Thirsting to open up a market: Terry McCarthy raises his glass to a challenge by discounted imports to Japan's cosy beer monopoly

Tokyo has been going through a heatwave for the past month, and weather forecasters say there is no sign of it letting up. Compared with last year, when it rained almost non-stop from June to mid-October, the skies have been blue, the temperatures high and the humidity even higher.

But, although salarymen are seen mopping their brows and loosening their sodden shirt collars in subways and office lobbies with expressions of long-suffering fatigue, retailers are delighted.

Consumers who saved their wages last summer have become more carefree in the heat and air- conditioning units, fans, refrigerators, mineral water and swimwear are all selling strongly.

But nowhere is the heat wave being felt more strongly than in the beer market. After a hot, steamy day in badly air-conditioned offices many workers cannot resist a few tankards of the amber nectar with a plate of par-boiled and lightly salted eda-mame, or green beans.

But what was a virtually closed market to foreign beer makers is suddenly cracking open as thirsty consumers start checking price tags.

For a long time Japan's beer market was a cosy cartel, with four firms enjoying an absolute monopoly which was in effect guaranteed by the government in return for high tax revenues.

Foreign imports were subject to crippling duties and tariffs while domestic upstarts were prevented from intruding on the cartel by a law that required any brewer to produce a minimum of 2 million litres of beer a year - so much for the mini-breweries and real ale houses of the US and Europe.

Prices were kept high because of the lack of real competition, high wage bills and an inefficient distribution network. And there was a further government requirement for the breweries to buy a percentage of their barley from Japanese farmers at prices far higher than the world market price. The result is that a beer in a bar in Tokyo costs the equivalent of pounds 10 a pint.

The brewers thought they had it all sewn up. As late as this May, they simultaneously announced a price rise on their premium brands that was identical despite accusations of price-fixing and cartel operations.

The government had revised the brewing law, requiring new entrants to the market to produce a 'mere' 600,000 litres per year - down from the previous minimum but still way above what any small start-up brewery could realistically hope to sell on its own.

But then the discount craze that has been sweeping through Japanese retailing hit the beer market. Discounting has become one of the most significant and, in the medium term, most far-reaching changes in Japan's heavily regulated economy. And it is a change at the grass roots - not a deal about percentages of microchips to be imported that has been cooked up by politicians, but a fundamental shift in consumer preferences and industry's response.

Everything may not be changing in Japan the way its trading partners would like, but discount retailing is one of the most widespread and irreversible trends that is helping imports and chipping away at many long-established cartels.

Late last year Daiei, the largest supermarket chain in Japan, began importing cheap beer from Belgium. Although taxes on foreign beer are two to eight times those on Japanese beer, Daiei was still able to sell cans of Bergenbrou for Y128 compared with the Y220 that domestic beers cost.

Daiei was not sure if Japanese drinkers would take to foreign beer after all the propaganda about the different taste of foreign rice, and their initial sales target for this year was 70,000 cases. But consumers have jumped at the cheaper import and Daiei says it will now sell between 1 million and 2 million cases of the Belgian brew.

Seiyu, another supermarket chain, quickly followed by importing an American beer called Schaefer, which is being sold at Y130 a can. In absolute terms the amount of imported beer sold in Japan is still low - about 2 per cent of all beer sales. But this year's discounting is likely to double that share and set a precedent for lower beer prices.

For the smaller retail outlets that do not have the ability to import foreign beer on their own account, the pressure is to reduce the prices on the Japanese beer that they stock in defiance of the manufacturer's 'recommended retail price'. According to one analyst only 52 per cent of smaller off-licences are selling beer at the official retail price and that percentage is likely to continue shrinking through the summer.

For now the four Japanese brewers - Kirin, Suntory, Sapporo and Asahi - are holding steady and refusing to lower wholesale prices. Instead they keep coming out with a bewildering array of new products - ice beer is the latest fad - in an attempt to hold on to their market. But by next year the discounting trend is likely to be so well entrenched that even these giants will be forced to cut prices.

In a sign that discounting is becoming more accepted, even by the conservative legal establishment, Tokyo District Court ruled two weeks ago that Kao Corporation had been illegally maintaining high retail prices. Kao, one of Japan's biggest cosmetics manufacturers, had stopped deliveries to a retail chain 18 months ago.

Officially the company said the retailer was refusing to employ special staff to give customers individual skin counselling and for that reason it would not allow the retailer to sell its products. But the real reason, as the court saw it, was that the retailer was selling the cosmetics at a discount.

A similar case was brought against another cosmetics manufacturer, Shiseido, last September. But although it also involved an attempt by Shiseido to stop a retailer from discounting the court's judgment was less unequivocal, saying simply that Shiseido had gone against the 'spirit' of the anti-monopoly law.

In the judgment against Kao the court came out strongly for the consumer and ordered Kao to resume shipments to the retailer whatever price discounts were being offered.

(Photograph omitted)