Japan’s Biggest Brewers Are All In on American Expansion

They say to find success, you should “fish where the fish are,” but major macrobrewers are probably better served by fishing where lots of people drink like fish. So it’s no surprise that the biggest brewing conglomerates in Japan — where national drinking rates have been declining with the population for years, to precipitous social and fiscal effect — have shifted more of their collective corporate focus over the past decade across the Pacific to American gullets. For all its vagaries and complexity, the United States is the most lucrative and influential beer market in the world, and Japan’s rice-lager leviathans have wanted in for quite some time.

“North America is the best and largest market,” Atsushi Katsuki, president and chief executive of Asahi Group Holdings, the biggest of Japan’s rice-lager titans, told Reuters in August 2022. “We haven’t been able to find many opportunities at the moment, but I think there are various forms of entry.”

Compared to its peers, Asahi was already late to the party. Even 18 months ago, the conglomerate’s rivals had all been operating malt-based beachheads stateside for years. Suntory, which despite its full-proof reputation is a top Japanese beer supplier, tied up with distiller Beam in 2014; Sapporo acquired Anchor Brewing Co. in 2017, and Stone Brewing Co. in 2022; Kirin scooped up New Belgium Brewing in 2019, and Bell’s in 2021.

They say “better late than never,” and apparently Katsuki & co. agree. Asahi finally entered the American arena earlier this week, announcing its plans to acquire Octopi Brewing of Waunakee, Wis., the 13th-largest craft brewer in the country. “With complementary strengths and a shared growth mindset, Asahi and Octopi maintain a commitment to creating meaningful connections with our partners,” said Paolo Lanzarotti, the chief executive of the subsidiary Asahi Europe & International, in a statement accompanying the sale.

Translation for those of you who don’t speak press-release-ese: “We finally made it. Let’s move some f*cking cases.”

From where your humble Hop Take columnist is sitting, Asahi made a savvy move ensnaring Octopi in its multinational tentacles. The Badger State brewery has been a rising star basically since it hit the scene in 2015, and produced 220,000 barrels in 2022 alone, according to the Brewers Association’s (BA) estimate. (2023 data aren’t available yet, though you can rest assured that BA chief economist Bart Watson is on the case. Send him your data, brewers!) It’s strategically located in the middle-ish of the country, with close proximity to the international shipping superhighway of the Great Lakes and the also-important Canadian market, and recently completed a $72 million renovation to expand to a million barrels’ worth of capacity. For other craft breweries, that kind of new tank space might be a liability in this economy. But Octopi has thrived as a contract brewer, and not just of beer, either: The firm co-packed 7 million cases’ worth of alcoholic and non-alcoholic beverages for middle-market players across the country last year alone. At Good Beer Hunting, Kate Bernot reports that just 25 percent of the company’s volume is beer, and none of it under its own banner. (It does have something of an informal house brand in Untitled Art, a premium beverage line co-founded by Octopi founder Isaac Showaki, but Showaki confirmed to Hop Take via email that it is uninvolved and unaffected by this deal.)

This is a key distinction from some of its Japanese competitors’ acquisitions, and certainly from the modus operandi Anheuser-Busch InBev established last decade with its ill-fated buying spree of craft breweries. Asahi isn’t buying the Octopi brand here — it’s buying logistical flexibility and an American runway to grow its own brands. The company says it’ll brew its flagship Super Dry lager and non-alcoholic Kozel line at the Wisconsin facility to start, plus a bunch more SKUs slated for sale in Canada. Execs told Brewbound’s Jess Infante this week that Asahi currently exports around 85,000 barrels of its flagship beer to the U.S. annually, from its breweries in either Japan or Italy; the firm hopes to produce 10 times that amount of product across its portfolio at Octopi in the mid-term.

There’s some recent industry precedent for such a “buy the forest, don’t worry about the trees” move. As now former workers told me last summer, one of Sapporo’s goals in buying Anchor was brewing its eponymous rice lager closer to American beer aisles; after struggling to retrofit the iconic San Francisco brewery to its purposes, it acquired Stone, which had a gleaming new facility in Richmond, Va., that could accommodate the corporate brewer’s expansion goals. When energy drink heavyweight Monster Beverage Corporation (MBC) bought CANarchy Collective for $330 million in 2022, the real prize was widely understood to be the distribution network its previous owners had created in rolling up breweries like Oskar Blues and Cigar City, rather than those brands themselves. And so on.

Moreover, Asahi’s timing is terrific. Given the American beer business’s many woes of late, buying breweries is a much less expensive prospect than it was last decade. Tilray Brands took seven of ‘em, plus an energy drink brand, off ABI’s hands for a mere $85 million this summer. Terms of its Octopi acquisition were not disclosed, but it’s fair to say that the deal was struck in far less frothy conditions than the marketplace boasted even five years ago.

