TOKYO/PALO ALTO, U.S. -- When a former Facebook executive first approached Yoichi Kiuchi with the idea of selling craft beer from his roughly 200-year-old brewery straight to consumers, he could not help but be skeptical.
"In my experience, the most important thing in this industry is controlling distribution," said the president of Kiuchi Brewery, located in Naka, about 100 km northeast of Tokyo.
But Shin Hasegawa, the former country director for Facebook in Japan, insisted that bypassing retailers and connecting directly with consumers was the way to go, especially with social media giving an unprecedented platform to smaller businesses who often receive little attention in traditional retail.
Curiosity got the better of Kiuchi in the end, and Kiuchi Brewery released the CRAFT X -- a beer developed together with Hasegawa's company MOON-X -- directly to consumers in January. "I thought it was an interesting idea to go straight to the consumer, even if I wasn't entirely convinced," Kiuchi said.
Kiuchi himself is no stranger to bucking the status quo. He first began making craft beer at Kiuchi Brewery back in the 1990s, shortly after the Japanese government opened the industry to smaller producers, despite fierce opposition from almost everybody around.
Yoichi Kiuchi's decision to produce beer at his family's centuries-old sake brewery was met with heavy opposition, including from his parents. (Photo by Takashi Sugimoto)
"This is like an enka singer doing rock music. Our sake will suffer," his naysayers would say, referring to a genre of music most popular among older generations.
But the gamble ultimately paid off. The brewery now makes 90% of its revenue from beer, including its flagship Hitachino Nest Beer known for its unique owl logo.
Kiuchi rates CRAFT X a 78 out of 100. "It's so there's room for improvement," he said.
"Big beer makers need to have a perfect product from the get-go," he said. But the direct-to-consumer approach means the brewery is more closely connected with its customers, and can tweak its products based on their feedback. Kiuchi said he realized this strong relationship with fans was a big advantage, and has already tweaked CRAFT X to better match their tastes.
Shin Hasegawa, former managing director at Facebook Japan, is now helping small businesses sell products directly to consumers. (Photo by Takashi Sugimoto)
Hasegawa's belief in the direct-to-consumer model stems from a trip he took to Iki Island in Nagasaki Prefecture three years ago, when he was still at Facebook. A staffer at city hall had proudly introduced him to the local brand of wagyu beef -- one that he said was very delicious, but had never heard of before.
Marketing has long been a challenge for smaller businesses in Japan. "The only option I could come up with for advertising was putting flyers in the newspaper," a local fruit vendor said. The vendor has since learned how to use Facebook and Instagram to promote products, which led to increased sales of jams made from local produce.
After returning home, Hasegawa began focusing on helping smaller, locally based business using technology. This eventually paved the way for him to launch his own company, MOON-X, which helps businesses sell their products directly to consumers.
Facebook is also working to connect small businesses to potential customers. It launched a service called Facebook Shops in May, which allows users to easily create an online store through Facebook or Instagram for free.
Nearly 300,000 signed on to an online Japanese demonstration for the service in June ahead of its launch in the country. The video was ultimately played about 1 million times.
"We received so much more interest than we were expecting," said Hideki Inoue, a director at Facebook Japan. Given Facebook's more than 3 billion users, its push into e-commerce could reshape the retail landscape across the world.
