 million to over ¥14.1 billion.

It was not until 1964 that the Nippon Breweries changed its name to Sapporo Breweries, Ltd. Shortly thereafter, arrangements were made to merge the Sapporo and Asahi breweries. By this time they had become the second and third largest breweries, respectively, in Japan. (Kirin had captured the largest share of the domestic beer market.) However, the merger never materialized.

The formation of a joint venture with Guinness plc, called Sapporo-Guinness, also took place in 1964. This agreement led to the sale of Irish stout in Japan. By 1976 the consumption of stout beer had risen dramatically and a sales war ensued with the Kirin brewery (which had its own version of the beverage). Even though the cost of Guinness’s product is twice that of Kirin’s, Sapporo has managed to maintain about 45% of the domestic stout market by relying heavily on Guinness’s quality image.

Sapporo entered the wine market in 1971 when it formed a joint venture with Mitsui and Company Ltd. to import both wine and liquor. Sapporo Liquor Company Ltd. first began to import Nicolas, Hoch, and Melini wines. The company then started to produce its own wines at the Katsunuma Winery west of Tokyo in 1976; its Polaire brand of wine now includes the top five best sellers in Japan. After the Okayama Winery was established in 1984, a wine cooler, a sparkling wine, and Hyosai, a white brandy, were also added to the growing domestically produced beverage line. In addition, the Sapporo Liquor Company imports Baileys Irish Cream, Bombay Gin, Green Island Rum, and several scotches, including J and B Rare, Dunhill, Knockando, and Spay Royal.

Sapporo brand name beer is brewed exclusively in Japan, but much of the barley and hops used in its manufacture is imported from Canada, Australia, West Germany, and Czechoslovakia. However, the company’s supply of yeast comes from a strain originally developed at the Sapporo laboratory.

In the mid-1970’s the Sapporo laboratory developed a technique for the ceramic filtration of beer. Since the introduction of pasteurization in the early part of the 20th century, beer had been sterilized by means of a heating process. This was necessary because the yeast residue in beer rendered it unsuitable for extended storage or longdistance transportation. Yet the problem with heating beer is that the high temperature affects its flavor. Sapporo’s unique ceramic filtration method removes the yeast residue from beer without having to heat it. The beer is filtered at a constant temperature of zero to one degree centigrade through a long ceramic cylinder; a thin coating of diatomaceous earth in the tube traps the yeast residue. The first draft beer made with this new process went on the market in 1977, and in 1985 the filtration technology was exported to South Korea and to the Miller Brewing Company in the United States. Even so, Sapporo still pasteurizes many of its products.

The Sapporo laboratory presently conducts research in fields such as soft drinks, and the application of beer yeast to the development of food seasonings and health food products. Sapporo scientists are also investigating the utilization of recent discoveries in biotechnology to develop new plant breeds, agricultural chemicals, and pharmaceuticals.

Sapporo’s diverse holdings also include real estate firms, the largest of which is the Seiwa Fudosan Company Ltd. Primarily a leasing agency, Seiwa Fudosan is also in charge of the current development of Sapporo’s Ebisu properties in Tokyo. In addition, an enormous sports and leisure center in Tokyo is operated by Sapporo’s affiliate, the Seijo Green Plaza Company Ltd.

Throughout its history, rising prices for raw materials have reduced company profits. During the 1970’s the Japanese government made matters worse by requiring brewers to purchase domestically grown barley; this accounted for 20 to 25% of the barley used in the entire industry. Originally intended to protect farmers who had switched from the cultivation of rice (which was in surplus) to barley, the domestic strain cost the brewers 3.7 times as much as imported ones.

In spite of such problems, Sapporo has grown consistently over the last 35 years. In fact, from 1985 to 1987 the company has enjoyed record sales and earnings. Sapporo attributed this success to reduced materials costs, a decreasing interest payment burden, and effective management of surplus funds. Furthermore, the appreciation of the yen and the consequent lower price of foreign malt have also helped.

Sapporo seems set for continued growth: recent overtures have been made concerning the construction of a brewery in China, and domestically, Sapporo is now the second largest brewer in Japan with nearly 20% of the market share. Although beer presently accounts for almost 90% of the company’s total sales, forays into fields such as real estate and biotechnology promise to be highly profitable in the near future.

Principal Subsidiaries and Affiliates

Sapporo Lion Ltd.; Tokyo Ribbon Service; Sapporo Wines Ltd.; Sapporo Liquor Co., Ltd.; Seiwa Real Estate Ltd.; Seijo Green Plaza Co., Ltd.; Nihon Glass Manufacturing Co., Ltd.; Sapporo Beer Transporting Co., Ltd.; Sapporo Nosan-Kako Malting Co., Ltd.; Nihon Suishitsu Kenkyujo Co., Ltd.

International Directory of Company Histories

Sapporo Breweries, Ltd.

views updated May 14 2018

Sapporo Breweries, Ltd.

