Suntory CEO Takeshi Niinami on adapting to new consumer trends

Takeshi Niinami, CEO of Suntory Holdings Credit – Courtesy of Suntory Holdings

(To receive weekly emails featuring conversations with the world’s top CEOs and decision makers, click here.)

Takeshi Niinami is not the kind of boss who locks himself in the luxurious C-Suite. As CEO of Japanese conglomerate Suntory Holdings, Niinami takes pride in spending time meeting customers and consumers on the company’s shop floor. Of course, it doesn’t hurt that Suntory doesn’t produce coal, but some of the world’s best-loved premium spirits, including Jim Beam, Maker’s Mark, El Tesoro tequila and Japan’s Yamazaki and Hibiki whiskies.

“In the case of Japanese whiskey, typically Hibiki 30,” says Niinami of his favorite drink. “For bourbon, I like Jim Beam Black.”

Few would begrudge Niinami a celebratory dram this month, as he celebrates a decade as CEO of Suntory Holdings, during which the company has grown into the No. 3 premium spirits producer worldwide. This year also marks 125 years since Suntory was initially founded as a retailer of imported wines, before diversifying with its own fortified variety and then opening Japan’s first malt whiskey distillery in 1923. Today, the $11 billion company also has a thriving line of soft drinks. , wine and health products.

Niinami is a graduate of Harvard Business School and was previously CEO of supermarket chain Lawson. He is also chairman of the influential Japan Association of Corporate Executives. He spoke to TIME about how Suntory is adapting to new consumer trends to stay relevant.

This interview has been condensed and edited for clarity.

Congratulations on taking charge of Suntory for ten years. What are some of the most important moments during your time as a leader?

The most important is the integration of Beam, which cost $16 billion. Second, digital activities are being expanded across the company. And thirdly, there is the further globalization of Suntory Holdings. The reason was the acquisition of Beam, which caused a ripple effect for many business units.

At the time, Beam’s sales were two to two and a half times those of our spirits division. We learned a lot about how to increase gross margins, and they learned how to improve quality. We place the greatest emphasis on production quality and commercial activity. Both relate to real cash flow, while Beam was very strong in administration, finance, strategy and marketing. So we thought we should instill the Suntory culture to focus more on production and commercial activities.

Commercially, Beam uses wholesalers and their relationships were good, but they did not know what was going on at the point of contact with consumers. Suntory’s focus is mainly on retailers, bars and restaurants. So the culture was different.

The story continues

The acquisition of Beam has of course contributed to the further internationalization of the Suntory brand. What did you bring from Beam’s corporate culture to Suntory?

The most important thing is that we had a dialogue between the two so often to understand the differences and find solutions to overcome them. For example, if a Japanese party says ‘yes’, it doesn’t really mean ‘yes’ because we want to avoid conflict and not argue. But they didn’t know that. So unless we discuss openly, we cannot overcome many things.

So for six (or) seven months there were so many differences between the two entities. That’s why we sent the middle management (management), and not the high level, so that they can learn the culture of a global player, while staying with Beam and working in Chicago, Kentucky or commercial regions.

Suntory is very good at keeping up with current consumer trends. How do you arrange that?

I still visit the US at least once or twice a month. And not just in the US, but in all the areas where we operate, to get a feel for what’s going on in the consumer arena. I think that’s the job of a CEO. I still visit the stores and interact with the consumers, the store managers and the partners so that I can learn. I don’t just read the industry newspaper, magazines, conferences, I go (to markets) and sometimes I feel like something is wrong, something different. So that’s so important, as well as checking data.

Suntory is currently making big strides in ready-to-drink (RTD) beverage products. What lies behind this shift?

I try to compare data and my feelings (on) visits to operations. And I discovered, wow, communities, society, are changing a lot and drinking less. So what we can do is leverage our strengths, which is RTD, because we are by far the number one in Asia, and we have the research and development capabilities in Japan, Shanghai, Singapore and Kentucky. So use our R&D capabilities to adapt to the changing landscape of young people in particular.

There seems to be a twofold impulse: people are becoming more aware of their health after COVID-19 and also of the cost of living crisis. How do these affect your operations and business plan?

Right after COVID there were so many big parties, (everyone was) drinking a lot! Because during COVID, drinking at home was a common habit that was deeply embedded in people’s lives. People ended up with a lot of money because they didn’t spend that much in restaurants, and a lot of people got subsidies from the government, so their pockets were full. So that created a big party in the industry and very good times. But now the party is over; I think people spent all the money they were allocated on drinking premium spirits. Secondly, many young people, such as Generation Z, do not drink or drink less. So, because of these factors, we need to respond to the market and have the good skills of RTDs.

Suntory was founded making fortified wine, but then moved into whiskey and later soft drinks. But Japanese companies are often criticized for being conservative and not moving quickly. How do you maintain a dynamic culture within Suntory?

We continue to globalize, and not only (at the service of) the US, Europe and the ASEAN countries, but also the South, such as India. And we found that Brazil, for example, had a great reputation for drinking whisky, but nowadays they’ve switched to American whiskies. So the trend itself in those countries is changing, and there is an opportunity for us to export from Kentucky to those countries, rather than focusing on the US. So we are always looking for potential countries (and) globalization means that we have to respond to local consumers. Agility is our strength, and unless we take action, other parties will feel the same way.

One of the aspects of being a global company is being held hostage to geopolitical headwinds, with a lot of talk lately about raising tariffs on whisky. How do you plan to address these issues?

First, we need to increase gross margins by operating efficiently in our factories. And we need to freshen things up so that local consumers think our brands are more premium than before so we can charge higher prices. Secondly, we produce locally. For RTD we can find co-partners and (use) concentrate, just like the (Coca-Cola) model. So we need to use innovation to overcome the situation of the world with higher tariffs.

There is a huge demand for Japanese whisky, which has led to some confusion over the definition of what exactly it is. What problems does that cause?

It’s the most serious problem I think about. Since I became CEO, we have doubled production, but it is still too small to meet global demand. That created a vacuum for fake Japanese whiskey, causing misunderstandings among whiskey drinkers who want real, authentic Japanese whiskey. Japanese whiskey should be distilled entirely in Japan, but I personally estimate that three-quarters of whiskeys that claim to be Japanese are not. And qualitatively it is completely different from our level. But honestly, we’ve created this vacuum. In the long run, the Japanese government will determine the definition.

Regarding the Japanese economy more broadly, many investors are confused because the stock market is at record highs but the yen is very weak. How would you rate the overall health of Japan’s economy?

First of all, we have had twenty years of deflation, which means that wage increases will continue, and that helps us (in) raising prices. So once inflation is said to be normal, I think the economy will be better off. Because companies will continue to invest in digital innovation to increase productivity and raise wages, and that is a source of domestic investment in Japan. But we need more people, which means we have to pay more, so this cycle is completely different from the time of deflation. Moreover, we may also need people from abroad.

So things are moving towards a significantly better economy. One concern is the lack of labor, so we need to accelerate productivity growth (given) a rapid decline in population. So we definitely need to seriously discuss what to do about immigration, and I’m in favor of it.

Write to Charlie Campbell at [email protected].