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Food & Beverage

Japan sake industry tackles rice surplus as COVID hits demand

Brewers shift production to other drinks while retailers seek new Asian markets

Nanbu Bijin will start production of rice-based Japanese craft vodka and gin early this year to lessen the growing problem of surplus rice used in sake production as demand for the traditional alcoholic drink has fallen amid the coronavirus pandemic. (Photo courtesy of Nanbu Bijin) 

TOKYO -- Japan's sake industry is taking on the problem of a surplus of rice specially grown for making the fermented alcoholic beverage as the coronavirus pandemic causes a sharp drop in demand for the drink due to the closure and reduced operating hours of restaurants and bars around the world.

According to Japan's Ministry of Agriculture, Forestry and Fisheries, demand for rice used in sake manufacturing last year is predicted to drop by about 10% from 2019 on the hit to orders for the traditional beverage.

"The biggest problem is sake rice harvested in 2020," Kosuke Kuji, president of Nanbu Bijin, a sake producer in Iwate Prefecture in northern Japan, said at a news conference. Some of that, he added, "has nowhere to go."

The company aims to tackle the issue of what to do with the rice overflow by starting production of rice-based Japanese craft vodka and gin in early 2021. "We decided to make new [rice-based] sprits instead of making sake that may be in surplus," Kuji said.

Such drinks are rare and produced only in Japan, while the unit sales price of such sprits is higher than for sake as they require more time to make, according to Nanbu Bijin.

It plans to commence sales by March after starting up a new production plant early in 2021 and will use charcoal from local white birch trees as filtration in distilling the rice spirits-based vodka.

Nanbu Bijin plans to sell the new products at domestic department stores and supermarkets. But Kuji sees "stronger interest" from overseas buyers and has been talking to ones from New York and Myanmar, he added.

Kuji said the company "will increase profit channels through diversification" by moving away from sake production alone. He called that "a new management strategy for the brewer in the coronavirus era."

The sake industry is facing a significant decrease in demand in Japan as the coronavirus has caused a drop in travel, purchase of the alcohol for souvenirs and eating out. Kuji, the fifth-generation operator of the brewery, said the company last year will see a 15% decline in sales.

Despite the declining demand, Nanbu Bijin has purchase contracts with rice farmers, meaning the company "must buy" from them, Kuji said. He stressed that once the planting of rice for sake stops, it becomes difficult to maintain high quality when demand recovers and the process restarts.

Demand for rice used to make sake is predicted to drop by about 10% in 2020 from 2019. (Photo courtesy of Nanbu Bijin)

Sake retailers are also trying to find ways to preserve growing inventories of the drink itself as well as open up new markets.

Gifu-based Sakura Sake Shop has started to store its stock at minus 5 C to preserve freshness. Sake is typically and traditionally stored at room temperature, but preserving it at minus 5 C for eight years maintains the freshness of taste, according to the company.

The retailer has also started exporting the sake to Hong Kong and Taiwan and is also considering Shanghai as a further destination.

President Yuichi Kondo told Nikkei those cities have been recovering from the coronavirus faster than ones in Europe and the U.S., adding that his business sees a chance to take advantage of the popularity of Japanese products in Asia.

Sake exports continue to expand. According to the National Tax Agency, sake exports in 2020 totaled about 24.1 billion yen, up 3.1% from 2019 and reaching a record high for the 11th consecutive year since 2010. Exports to China, Singapore and Australia were particularly strong, with double-digit increases.

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