Sapporo Breweries, Ltd.

10-1, Ginza 7-chome
Chuo-ku, Tokyo 104
Japan
(03) 572-6111

Public Company
Incorporated: September 1949 as Nippon Breweries, Ltd.
Employees: 3,819
Sales: ¥379.9 billion (US$2.386 billion)
Market Value: ¥365.7 billion (US$2.297 billion)
Stock Index: Tokyo Osaka Nagoya Sapporo

The American largely responsible for renewing trade relations with Japan, Commodore Matthew Perry, brought several cases of beer to Japan as a gift for the Tokugawa Shogunate. The beverage was so well liked that the Japanese government soon decided to establish a brewing industry. After an extensive search for a suitable area, wild hops were found growing on the island of Hokkaido, the northernmost island in the Japanese archipelago. As a result, in 1876 the Commissioner-General for the development of Hokkaido founded Japan’s first brewery in the town of Sapporo.

The original government facility was designed by the brewmaster Seibei Nakagawa who had returned to Japan after studying beer-making techniques in Germany. The first product brewed in the factory was called Sapporo cold beer or German beer, and even some of the early labels were printed in German as well as in Japanese.

In 1886 the brewery was sold by the government to Okura-Gumi, a private limited partnership. Two years later, Okura-Gumi itself was purchased by a group of Japanese businessmen, who then reorganized the brewing operations under the name Sapporo Brewery Ltd. A number of other breweries, which would soon figure prominently in Sapporo’s development, were also started during this time, including Nippon Brewing Company Ltd., Osaka Brewery, Kirin Brewery Company Ltd., and the Nippon Beer Kosen Brewery.

In the first decade of the 20th century, the Sapporo Brewery, the Nippon Brewing Company, and the Osaka Brewery was amalgamated into the Dai Nippon Brewery Company Ltd. This process of amalgamation and consolidation continued for 20 years until, in 1933, the Nippon Beer Kosen Brewery was also absorbed by Dai Nippon.

During the 1920’s and 1930’s Japanese militarists, implementing their plan to make Japan the dominant economic power in Asia, began to centralize the brewing industry. By 1943, the merger of all Japanese breweries was virtually complete: Dai Nippon and Kirin were the only two brewing companies left in Japan. In fact, the militarists were powerful enough to force the Sapporo division of Dai Nippon to establish joint ventures in the occupied territories of Korea and Manchuria.

At this stage, local markets were dominated by particular brands. Dai Nippon sold Sapporo beer in the region north of the Kanto district, primarily in Hokkaido. The company also manufactured Yebisu and Asahi brand beers; the former was popular in the Tokyo area and the latter in the Kansai area. Not surprisingly, because of the increased demand for beer (it was rapidly superseding the traditional drink sake), its production continued throughout the war.

The current structure of Japan’s brewing industry originated after World War II during the U.S. occupation. In 1949 the Dai Nippon Brewery, which had cornered nearly 70% of the beer market in Japan, was divided into Nippon Breweries Ltd. and Asahi Breweries Ltd. Initially, Nippon Breweries marketed beer exclusively under its own brand name; it was not until 1957 that beer displaying the Sapporo label was reintroduced.

Nippon’s growth during the postwar was impressive, primarily because of an expanding product line; from 1951 to 1981 production at the company’s facilities increased by a factor of 15. During that same period, the brewery’s sales increased from ¥20 billion to ¥330 billion, and its capitalization from ¥100 million to over ¥14.1 billion.

It was not until 1964 that the Nippon Breweries changed its name to Sapporo Breweries, Ltd. Shortly thereafter, arrangements were made to merge the Sapporo and Asahi breweries. By this time they had become the second and third largest breweries, respectively, in Japan. (Kirin had captured the largest share of the domestic beer market.) However, the merger never materialized.

The formation of a joint venture with Guinness plc, called Sapporo-Guinness, also took place in 1964. This agreement led to the sale of Irish stout in Japan. By 1976 the consumption of stout beer had risen dramatically and a sales war ensued with the Kirin brewery (which had its own version of the beverage). Even though the cost of Guinness’s product is twice that of Kirin’s, Sapporo has managed to maintain about 45% of the domestic stout market by relying heavily on Guinness’s quality image.

