Supporting sake: crowdfunding as a way forward

by | May 31, 2019 | Sake News from Japan

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Toyo Keizai Online asks an interesting question – why are there so many sake-related crowdfunding projects?

Japan is still turning away from sake, with sales volumes declining continuously over the last 20 or so years. According to the Japan Sake and Shochu Makers Association (JSS), sales volume for sake in 2017 was 533,000 kilolitres, about half the figure 2 decades ago.

Displaced by other drinks like chūhai (shōchū highball), wine, and other highball drinks, sake particularly struggles for popularity among young people.

The sake industry isn’t just sitting back and watching it happen, and one means of survival turns out to be crowdfunding (where venture capitalists and individuals who want to develop new products raise money online from supporters, who receive rewards such as the final product).

As of April 2019, Makuake (crowdfunding platform subsidiary of CyberAgent) had hosted over 100 successful crowdfunding campaigns by sake breweries. As there are around 1,400 sake breweries in Japan, that’s almost 1 in 10. The number of supporters for sake-related projects grew to around 25,000 and they raised a total of over a quarter of a billion JPY. Makuake takes 20% of the pledges.

Kana Bōgaki, co-founder of CyberAgent, commented that sake breweries struggle to communicate the passion and unique character of their product to people without having them taste it. But they can use photos, video and text on their Makuake page to create a story and communicate with their audience.

The rush to crowdfund sake on Makuake happened after Iinuma Honke in Chiba used the platform for their Shushui no Yoake project. Their target was JPY 1 million, and they raised far more – JPY 10.59 million. The key to their success may have been calling their first junmai daiginjō of the year Nihonshu Nouveau, a neat advertising trick that helped it sell. They took advice from Makuake on how to launch the product.

Bōgaki describes crowdfunding as a new form of e-commerce. The products sold aren’t distributed in the real world and have no actual value. The appeal of crowdfunding for consumers lies both in the element of risk involved in becoming a supporter, and in being able to boast about having something that others don’t.

Many breweries use Makuake as a test market for new products. It’s difficult to get a bank loan for a product still in development that has no track record, but success in crowdfunding can itself lead to the offer of a loan. Bōgaki claims that Makuake is often asked by banks to introduce them to sake breweries.

Even giant Hakutsuru has used Makuake to test sales. In 2016, eight young employees (average age 30) independently launched a new product development project. Naotaka Sada, project leader in product development at Hakutsuru, reflects that the demographic for most of his company’s staple products are in their 60s or above. That’s what spurred him to take action. Thinking about how to get younger people interested, he came up with the concept of a sake they could take as a gift to parties, just as you would a bottle of wine. The project, initiated by young employees at Hakutsuru, raised far more than its target on Makuake.

Being a large producer, Hakutsuru didn’t want any products that strayed too far from the mainstream. So the team took great care with production and went for a junmai with absolutely no flavourings or sweeteners. Sada was aiming for a sweet spot between something traditional drinkers would be satisfied with and something people who didn’t drink sake would be pleasantly surprised by.

Key to the project were three o-kura-iri (お蔵入り, in-brewery) yeast strains held by Hakutsuru. The company uses its own yeast for brewing, and also stores around 400 strains that are not stable enough for mass production, using them instead for research . The project team selected a few that created particularly fruity aromas well suited to the sake they wanted to create.

The result was a range of three sake: Kimorebi no Mushimegane (木漏れ日のムシメガネ, magnifying glass in dappled sunlight), Hidamari no Shunōkeru (陽だまりのシュノーケル, snorkel in the sunlight), and Kōkon no Teresukōpu (黄昏のテレスコープ, telescope in the twilight). [Well, they get prizes for naming…] They were very different from most sake, instead coming closer to slightly sweet white wines.

The goal for their Makuake funding was JPY 1 million, but they raised far more – JPY 5.32 million. Looking at the supporters, half were in their 20s or 30s. Sada commented that attracting an age range so far removed from their usual one was a huge surprise, not least for Hakutsuru as a company.

The three sake were limited editions, with only 3,000 bottles of each type, and 600 of each were presold through Makuake. The rest went on sale on the Hakutsuru site or through stores they manage directly. Sada wants to continue developing products that resonate with younger people, aware of the structural changes that pose a real threat to the old giants of the industry.

Crowdfunding is also part of venture development in the very traditional sake industry. New venture WAKAZE, which plans and then produces individual sake, used Makuake for new products even before becoming a company. It’s hard to get new sake brewing licenses in Japan, so they outsourced production to existing kura in places like Yamagata and Tsuruoka.

Looking back, production manager Shōya Imai reflects that before incorporating WAKAZE was just a project that attracted interested members of the public, with no funding. Even if they wanted to start brewing, they had to know in advance how much they would sell – a tall order. Makuake helped them solve that problem, and he also anticipated that using it would allow them to build a community of fans.

The first project after incorporating was ORBIA, a sake developed to pair with Western food. Imai notes that the idea of food pairing is well established in Western cuisine, and they raised far more than their target of JPY 1 million – the project hit JPY 4.35 million. Product development for ORBIA was boosted by involving a sommelier from a famous Tokyo restaurant, and when they went to sell the final product they found that its popularity on Makuake made it more interesting to other buyers.

WAKAZE use crowdfunding not only for products, but also for projects. Last summer, they went to their supporters to raise funds to build a doburoku (unfiltered sake) brewery and bar in the Sangenchaya district of Tokyo. Supporter rewards included vouchers for doburoku and meals, brewing experience days and membership cards that give a discount on all meals. Imai sees the real aim of these projects as creating a place, rather than a product, and giving fans more options. Many supporters are now regulars at the bar.

WAKAZE is now focusing on a target they’ve had their eyes on since the company was founded – overseas expansion. The first stage of their plan was to establish their own brewing facilities in Paris, France. Imai comments that despite how heavily involved the company is with sake, this will allow them to brew their own for the first time. They’ve already selected a location in the suburbs, fitting started in May and the kura should be ready to brew by August. They plan to present locally brewed products at the Salon du Sake, Europe’s largest sake event, held in October.

A Makuake crowdfunder was set up on 15 April, and had reached JPY 4.73 milion by 20 May, just short of the JPY 5 million goal. Supporters will receive the first batches produced by the Paris brewery. Imai hopes this will communicate their gratitude to the fans who made their dream of expansion to Paris possible.

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