Jim Beam and Suntory Overcome Culture Clash to Make an Upscale Bourbon

(Bloomberg) -- Creating a whiskey that combines Japanese and U.S. distilling techniques wasn't easy for Suntory Holdings Ltd.

Five years after the Japanese spirits giant pushed into the U.S. market with a $16 billion acquisition that gave it Jim Beam, Maker's Mark, Knob Creek and other brands, the company is finally releasing a new bourbon it says signifies the integration of two businesses.

The joint venture with its Jim Beam unit took about two years longer than Suntory's Chief Executive Officer Takeshi Niinami had anticipated. The companies surmounted tensions about the right way to make whiskey, as well as hurdles in communications that come from mixing Eastern and Western cultures. Closely held Suntory mostly left the bourbon recipe alone, but changed how it purifies water and tweaked operating procedures to make it more efficient, he said.

The result is Legent, which tastes a bit smoother and slightly fruitier than standard Jim Beam and carries a suggested retail price of $34.99.

“It's a symbol of the 50-50 relationship,” Niinami said in an interview in New York. “These differences were overcome.”

The deal to buy Jim Beam made Suntory the world's third-largest spirits company, behind Diageo Plc and Pernod Ricard SA. And it gave the company a much larger presence outside of Japan, where an aging population and a sluggish economy have hampered growth. Suntory now generates more than half its profit in international markets. The company has grappled with tariffs on American whiskey imposed by the European Union, a situation exacerbated by Brexit, which has driven down the price of the pound and made scotch cheaper, Niinami said.

U.S. Focus

Its main focus now is selling more spirits in the U.S., where Legent will be distributed. Bourbon consumption has surged across the globe in recent years, and jumped 6.4 percent in the U.S. last year. The growth in alcohol is mainly occurring at the high-end of the market, and rare, expensive Japanese whiskey has become increasingly popular.

Legent is aiming to take advantage of some of that cachet, but still faces challenges. Overall, Americans drank less alcohol in 2018, the third straight year of declines. And younger consumers are cutting back and gravitating to healthier drinks or legal cannabis.

Niinami said the trend of reduced intake is most pronounced among members of Generation Z, who are just starting to drink.

“That's why premiumization is the way to go,” he said.

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net;Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, ;Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Jonathan Roeder