The traditional, rice-based alcoholic drink sake has always been part of the life and national culture of Japanese people, both on special and daily occasions. However, the Japanese market is shrinking, and sake breweries are looking for future growth in overseas markets. Hong Kong is one such market, with a prolonged history and place in Japanese culture, and receptive to Japanese products. Thanks to promotional efforts and increased retail penetration, sake is proving increasingly popular amongst consumers in Hong Kong and has a growing role in local drinking culture.

Sake in decline in its home market

Sales of sake are falling in Japan. Demand tends to be concentrated amongst middle-aged and older consumers, where alcohol consumption tends to decline with age. The sake industry is keen to extend consumption to younger adults, but they tend to prefer sweeter, and lower-alcohol products, such as RTDs.

In recent years, the only bright news in the sake industry has been the increasing popularity of middle to high-end sake, namely ginjo (with a rice polishing ratio of 60% or less) and daiginjo (with a rice polishing ratio of 50% or less). The more rice has been polished, the higher classification level it is given, as this process makes clearer and more fragrant sake. This quality matches growing consumer desire for a premium experience, which is partially raising appreciation among younger adults. However, these products are mainly enjoyed at foodservice, and the foodservice channel was hit hard in 2020, as restaurants and bars were requested to shorten opening hours due to the pandemic. As a result, on-trade volume sales of sake shrank by 40% in 2020, dragging down total volume sales by 12%. Although some recovery can be expected after 2021, the market is expected to remain stagnant, due to reduced drinking occasions in the post-pandemic world and an ageing consumer base.

Source: Euromonitor International

Seeking opportunities in exports

Given declining demand in Japan, sake breweries are looking to exports to sustain future growth. The Japanese Government selected sake as one of its key focus products, under the strategy decided in 2016 to strengthen the export of agriculture, forestry and fisheries products. According to the Ministry of Finance, sake exports reached their highest value in 2020, at JPY24.1 billion, marking the eleventh consecutive year of growth.

Source: Euromonitor International from Ministry of Finance, Trade Statistics of Japan

Hong Kong: Key growth market for sake

Being one of the key cities in the Greater Bay Area, where consumers tend to appreciate Japanese culture and products, Hong Kong offers a highly significant opportunity for sake manufacturers. Hong Kong consumers are well known of their keen interest in Japanese culture, with Japan constantly ranked within the top three destinations. Japanese food and beverages, in particular, are a big favourite to many consumers in Hong Kong, and are often perceived as an industry benchmark in terms of indulgence, quality and premium standing. Surfing on such a pro-Japan tide, Japanese variety stores such as Don Don Donki have found considerable success in Hong Kong.

Because of its wide product variety, clean taste and rich texture, sake enjoys significant appeal in Hong Kong. Popular sake brands like Dassai, Juyondai and Born are not only ubiquitous at Japanese restaurants, bars and specialist liquor stores, but also increasingly present in supermarkets and convenience stores. Moreover, there is an increasing presence of local Japanese sake (地酒) sourced from various Japanese prefectures like Hokkaido in Hong Kong. The entrance of these new sake options has not only diversified the product offering in Hong Kong with local specialities and tastes that are authentic and unique, but has also brought novelty, and consumer interest and demand is rising.

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