Suntory's 'Kinmugi', Kirin's 'Honkirin', and Asahi's 'Clear Asahi' are commonly found in convenience stores and supermarkets across Japan. These products share a common trait: while they closely resemble beer in appearance, taste, and aroma, they are legally classified as 'third beer.'
What exactly is 'third beer'? The answer lies in Japan's unique tax system. The country categorizes beer based on the malt content and production methods, imposing higher tax rates on beverages with a higher malt ratio.
In response, beverage companies developed alternatives that maintain a beer-like flavor while benefiting from lower tax rates. This led to the creation of happoshu, a beverage with reduced malt content that offers a similar taste while lowering tax burdens. Following the collapse of Japan's bubble economy in the 1990s, price-sensitive consumers quickly gravitated toward happoshu.
As happoshu sales surged, the Japanese government raised taxes, prompting companies to seek new alternatives. They introduced beverages that use little to no malt or mix happoshu with distilled spirits to create a new category with even lower tax rates, known as 'third beer.'
This cat-and-mouse game between the government and beverage companies has persisted for nearly 30 years. During this time, third beer has established itself as a leading product due to its affordability. By 2020, its market share reached 46%, surpassing traditional beer's 41%. A market emerged where 'non-beer beer' outsold actual beer.
However, this chase will come to an end in October. The Japanese government is set to finalize a tax reform that has been gradually implemented since 2020, unifying the tax rate for beer, happoshu, and third beer at 54.25 yen (approximately $0.46) per 350ml can. With the tax rates equalized, there will be little incentive to produce third beer separately.
Indeed, Suntory announced on July 16 that it will transition Kinmugi from third beer to regular beer, set for release on October 6. Kirin will also convert Honkirin to regular beer, launching it on November 4. Both products will increase their malt content to meet the requirements for regular beer. Asahi plans to alter the ingredients and production methods of Clear Asahi to sell it as regular beer. Products originally developed to benefit from lower tax rates will finally become true beers, retaining their names but eliminating the third beer category.
Consumer focus is shifting to pricing. According to the Nihon Keizai Shimbun (Nikkei), the current average selling price for a 350ml can of Kinmugi is about 155 yen (approximately $1.42). Even after accounting for the tax increase post-transition, the price is expected to be around 162 yen, still lower than the average price of traditional beers, which ranges from 196 to 197 yen. Meanwhile, traditional beers may see price reductions due to tax cuts, potentially dropping to around 188 yen, narrowing the price gap to about 20 yen. As the price difference shrinks, consumers are increasingly moving from third beer back to traditional beer. Following two rounds of beer tax cuts and tax increases on third beer, the share of traditional beer in the overall beer market rose from 41% in 2020 to 57% in 2025.
However, consumers may find it challenging to fully experience the benefits of tax cuts. Although beer taxes have decreased by about 23 yen since 2020, rising raw material costs have led companies to raise their shipping prices twice, effectively offsetting about 80% of the tax cut, according to Nikkei. Meanwhile, beverage companies are rebranding their existing third beer brands as low-cost regular beers to attract price-sensitive consumers. Suntory plans to market this product line as 'Daily Beer,' meaning a beer for everyday consumption.
After October, the beer market is expected to shift from a 'beer versus third beer' dynamic to a competition based on price and quality. However, the overall beer market is not expected to recover simply because traditional beer is displacing third beer. Beer sales in Japan have declined by 46% compared to their peak in 1994, and with a shrinking population and consumers gravitating toward low-alcohol canned beverages (RTDs) and non-alcoholic drinks, beer sales are projected to continue decreasing by 1-2% annually. The beverage born from tax evasion will, after 30 years, retain only its name while becoming true beer, yet it will face a shrinking market overall.
* This article has been translated by AI.
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