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Sunday, June 30, 2002

I microbrewed it my way

From solid resolve to liquid assets


By JOHN SCHULTZ
Special to The Japan Times

In 1994, within months of microbreweries being legalized in Japan, two began operation, followed by around 50 the next year. Although the general public took little notice back then, this regulatory rejig was to reshape my life.

News photo
At opposite ends of the microbrew scale are the Ginga Kogen Beer brewery in Nasu, Tochigi Prefecture (above) and TY Harbor Brewery in Shingawa, Tokyo, where Brewmaster kazunaga Abe and chef David Chiddo pose proudly.
News photo

I had first considered starting my own brewery when I was working as a securities analyst for Salomon Brothers, covering companies that manufactured brewing systems. With the opening of the country's first microbreweries and the news that U.S. microbrewer Boston Brewing Co. had just gone public, I thought underwriting an IPO by a small Japanese brewing enterprise might raise my employer's profile.

At that time, it looked as though microbreweries were set to be the Next Big Thing, but their stocks in the U.S. fizzled almost as fast as the heads on their beers -- and with that my share-issue project, too. Nevertheless, I remained enraptured at the thought of having my own microbrewery and being able to escape the stock market for a more palatable way of making a living.

In 1996, I took a couple of days off in the autumn, right before midterm results when all the analysts' reports hit the fan. I drove into the Japan Alps to Takayama and visited some of the small new breweries in Gifu Prefecture. From there, I went over to the Sea of Japan and up the Hokuriku Expressway to visit the father of all Japan's microbreweries, Uehara Shuzo, maker of Echigo Beer. After a few samples, I motored down to my vacation home in Fukushima Prefecture, in the little town of Tadami in the heart of Minami Aizu in Japan's snow country.

When I reached Tadami, I stopped in at Tamokaku, the company that started the development where I have my house. I told the people there about my dream of building a small brewery in the town. The idea was enthusiastically received and the ball was set rolling.

From that point on, I lost control of my life.

During 1997, I spent much of my time and energy researching brewing systems, recruiting investors and struggling to find a means of financing the plan without risking financial ruin. Meetings among potential investors turned into brawls over sites, names and other trivia -- eventually forcing me to abandon the idea of finding outside investment.

Unlike most Japanese companies seeking to enter the brewing business, I had actually made beer before as a home-brewer. As an American, I could talk directly with overseas system vendors without the help of consultants. That alone helped lower the initial cost of equipment from hundreds of millions to just millions of yen.

However, my weak point was dealing with the Tax Agency (which grants licenses) and the brewing-license application process itself, meaning I had to pay dearly for a go-between. Nonetheless, by the spring of 1998 Minami Aizu Brewing was registered as a joint-stock company with capital of 10 million yen and one shareholder, me. I had commitments from potential buyers of my beer, and the brewing-license application was in the hands of the tax agents. However, I was still short of about 50 million yen, and the license application had to be suspended until I could find the money.

Throughout the midterm-results season of 1998, my mind was in turmoil trying to locate sources of finance. By that time, there were nearly 200 microbreweries in Japan, and the idea looked increasingly solid. Other companies expressed interest in my project, but just as they were ready to act, Japan's economy was approaching the abyss. Resources for new projects had run dry, banks were almost entirely concerned with self-preservation and not loaning money for startups, and it looked like the end of the road.

Then in December, in an attempt to shore up the economy, the government released funds for new capital investment through the Public Finance Corporation, aimed at small and medium-size startups. My company's speedily prepared loan application was approved in January 1999 -- so then it was back to the brewing-license application process. More letters, more forms and more silence from the bureaucrats.

Finally, in late April, the Tax Agency gave its provisional approval for construction of the brewery. Though the idea was to be up and running by August, we finally tapped the first brew, many crises later, on Nov. 7 -- which just happened to be my 50th birthday. I am 53 years old now, but many more years the wiser, since I now know that obtaining a license to brew was just the beginning of the battle in the Japanese market.

Basically, for the amount of beer that people drink here, the average person has a limited knowledge of what Australians call "the amber nectar." Although the first commercial brewer in Japan was the American William Copeland who, in 1870, founded what would become Kirin Beer, most Japanese associate the drink with Germany. What do you eat with beer? Sausage, of course. The idea of pairing different beers with different foods is virtually unknown. What color is beer? Yellow, of course. Everything any darker is kuro-biiru (black beer). At what temperature should beer be served? As cold as possible. Anything warmer than just above freezing is likely to draw complaints. Never mind the fact that deep chilling does not let the flavors of ale or stout come through. As a brewer of not only lager but also ale and stout, consumer education is a major hurdle to be overcome in pursuit of commercial success.

As well, the most common question I was asked out here in the mountains of Fukushima was: "What is local about your beer?" People wanted to know why I brewed it there when there was nothing distinctly "local" about it. In Tadami, most residents regarded my product as a tourist attraction, not something to consume every day -- especially as the local maze of distributors helped jack up the price beyond what people wanted to pay.

Eventually I caved in and decided to brew a distinctly "local" product by developing my own buckwheat (soba) beer. It's just another grain, like rice or barley, so why not? Actually, buckwheat thrives in the cold, rocky Tohoku region, which is well-known for its handmade soba noodles.

My efforts paid off, since our Buckwheat Brown Ale is now one of the most popular brews in the region! Amazingly, proprietors are serving it only slightly chilled and are not worried about a bit of haze since the beer is unfiltered. What a transformation in attitudes in just a few years! And what a testament to the perhaps surprising notion that the average Japanese consumer can be open to new things.

The consultant I hired to help with the license insisted that to sell beer in Japan, I would have to make it less bitter (use less hops) and brew it to suit Japanese taste preferences. Yet country folk in Tohoku are now drinking ale made with buckwheat, served at temperatures many Americans would call "warm." Even with this small success, though, my mission is unaccomplished. I still have many years of debt to repay and many drinkers of ice-cold beer to convert.

John Schultz is the founder and brewmaster of the Minami Aizu Brewery in Tadami, Fukushima Prefecture. He is the second American to have started a brewery in Japan, after William Copeland in 1870.


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