Sapporo entered the wine market in 1971 when it formed a joint venture with Mitsui and Company Ltd. to import both wine and liquor. Sapporo Liquor Company Ltd. first began to import Nicolas, Hoch, and Melini wines. The company then started to produce its own wines at the Katsunuma Winery west of Tokyo in 1976; its Polaire brand of wine now includes the top five best sellers in Japan. After the Okayama Winery was established in 1984, a wine cooler, a sparkling wine, and Hyosai, a white brandy, were also added to the growing domestically produced beverage line. In addition, the Sapporo Liquor Company imports Baileys Irish Cream, Bombay Gin, Green Island Rum, and several scotches, including J and B Rare, Dunhill, Knockando, and Spay Royal.

Sapporo brand name beer is brewed exclusively in Japan, but much of the barley and hops used in its manufacture is imported from Canada, Australia, West Germany, and Czechoslovakia. However, the company’s supply of yeast comes from a strain originally developed at the Sapporo laboratory.

In the mid-1970’s the Sapporo laboratory developed a technique for the ceramic filtration of beer. Since the introduction of pasteurization in the early part of the 20th century, beer had been sterilized by means of a heating process. This was necessary because the yeast residue in beer rendered it unsuitable for extended storage or longdistance transportation. Yet the problem with heating beer is that the high temperature affects its flavor. Sapporo’s unique ceramic filtration method removes the yeast residue from beer without having to heat it. The beer is filtered at a constant temperature of zero to one degree centigrade through a long ceramic cylinder; a thin coating of diatomaceous earth in the tube traps the yeast residue. The first draft beer made with this new process went on the market in 1977, and in 1985 the filtration technology was exported to South Korea and to the Miller Brewing Company in the United States. Even so, Sapporo still pasteurizes many of its products.

The Sapporo laboratory presently conducts research in fields such as soft drinks, and the application of beer yeast to the development of food seasonings and health food products. Sapporo scientists are also investigating the utilization of recent discoveries in biotechnology to develop new plant breeds, agricultural chemicals, and pharmaceuticals.

Sapporo’s diverse holdings also include real estate firms, the largest of which is the Seiwa Fudosan Company Ltd. Primarily a leasing agency, Seiwa Fudosan is also in charge of the current development of Sapporo’s Ebisu properties in Tokyo. In addition, an enormous sports and leisure center in Tokyo is operated by Sapporo’s affiliate, the Seijo Green Plaza Company Ltd.

Throughout its history, rising prices for raw materials have reduced company profits. During the 1970’s the Japanese government made matters worse by requiring brewers to purchase domestically grown barley; this accounted for 20 to 25% of the barley used in the entire industry. Originally intended to protect farmers who had switched from the cultivation of rice (which was in surplus) to barley, the domestic strain cost the brewers 3.7 times as much as imported ones.

In spite of such problems, Sapporo has grown consistently over the last 35 years. In fact, from 1985 to 1987 the company has enjoyed record sales and earnings. Sapporo attributed this success to reduced materials costs, a decreasing interest payment burden, and effective management of surplus funds. Furthermore, the appreciation of the yen and the consequent lower price of foreign malt have also helped.

Sapporo seems set for continued growth: recent overtures have been made concerning the construction of a brewery in China, and domestically, Sapporo is now the second largest brewer in Japan with nearly 20% of the market share. Although beer presently accounts for almost 90% of the company’s total sales, forays into fields such as real estate and biotechnology promise to be highly profitable in the near future.

Principal Subsidiaries and Affiliates

Sapporo Lion Ltd.; Tokyo Ribbon Service; Sapporo Wines Ltd.; Sapporo Liquor Co., Ltd.; Seiwa Real Estate Ltd.; Seijo Green Plaza Co., Ltd.; Nihon Glass Manufacturing Co., Ltd.; Sapporo Beer Transporting Co., Ltd.; Sapporo Nosan-Kako Malting Co., Ltd.; Nihon Suishitsu Kenkyujo Co., Ltd.