Commentary: Japan whisky drought offers bitter aftertaste of retreat by corporate Japan

Commentary: Japan whisky drought offers bitter aftertaste of retreat by corporate Japan

Top distillers among the nation’s companies ruing chronic under-investment 20 years ago must rebound from the miscalculations of the past, says one observer at the Financial Times.

Higher local demand, partly because of the renewed popularity of the whisky-and-soda
Higher local demand, partly because of the renewed popularity of the whisky-and-soda "highball", was one reason for Suntory's decision to suspend shipment of its premium products. (Photo: AFP/Noam Galai)

TOKYO: “For relaxing times,” purrs a louche Bill Murray fronting a whisky advert within the 2003 film Lost in Translation, “make it Suntory time”. 

Fifteen years later — partly because of that product-placement coup — the times at Suntory are anything but relaxing. 

Driven by rave reviews, sophisticated consumers, marketing genius and tourism, Japanese whisky sales are glugging away at a pace far higher than expected at the turn of the millennium, when what are now hit products were being distilled and barrelled. 

Stocks of the most popular lines are down to vapours. Nikka halted sales of several of its best single malts in 2015. 

Suntory last week grudgingly confirmed what aficionados around the world had feared, saying it was discontinuing sales of its world-class Hibiki 17-year-old blend and Hakushu 12-year-old single malt. 

DOWNTURN, TIMIDITY, DESPAIR

You might think this occupational hazard the exclusive preserve of an industry whose sherry-casked production and capital investment strategies demand unhedgable bets on a distant blip in the consumer cycle.

But whisky makers are far from unique — they just have fewer places to hide from historic miscalculations than the country’s banks, carmakers and other industrial giants. 

The real lessons from the single malt drought, say market strategists, are lying undeclared or undiscovered across corporate Japan. 

Connoisseurs still able to lay their hands on a bottle of the Hibiki may swoon over infinite subtleties of taste. But in bluntly corporate terms, a 17-year-old blend of whiskies is a time capsule of management decision-making made roughly two decades ago. 

Hibiki’s tasting notes may say rosemary, sandalwood and lychee; the time capsule says downturn, timidity and despair. 

Suntory Holdings Ltd's President and CEO Takeshi Niinami speaks behind the company's alco
Suntory Holdings Ltd presents the company's alcoholic beverages at the company headquarters in Tokyo, Japan on Oct 26, 2015. (Photo: REUTERS/Toru Hanai)

DOWNBEAT VIEW

Suntory and Nikka management cannot really be blamed for the calls they made at the time, or for failing to anticipate the extraordinary global enthusiasm for their products that would later evolve.

The whisky makers’ market around the turn of the millennium seemed unambiguously to be advocating caution. Whisky sales had been in steady decline for many years and the belt-tightening and lay-offs throughout Japanese industry indicated (correctly, it turns out) that the historic support from corporate expense accounts was in jeopardy. 

But everyone took a similarly downbeat view — the mindset, some would argue, that suppressed corporate spending and locked deflation in place for so long. 

In the late 1990s and early 2000s, Japan was a distinctly uncomfortable place for corporate decision makers and the safest option invariably looked the best one.

The bursting of the late-1980s stock and real estate bubble was by then biting hard. Unemployment had broken the 5 per cent mark and was running at nearly twice the average pace of the previous 10 years.

Large companies, as measured in the Bank of Japan’s quarterly Tankan survey, were resolutely downbeat on business conditions. In a defining example, Toyota’s output at its main plant in Takaoka was at a 33-year low. 

Japan office workers
Japanese workers walk toward their offices in Tokyo on Oct 21, 2016. (Photo: AFP/Toshifumi Kitamura)

UNDER-INVESTMENT, CONSERVATISM

While Suntory simply laid down less whisky and must wince, 20 years later, at the opportunity cost of sales that might have been, many other Japanese companies were making decisions that resonate more acutely.

Under-investment in technology — particularly IT — was pandemic and set many Japanese companies far behind their international peers. Banks, even as they began the great run of mega-mergers that would have created just the right excuse to embrace the innovations that would now come under the heading of “fintech”, were painfully reluctant to do so.

Large industrial groups are now griping about shortages of precisely the generation of mid-career engineering specialists they were failing to nurture two decades ago. 

The mood of arch-conservatism across boardrooms created a general resistance to "globalising". Companies now yearning for internationalists may rue the fact that the early 2000s marked the point at which they mostly stopped sponsoring their best and brightest to take MBAs at the world’s finest business schools. 

The behaviour of many leading Japanese companies in 2018 is defined by their efforts to do something that producers of 17-year old whisky cannot, and offset the miscalculations of the past with recuperative activity in the present. 

The successive years of outbound dealmaking since 2014, for example, are in part driven by a belief that history can be reversed by buying foreign companies that were making bolder decisions at a time Japan was in emotional retreat.

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Source: Financial Times/sl

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