DRINK TO INNOVATION Thirst for new markets as coronavirus upends whisky empire By John Gapper and Nana Shibata
When Bob Harris, the jaded movie star played by Bill Murray in the 2003 film Lost in Translation, flies to Tokyo to advertise Suntory’s Hibiki 17-yearold blended whisky, he behaves in a way that now seems reckless. He sings at a karaoke club, rides in a packed elevator, and drinks in a crowded hotel bar. “For relaxing times, make it Suntory time,” Murray’s character declares. These are not relaxing times for Suntory Holdings Limited. Its biggest market, Japan, has only recently emerged from a Covid-19-induced state of emergency that emptied out bars, restaurants, and karaoke clubs. Although customers are now tentatively returning to entertainment venues, the outlook for the drinks business is one of prolonged upheaval. It follows a long period of global growth for the company, which rode two decades of surging popularity for Japanese whisky, followed by a “premiumization” of the drinks business, as younger drinkers turned to craft spirits or single malts from historic distilleries, such as Suntory’s fabled Yamazaki. Suntory now faces fundamental questions about the way it operates. If customers have less money in the economic downturn, will they still pay higher prices for expensive spirits? If large gatherings are restricted, will they socialize in smaller groups or just stay at home?
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“Suntory loves human contact, which is an instinct of human life,” the company’s CEO Takeshi Niinami said in an interview with the Nikkei Asian Review. “People are a bit stressed out by working from home, so I don’t think on-premise will disappear. It will thrive, but not at such a scale. It is obvious that we will reduce gatherings, but people will still gather, maybe in their neighborhoods, so local bars and restaurants will have more of a chance.” To thrive, Niinami believes that spirit makers will have to be imaginative. Suntory has innovated its way out of crises before, but this time the challenge is enormous. The pandemic has put everything from premiumization to the business model of bars in question. Niinami, a Harvard-educated executive who spent 12 years in charge of the convenience store chain Lawson before coming to Suntory, knows his company must prepare for change. “We have to be creative in how people can be connected. Don’t give up,” Niinami said. “I am encouraging our senior executives to see what we can do. We are thinking about new occasions for people [to gather] and what we can offer, such as a new cocktail. Something to cheer people up.” But adapting will be costly for companies with traditional marketing and distribution models. Suntory is also heavily focused on a few countries while its rivals, such as Diageo, are more diversified. “Suntory’s key weakness is that it is highly reliant on just two markets: Japan and the United States,” said Matthew Barry, a consultant at the research group Euromonitor International. “Covid-related problems in either of the two, whether from new lockdowns, a recession, or both, would hit Suntory hard.”
