With the Federal Reserve looking likely to keep interest rates high for an extended period of time, companies may feel additional pressure to adjust prices to continue growing in line with consumer habits. unknown. Suntory (STBFY), a leading global drinks manufacturer, manufactures a wide range of products across multiple tiers and is well positioned to leverage its pricing power.
Suntory Holdings CEO Tsuyoshi Niinami speaks with Yahoo Finance's Brian Sozzi and Julie Hyman at the World Economic Forum in Davos, Switzerland, addressing inflation, pricing, and changing spending habits of Gen Z. discuss.
Niina explained how the conflict in the Red Sea was impacting his company's logistics, saying deliveries were taking longer and they were “considering” raising prices to offset the additional costs. Ta.
Niina gave insight into Generation Z, saying they are more “health conscious” and prefer doing business with socially conscious companies. He remains aware of the differences between his generation and Gen Z, and will focus on adjusting his business model accordingly.
It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team discusses the world's most pressing issues and priorities in business, finance, and politics. Interact with top decision makers and outstanding leaders. Watch the full episode of Yahoo Finance Live here.
Editor's note: This article was written by Nicholas Jacobino
video transcript
[MUSIC PLAYING]
Brian Sozzi: There's a lot more going on at the World Economic Forum in Davos, Switzerland than just talk about AI. Many food and beverage companies here are trying to understand how climate change could impact their business. Let's talk to Taku Niinami, CEO of one of those very large companies, Suntory. Taku, it's nice to meet you in person for a change.
Takeshi Niinami: I'm glad to meet you.
Brian Sozzi: appreciate.
Takeshi Niinami: thank you.
Brian Sozzi: So what's your biggest takeaway from the conference so far?
Takeshi Niinami: The Middle East crisis may intensify. That could impact global supply chains in terms of increased costs, possibly causing energy costs to rise again. So it's a big risk. So, the situation is more complicated than I thought.
Julie Hyman: So what is Suntory doing to perhaps prepare for such a thing to happen, especially with increasing shipping issues through the Suez Canal and Red Sea?
Takeshi Niinami: Well, first of all, we are currently building up inventory. And we will ship it as soon as possible. From '22 to '23, so many products came out. Therefore, it must be avoided. Additionally, our logistics team is currently very agile in securing space. But that means travel and delivery times are expected to be longer than they are now, so I think it will probably take him a week or so.
Brian Sozzi: Are you expecting product shortages? Will you need to raise prices to support these pressures?
Takeshi Niinami: Currently under consideration. However, consumer confidence is declining in the United States, for example. Therefore, its value will probably go up in the near future. That depends on the Fed-led interest rate scenario. That's why I want to increase it even more around the world. However, the situation at the moment is worse than last year.
Julie Hyman: And for those who aren't aware, I think Suntory is the third largest distilled spirits company in the world. But you make more than spirits. You make a lot more than just Japanese whisky, right? We also carry Sauza Tequila, Jim Beam, Orange Gina, and other soft drinks, beer, and wine. So what kind of pricing power do you have when you want to expand that pricing strategy a little bit around the world? For example, did you raise prices significantly during a period of inflation in the United States? Where are you on that front line now?
Takeshi Niinami: Two things. First of all, we maintain premium products and focus on premium and slightly premium products rather than super and luxury, which are subject to consumer disabling trends. So we're going to focus again on premium and tequila, American whisky, Japanese whisky. On the other hand, we want to respond to the current trend of Gen Z drinking less. And they're drinking seltzer, RTDs. Therefore, we place him in third place in his RTD segment. So we would like to strengthen–
Julie Hyman: That means it's ready to drink.
Takeshi Niinami: Yes, it's ready to drink. So we have bold plans to expand our RTD business around the world, including the United States, China and India.
Brian Sozzi: Just being Gen Z — Maybe it's because I'm older, but I never noticed this. Half of Gen Z will reach legal drinking age by the end of this year. Why do you think they don't? Are they drinking less? Is that a healthy thing?
Takeshi Niinami: I think they are also health conscious. And for some reason they don't want to drink like their fathers and mothers. Mothers don't think so, but there's a certain social divide in this. They definitely prefer companies that are committed to social responsibility and environmental sustainability. I think they have different standards that are completely different from my generation.
In that context, they're different and they like that difference. Reduce the amount of alcohol you drink and enjoy meeting people. But I think it's a big trend that we have to worry about in terms of lifting spirits.
Brian Sozzi: Your business has been running incredibly well for decades. And one of the benefits is that you have a lot of cash and can do different things. Would you like to create a brand out of nothing from your development team, or are you looking to acquire a brand from the industry like we have in recent years?
Takeshi Niinami: Well, I guess so. Well, switching brands between competitors is, I mean, a normal deal. And we would like to increase our tequila portfolio, for example. We will also increase the exposure in Scotland of Japanese whiskey and Scotch produced based on Japanese craftsmanship.
Therefore, we are sending out messages to create a new brand based on Japanese craftsmanship. And we work in partnership with local artisans. So, I'm sorry, but we're going to increase Scotch, Japanese Whiskey, Tequila and American Whiskey, not just based on marketing, but based on further improvements in quality. But we want to prove that we are quality players.
Julie Hyman: Come to think of it, Japanese whisky, just like Scotch whisky, is also true of Kentucky whisky, but now we have a definition, right? Tell us about that and how it has affected the reputation of Japanese whiskey in other markets.
Takeshi Niinami: That is a cause for concern. In fact, starting April 1st of this year, the definition of Japanese whiskey will become very strict, and it will have to be produced in Japan. And you have to use Japanese whiskey. In Japan, you must be at least 3 years old. These definitions at least guarantee the quality of authentic Japanese whisky. However, unfortunately, there are quite a few people who refer to Japanese whiskey as Japanese whisky.
Therefore, starting April 1st, we will demonstrate to our clients and consumers that genuine Japanese whiskey is Japanese whisky. Therefore, we at Suntory only manufacture and supply Japanese whiskey produced in Japan. So please be careful. and provide guidelines to clients.
