Sapporo Holdings - Company History

A merger born of intensifying competition, and more than half the country's output

In March 1906 three brewers — Sapporo Beer, Nippon Beer and Osaka Beer — combined to form Dai Nippon Beer[1], capitalised at ¥5.6 million[2]. Magoshi Kyohei (馬越恭平) of Nippon Beer became its first president[3]. The merger was made because competition between the brewers had grown fierce enough that half-measures would no longer serve[4]. It was brokered by Kiyoura Keigo (清浦奎吾), the Minister of Agriculture and Commerce, who mediated between Magoshi, Shibusawa Eiichi (渋沢栄一) and Okura Kihachiro (大倉喜八郎)[5]. One of the three, Sapporo Beer, traced its line back to the Kaitakushi Brewery (開拓使麦酒醸造所), the brewery of the Hokkaido Colonisation Commission, established in September 1876[6].

The effect of the merger showed in volume: of the 159,000 koku of beer produced in Japan in 1906, more than half came from Dai Nippon Beer[7]. The company kept brewing, soft drinks and bottle-making integrated in-house[8], and held its place as industry leader through further capital investment and further mergers with rivals. An oligopoly in which the only real competitor was Kirin Brewery persisted through the pre-war decades, and by the end of the Second World War the company's share had reached 75%[9]. The sales structure of carrying many brands and selling them region by region also hardened in this period[10].

Launching Nippon Beer, and an eight-year gap where the pre-war brands had been

In September 1949 Dai Nippon Beer was split into two companies, Asahi Breweries and Nippon Breweries, under the Act on the Elimination of Excessive Concentration of Economic Power and the Corporate Reconstruction and Reorganisation Act[11]. The 300 companies GHQ had notified for break-up were said to account for 75% of the influence held by all Japanese enterprises[12]. Nippon Breweries began with Shibata Kiyoshi (柴田清) as its first president[13] and capital of $277,778 (¥100m)[14]. From the old company it inherited the Yebisu and Sapporo trademarks and five plants — Sapporo, Kawaguchi, Meguro, Nagoya and Moji[15].

Shibata, however, sealed away the pre-war marks he had inherited, and in December 1949 consolidated the range under a single new brand, Nippon Beer, which went on sale that month[16]. The aim was to be rid of the awkwardness of carrying many brands region by region[17], but once peace returned consumers went back to choosing the pre-war names, and the company was forced to fight at a disadvantage[18]. As late as 1955 it was still acknowledging in its own accounts the handicap the new mark imposed[19]. Kirin Brewery, which had escaped the break-up, gained share over these years, and in 1954 first and second place changed hands[20]. The period in which the pre-war flagship brands were absent from the market ran eight years, until the Sapporo Beer trademark was revived in February 1957[21].

Naming the company after the brand, and differentiated products that fell short

The revived Sapporo Beer mark was very well received, and the change of trademark brought the company's momentum back[22]. Having confirmed that the brand had been accepted by the market, in January 1964 Nippon Breweries changed its corporate name to Sapporo Breweries[23], aligning the company with its leading brand. The decision was taken under Matsuyama Mosuke (松山茂助), who had succeeded to the presidency after Shibata Kiyoshi died in September 1961[24]. Kirin's advance did not stop, however, and by December 1968 Sapporo's domestic share had fallen below 25%[25].

One line of attack was a merger with Asahi Breweries; talks were pursued three times — in the spring of 1963, at the end of 1965 and in the spring of 1966 — and each time collapsed[26]. The other was product differentiation: Five Star, Light[27], and the launch of Yebisu in December 1970[28]. None of them dented Kirin. Yebisu, brewed without adjuncts and positioned in the upper price band at ¥10 more, was released first in Tokyo and succeeded in building an image as a premium beer[29], but its revival coincided with an industry-wide round of price rises and it missed its chance to spread[30]. Sapporo's beer share in fiscal 1971 was 22%, and in the Kinki region around Osaka only about 0.8%[31].

Sapporo Bin Nama goes national, and lager is written off

With the orthodox approach of changing the taste producing no result, share had slipped to around 20% by December 1977[32]. That year the former president Uchida Kurato (内多蔵人) warned that Kirin's share might reach 80 or even 90%, and said his own company had much to reflect on for having let that lead run away unchallenged[33]. The change in product strategy narrowed to a single point — stopping pasteurisation — and in April 1977 Sapporo Breweries launched Sapporo Bin Nama (サッポロびん生), bottled unpasteurised draught, across the country[34]. The national rollout followed test sales in Hokkaido, Nagoya and Osaka that confirmed the demand, and first-year shipments reached 8 million cases, twice the plan[35].

From the following year the advertising budget was concentrated on draught, and the company wrote off lager — still close to 80% of the market — at a point when draught accounted for only 23%[36]. Switching from lager to draught required production capacity behind it, and reinforcing filtration and aseptic equipment alone absorbed $19.9M (¥4bn) to $24.9M (¥5bn) of investment every year[37]. Black was adopted for the Bin Nama label over internal objections, to differentiate it from the fresh-and-breezy positioning of rivals and to make it a year-round product rather than a seasonal one[38]. Kawai Koji (河合滉二), who had effectively driven this course since his days as managing director for sales, became president in February 1978[39]. On taking office he said that with Bin Nama as its weapon the company could now put up a real fight[40].

Confined to the draught category the bet paid off: in the 1980 draught market Sapporo took 39% and first place, ahead of Suntory on 32%, Asahi on 23% and Kirin on 6%[41]. In a year of weak demand, Kirin's shipments fell 0.3% and its share 0.7%, while Sapporo secured a 3.1% rise in shipments and a 0.4% gain in share[42]. Its share in Tokyo rose several points over four or five years to a little over 26%[43]. Sales for the year to December 1981 were $1.5B (¥330bn) with recurring profit of $40.9M (¥9bn), about 60% above the $810.9M (¥208bn) of the year to December 1977[44]. Across beer as a whole, though, Kirin held 62.2% against Sapporo's 19.7%, and the ranking did not move[45].