10-1, Ginza 7-chome
Chuo-ku, Tokyo 104
Japan
(03) 5423 2111
Fax: (03) 5423 2057

Public Company
Incorporated: September 1949 as Nippon Breweries, Ltd.
Employees: 4,071
Sales: ¥663.9 billion (US $6.65 billion)
Stock Exchanges: Tokyo Osaka Nagoya Sapporo
SICs: 2082 Malt Beverages; 2086 Bottled and Canned Soft Drinks; 2084 Wines, Brandy and Brandy Spirits; 5812 Eating Places; 6531 Real Estate Agents and Managers

Over the course of its more than 100 year history, Sapporo Breweries Ltd. has evolved from a government-owned beer maker into a multi-faceted consumer products concern. In the mid-1990s, its interests included the namesake Sapporo beers and a full line of soft drinks, wine, teas, and coffees, as well as real estate, restaurants, and hotels. Along with Kirin Brewery Co., Asahi Breweries Ltd. and Suntory Ltd., Sapporo ranks among Japan’s “Big Four” breweries; its flagship Black Label brand beer held 18.2 percent of the country’s beer market in 1994.

Beer was introduced to Japan in the mid-1800s. The American largely responsible for renewing trade relations with Japan, Commodore Matthew Perry, brought several cases of beer to Japan as a gift for the Tokugawa Shogunate. The beverage was so well liked that the Japanese government soon decided to establish a brewing industry. After an extensive search for a suitable area, wild hops were found growing on the island of Hokkaido, the northernmost island in the Japanese archipelago. As a result, in 1876 the Commissioner-General for the development of Hokkaido founded Japan’s first brewery in the town of Sapporo. (Coincidentally, the global beer capitols of Munich, Milwaukee, and Sapporo are all located along the 45° north latitude.)

The original government facility was designed by the brewmaster Seibei Nakagawa, who had returned to Japan after studying beer-making techniques in Germany. The first product brewed in the factory was called Sapporo cold beer or German beer, and even some of the early labels were printed in German as well as in Japanese.

In the first decade of the 20th century, the Sapporo Brewery, the Nippon Brewing Company, and the Osaka Brewery were amalgamated as the Dai Nippon Brewery Company Ltd. This process of amalgamation and consolidation continued for 20 years until, in 1933, the Nippon Beer Kosen Brewery was also absorbed by Dai Nippon.

During the 1920s and 1930s Japanese militarists, implementing their plan to make Japan the dominant economic power in Asia, began to centralize the brewing industry. By 1943, the merger of all Japanese breweries was virtually complete: Dai Nippon and Kirin were the only two brewing companies left in Japan. In fact, the militarists were powerful enough to force the Sapporo division of Dai Nippon to establish joint ventures in the occupied territories of Korea and Manchuria.

The current structure of Japan’s brewing industry originated after World War II during the U.S. occupation. In 1949 the Dai Nippon Brewery, which had cornered nearly 70 percent of the beer market in Japan, was divided into Nippon Breweries Ltd. and Asahi Breweries Ltd. Initially, Nippon Breweries marketed beer exclusively under its own brand name; it was not until 1957 that beer displaying the Sapporo label was reintroduced.

Nippon’s growth during the postwar period, primarily because of an expanding product line, was impressive; from 1951 to 1981 production at the company’s facilities increased by a factor of 15. During that same period, the brewery’s sales increased from ¥20 billion to ¥330 billion, and its capitalization from ¥100 million to over ¥14.1 billion.

The formation of a joint venture with Guinness plc, called Sapporo-Guinness, also took place in 1964. This agreement led to the sale of Irish stout in Japan. By 1976 the consumption of stout beer had risen dramatically and a sales war ensued with the Kirin brewery, which had its own version of the beverage. Even though the cost of Guinness’s product was twice that of Kirin’s, Sapporo managed to maintain about 45 percent of the domestic stout market by relying heavily on Guinness’s quality image.

Sapporo entered the wine market in 1971 when it formed a joint venture with Mitsui and Company Ltd. to import both wine and liquor. Sapporo Liquor Company Ltd. first began to import Nicolas, Hoch, and Melini wines. The company then started to produce its own wines at the Katsunuma Winery west of Tokyo in 1976; its Polaire brand of wine would eventually include the top five best-sellers in Japan. After the Okayama Winery was established in 1984, a wine cooler, a sparkling wine, and Hyosai, a white brandy, were also added to the growing domestically produced beverage line. In addition, the Sapporo Liquor Company imported Baileys Irish Cream, Bombay Gin, Green Island Rum, and several scotches, including J and B Rare, Dunhill, Knockando, and Spay Royal.

