Domestic wines maintain a significant presence by targeting the low-end of the market, where average prices are lower than ¥500 per 750ml bottle. In the less than ¥1,000 per 750ml bottle wine segment wines that touted “no food additives” faired well in 2008.

However, there has been a stronger marketing effort to promote premium domestic wines as well. The largest wine company in Japan, Mercian, has employed European wine makers to produce wines using Koshu grapes, which proved very successful in 2008. Its high brand Koshu (Yamanashi prefecture) wines sold well in 2008.

Competition has grown in intensity since the introduction of several low-priced brands from major California wineries, many of which are handled by Japan’s major liquor/beer producers and distributors. Mercian began bottling California wine at their Japanese plant in December 2007 that it had previously imported in small packages. Mercian placed a high degree of marketing efforts for this product, which resulted in a successful campaign. Wine importers have started to import tremendous amounts of Chilean wine as they prepare for the implementation of the Free Trade Agreement with Japan.

Sales of non-wine beverages classified in the same category as wine have continuously increased as well. This can lead to misleading information, such as in the first half of 2005, when taxed delivery of domestic wine showed an increase of more than 10 percent, when it was due to the sales of fruit wines and chuhi beverages.

The domestic wine market is dominated by a few large companies, with the top three accounting for nearly three-fourths of all sales. Recently, the large domestic producers such as Mercian (with about a 20 percent market share), Suntory (18 percent), Sapporo (8 percent), and Kikkoman (7 percent) have been attempting to differentiate their products based on quality or other value-added attributes such as health orientation and a variety of fruit bases, as well as promoting organic and additive-free wines, with less focus on pricing.

Fig. 10 shows wine sales of three price ranges. As previously noted, domestic wines generally target the less than ¥500 price zone, while imported wines traditionally targeted the two other higher price zones. However, recent penetration of the low price zone by imported wines (mostly from New World producers) has led domestic producers to give more attention to the moderate and premium price zones, which cost ¥1500 and above per bottle.The market in 2008 was not very good for lower end wines in comparison to 2007, however wines that were additive free did very well.