Want to bet the Japanese taxman is already licking his chops?

Kirin, the country’s largest brewer, announced they will enter the “third beer” market in April to get their share of the earnings generated by Sapporo and Suntory.

What’s “third beer”? Japan taxes beer based on malt content, so about 10 years ago an enterprising brewery came out with a beverage called happoshu. The tax authorities define beer as having at least 67% malt, and happoshu, sold under the brand name Hop’s, contained less than that amount. The lower malt content meant it technically wasn’t beer, which meant it was taxed at a lower rate, making it cheaper. The government originally translated happoshu as “sparkling spirits”, but cooler heads prevailed, and it was changed to “low malt beer”.

Happoshu sales skyrocketed and other companies entered the market. To show how much they appreciated the breweries’ entrepreneurial spirit, the Japanese government raised taxes on happoshu—twice. But it’s still cheaper than beer; the tax on a 350 ml. can of beer is 77 yen, while it’s 46.99 yen for a can of happoshu. Naturally, it depressed sales.

Undeterred, Sapporo Beer came out last February with yet another tax-beating beverage, Draft One. This is the so-called third beer. It also has been called “a malt-free beerlike alcoholic beverage”, a “quasi-beer”, and probably dozens of other scatologically derived epithets by beer lovers in different states of intoxication. Draft One contains no malt. In fact, it is made from hops, sugar, and green beans. You can find one man’s opinion of the stuff at Beeradvocate.com.

Draft One was an instant success. Sapporo hoped to ship 10 million cases during its first year, but wound up shipping more than 18 million cases. Regardless of how it tastes, quasi-beer has a tax rate of 24.20 yen for a 350 ml. can, just a little shy of half the tax on happoshu.

So now Kirin and Asahi will jump into the market in April. Kirin expects to sell 19.7 million cases this year. They do not say when they expect the taxman to pounce again, though that day is sure to come before long.

Here’s the full article in the Japan Times. Another article well worth reading is at the Allaboutbeer site, called Taxing the Pour. It is an overview of the interaction of taxes and beer throughout history. (It ain’t just the Japanese.) One of the choice factoids presented is that the penalty in a French city during the 13th century for brewers who failed to pay their taxes was chopping off their right hand. I think it’s safe to say they had no problem collecting taxes at all.