First established in 1908, Sapporo’s research and development division was created to breed varieties of barley and hops especially suited to Japan’s climate. In the mid-1970s the Sapporo laboratory developed a technique for the ceramic filtration of beer. Since the introduction of pasteurization in the early part of the 20th century, beer had been sterilized by means of a heating process. This was necessary because the yeast residue in beer rendered it unsuitable for extended storage or longdistance transportation. Yet the problem with heating beer was that the high temperature affected its flavor. Sapporo’s unique ceramic filtration method removed the yeast residue from beer without having to heat it. The beer was filtered at a constant temperature of zero to one degree centigrade through a long ceramic cylinder; a thin coating of diatomaceous earth in the tube trapped the yeast residue. The first draft beer made with this new process went on the market in 1977, and in 1985 the filtration technology was exported to South Korea and to the Miller Brewing Company in the United States. Even so, Sapporo continued to pasteurize many of its products.

In 1988, Sapporo’s research and development department expanded into the propagation of rare orchids for sale in the United States, Europe, and domestically. The Sapporo laboratory also conducted research in such fields as soft drinks, and the application of beer yeast to the development of food seasonings and health food products. Sapporo scientists also investigated the utilization of recent discoveries in biotechnology to develop agricultural chemicals and pharmaceuticals.

Throughout its history, rising prices for raw materials cut into company profits. Sapporo’s supply of yeast came from a strain originally developed at the Sapporo laboratory. Although Sapporo brand name beer was brewed exclusively in Japan, much of the barley and hops used in its manufacture were historically imported from Canada, Australia, West Germany, and Czechoslovakia. During the 1970s the Japanese government raised the brewery’s already high costs by requiring them to purchase domestically grown barley; this accounted for 20 to 25 percent of the barley used in the entire industry. Originally intended to protect farmers who had switched from the cultivation of rice (which was in surplus) to barley, the domestic strain cost brewers 3.7 times as much as imported ones.

In spite of such roadblocks, Sapporo grew consistently. In fact, from 1985 to 1987 the company enjoyed record sales and earnings. Sapporo attributed its success to reduced materials costs, a decreasing interest payment burden, and effective management of surplus funds. Furthermore, the appreciation of the yen and the consequent lower price of foreign malt also helped boost results.

But as the Japanese beer market fast approached saturation in the late 1980s, Sapporo sought new markets through geographic and product diversification. Having established distributorships in over 30 countries around the world, the company founded its first full-fledged foreign subsidiary in the United States in 1984.

While striving to maintain a premium image for its flagship beers, Sapporo catered to both ends of the Japanese beer market in the late 1980s and early 1990s. The company introduced the gold-labeled Yebisu Beer and the ultra-dry Kissui ale for the upscale market. Around the same time, it inked a contract with the U.S.-based Stroh Brewing Company to import a bargain-priced beer into the country. And after five years of research and development, the company also launched “Drafty,” a sparkling alcoholic drink which the company was able to offer at a low price, due to the product’s low malt content, which incurred less tax.

The seeds of Sapporo’s burgeoning restaurant empire were planted with the establishment of the brewery’s first beer hall back in 1899. By 1994, a beer hall division had grown to become Sapporo Lion Limited, a 180-location chain that contributed about five percent of the company’s annual revenues and an incalculable amount to Sapporo’s brand cachet. Echoing an American trend, the company began to develop several “brew-pubs” featuring boutique beers brewed on site.

Having put its first soft drink, Ribbon Citron, on the market as early as 1909, Sapporo placed ever-increasing emphasis on its nonalcoholic beverage line. By the late 1980s, this product segment included traditional and medicinal teas, Beans brand canned coffees, and a variety of carbonated sodas and mineral waters. The company concentrated on introducing all-natural, wholesome drinks with fruit flavors and light carbonation in the early 1990s.

While real estate still only contributed 6.5 percent of Sapporo’s total annual revenues in the mid-1990s, this segment was considered the cornerstone of the company’s diversification strategy. Development activities took center stage with the 1994 opening of the Yebisu Garden Place, a downtown Tokyo office complex that featured retail outlets and upscale condominiums that cost the company ¥295 billion and took ten years to complete. The brewer proudly moved its headquarters to the new facility that same year. But far from abandoning its historical birthplace, the company redeveloped its first brewery into what it referred to as a “cultural mall,” incorporating public services, retail, and leisure centers.

An especially hot summer spurred demand and boosted domestic beer consumption to record levels in 1994. Sapporo’s own four percent year-to-year increase in beer sales contributed to a 10.3 percent overall revenue increase, to ¥663.9 billion that year. However, the company’s new president and representative director, Kenzo Edamoto, warned that the long-term beer industry trend was toward marginal growth, hence Sapporo’s energetic development of its real estate and other businesses.

Principal Subsidiaries

Sapporo Lion Ltd.; Sapporo Wines Ltd.; Meguro Planning Co., Ltd.; Sapporo Beer’s Beverage Co., Ltd.; Sapporo Development Co., Ltd.; Sapporo U.S.A., Inc.