Better still for both Asahi and its fellow Japanese macrobrewers, rice lager is on-trend lately after years as a niche item. Its real and perceived lightness compared to American adjunct lagers (all of which are brewed with some rice themselves) sets it up nicely to benefit from the coveted “health halo” effect with American drinkers looking to drink “less but better,” as the marketers like to say. And while many people (or at least, the person writing this) encounter the rice brands in on-premise environs — the ramen place down my street here in Richmond has Stone-brewed Sapporo on tap! — the reality is that the Japanese brands are also crushing it off-premise, where most beer is sold in this country.

Since 2019, Asahi, Kirin, and Sapporo have all grown domestic-for-us dollar sales north of 50 percent each, according to NielsenIQ (NIQ) scan data for all retail outlets, according to data shared with Hop Take by the consulting firm 3Tier Beverages. “Not to mention the fact that some of these brands, particularly Sapporo, their single cans are what they’ve pushed heavily over the last year, and correctly, because of the growth of convenience” stores as a channel, says Stephanie Roatis, an insights consultant at the Chicago firm. “I think they just caught a really good wave.”

The biggest wave in the American beer market that the rice-lager leaders stand to catch hasn’t even crested yet. Imports were the only beer-flavored beer segment (i.e., excepting flavored malt beverages) to notch growth in both dollars and volume in NIQ off-premise scans for full-year 2023. Yes, yes: The tremendous tear Modelo has been on has buoyed the whole cohort. But that’s not it. “Even with Modelo, Corona, and Heineken aside, import is still growing as a category in volume,” says Roatis. The Japanese brands are part of that growth.

I also think they stand to benefit by proxy as drinkers (and the retailers that want their money, and the wholesalers that want their money) primed on Mexican beers become newly open to the idea that foreign breweries beyond the European Union’s borders might just have something to offer. “Mindshare” is a vapid piece of trade patois, but the underlying premise — that the attention of distributors, supermarkets, and customers is a finite resource — is very real. There ain’t no shame in Super Dry et al. drafting off a Modelo-led import boomlet en route to more shelf space. There is plenty of money in it, though.

Whether Asahi can execute is another question. Its countrymen-brewers have enjoyed mixed results getting a handle on their American operations, achieving strong growth on a small base for their own brands while occasionally fumbling on brand management for the ones they’ve bought. (Voodoo Ranger under Kirin: going great! Anchor under Sapporo: going to the liquidator’s auction block!)

With its recent buy-in, Asahi avoids some of the growing pains of taking over a domestic line, because despite Octopi’s size, the Wisconsin brewery is barely known even to more plugged-in craft beer enthusiasts, let alone the mainstream American drinking public. But Japanese beer is still emphatically a specialty product in the U.S., with little of the advertising legacy or demographic benefit of a Heineken or Corona. Mexican brands have proven viable platforms for flavor-forward experiments like savory FMBs and malt-based canned cocktails. What’s the rice-lager line extension that sweetens the deal and “captures incremental occasions” (in the jargon) with Americans’ stupid-simple palates where they are?

Now that Asahi has made its move, and the collective might of Japan’s brewing industry has fully arrived in the U.S., we might just find out. The market is in flux, and there’s blood in the water — or at least, placements up for grabs. The Japanese firms have a real chance at riding converging trends to substantial, sustainable gains in the American beer business. Actually pulling it off, though, is anything but shooting fish in a barrel.

🤯 Hop-ocalypse Now

Remember BrewDog, the edgelord beer-makers from Scotland that have raised something like $100 million in crowdfunded equity with all manner of lofty promises, slick schemes, and tantalizing visions of initial public offerings to come? Though it still hasn’t gone public, BrewDog does very much still exist — and lest ye forget, the shady Gaelic cornballs in charge of the brewery are making a movie about themselves. According to cofounder James Watt’s social media post earlier this month, the film, “Underdogs: The Rise of BrewDog,” will showcase “high highs, low lows, failures, successes and a healthy dose of controversy along the way.” Nothing more “punk” than announcing your self-referential vanity cinema project on LinkedIn a week before reneging on your living-wage pledge, folks. Can’t wait to see how the script handles all the lawsuits!

📈 Ups…

New Jersey lawmakers have advanced yet another bill to the governor’s desk containing much-needed brewery licensing reforms… Constellation Brands’ red-hot, import-driven beer division continued to print money last quarter… The on-premise closed out 2023 strong with 31,000 more restaurant jobs than before the pandemic began… Arizona’s attorney general will try to kibosh the Kroger-Albertsons deal if the Federal Trade Commission doesn’t…

📉 …and downs

Tilray Brands is struggling to protect margins in its beer division after acquiring seven craft brands from Anheuser-Busch InBev last year… At $0.96 per ounce, the Philadelphia Eagles charge the most for beer in the entire NFL… Molson Coors is getting sued over Coors Light’s allegedly misleading “Born in the Rockies” slogan… The parent company of Sixpoint Brewery and Victory Brewing Co. is facing a wage-theft lawsuit in North Carolina court…

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