Free-flowing

Will the EPA transform Japan’s wine shelves?

Text by Justin McCurry

Not all that long ago, finding a decent, reasonably priced bottle of wine in Japan was something of a challenge. Restaurants aside, the limited choice generally ranged from expensive labels in department store basements or cheap — and often very sweet — domestic wines that were hardly a treat for the palate.

However, the situation has improved considerably over the past decade. Bilateral free trade deals with Chile, in 2007, and Australia, in 2014, have meant that affordable and drinkable wines are no longer a rarity. And it should be noted that the quality of Japanese wines has made huge strides over the same period.

Earlier this year, with the signing of the Japan–EU Economic Partnership Agreement (EPA), Japan and the European Union finally broke through what many regarded as the last obstacle standing between Japanese consumers and greater access to wines from some of the world’s top wine-producing nations. The agreement — reached after four years of sometimes fraught negotiations — was described by Donald Tusk, president of the European Council, as a “landmark moment for global trade”, covering some 600 million people and accounting for roughly 30% of global GDP.

When it comes into force, expected early next year, the EPA will eliminate tariffs on 94% of all imports from the EU, including more than 80% of agricultural and fishery products. While some of the food tariffs will be phased out over time, the effect on the price of European wines in Japan will be immediate, with the 15% duty currently imposed disappearing on day one.

The knock-on effects could be significant. EU wine exports to Japan are already worth about €1 billion, according to European Commission data. The sector represents the EU’s second-biggest agricultural export to Japan in terms of value.

But will the wine shelves of your local supermarket look dramatically different this time next year as a result of the change?

“We are focusing on high-quality, inexpensive wines, and the tariff reduction should lower the retail price,” says Ernest Singer, CEO at Millésimes, an importer of fine wines based in Tokyo.

“I expect it will dramatically improve our market share,” continues Singer, whose company is the sole agent in Japan for many of the top producers in Spain, Italy and Portugal, as well as those in the Bordeaux, Burgundy, Beaujolais and Rhone regions of France. “I think, and hope, that there will be renewed interest in fine wines among consumers.”

The increased interest, and sales, that trade agreements bring is already evident in the fortunes of Chilean wine in Japan. In 2015, it replaced France as the top exporter of wine to Japan in volume, according to the Ministry of Finance. That year, imports of Chilean wine rose 18.1% from the previous year to 51.59 million litres, while those of French wine fell 2.8% to 51.51 million litres, according to trade data.

Understandably, importers are reluctant to discuss details of how their pricing strategy might change after the tariff is removed. If there is a consensus among those contacted by Eurobiz Japan, it is that they will adopt a wait-and-see approach before making any major changes.

Companies will have to consider a number of factors, including the euro-yen exchange rate, before making any decisions on pricing, according to María Varela at Mikuni Wine, which specialises in high-end wines from the Burgundy, Rhone and Madiran regions of France, as well as Rioja and Cava from Spain, among others.

“The impact will not be as great for us as we focus on more expensive wines,” she says. “The impact will be bigger for firms that import large quantities of cheaper wine.”

The focus on the lower end of the market, though, could have a significant impact on consumers, given that “cheap” wines — or those with a retail price of below ¥2,000 — account for 95% of sales in Japan.

“Japan is a mature market and progress is being made in all segments,” says Ken Moroi, managing director at Vranken-Pommery Japan, whose portfolio of Champagnes includes the emblematic cuvée Brut Royal, which was first distributed in Japan during the Taisho period (1912 – 1926).

“Now there are specific categories, such as Champagne, that have doubled in size,” he continues. “The dynamism of this super-premium category has been driven by marketing campaigns and the efforts of their distributors in Japan.”

Moroi speculates that clever marketing and a growing interest in high-quality wines — rather than the removal of tariffs — would drive Japanese consumer habits in the long term.

“Besides some retail chains using this opportunity to create a temporary shopping frenzy, I believe that we are heading towards higher and higher quality,” he says.

Yoko Maki, public affairs manager at MHD Moët Hennessy Diageo — whose Champagne brands include Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug and Ruinart — echoes that sentiment.

Noting that Japan’s market for wine has grown steadily over the past decade, Maki believes the tariff changes could precipitate a “wave” of European wines, but adds that MHD would continue to focus on the luxury end of the market.

“We don’t know exactly what the impact will be, but we hope that it will increase the variety of wines available in Japan and make the market more attractive,” she says.

Faced with a potential onslaught of cheaper European wine, it remains to be seen how Japanese makers will respond. While they lack the history and infrastructure of their European counterparts, there is no doubt that Japanese wines are being taken more seriously.

Even those involved in importing European wines appear to welcome the greater local competition.

“The quality of Japanese wine is improving dramatically,” states Maki. “We think it’s good that the whole wine market is becomeing more active.”

There isn’t a wine lover in Japan who wouldn’t drink to that.  •