The surge in global appreciation for Japanese food and drink culture presents a compelling opportunity for trade professionals and budding entrepreneurs. Importing sake to the US has become an attractive venture, especially now, with favorable currency conditions due to the cheap Japanese yen. Understanding the economic landscape of this endeavor is crucial. Let's deconstruct the cost calculation process step by step, using a scenario outlined by a JETRO handbook as our guide.
Sake Brewery to Exporter: Margins and Freight
After selecting a sake for import, you place an order with the chosen brewery, and the sake is then transferred to a specified warehouse in Japan. From there, it is exported with the assistance of a freight forwarder. An additional 10% is applied to the brewery's sale price to cover the shipping expenses to the port, a figure that represents the fundamental costs associated with LCL sea freight export to the US West Coast.
The total shipping costs, however, may fluctuate based on the volume of the order and the chosen mode of transport. Options such as air freight or the use of refrigerated containers for shipment will incur higher costs. It's also worth noting that when the order exceeds a certain threshold of cases, the brewery often absorbs the shipping fees from their location to the warehouse in Japan.
Exporters typically apply a margin of approximately 10-30% to the cost of sake, with the exact percentage depending on the size of the order among other variables. For initial transactions with a new sake exporter, payment is generally required up-front.
Additionally, the choice of forwarder or shipping company — responsible for transporting the sake from Japan to the US or any other global destination — is a critical cost consideration. Selecting an efficient and economically viable shipping service is crucial, as it directly influences the final cost structure of the imported sake.
The Sake Import Process: Taxes and Margins
The importation of sake into the USA involves several tax considerations. Initially, a basic tariff of approximately 2% is assumed for sake imports. Specific to the USA, this includes a basic customs duty of 3 cents per liter, an imported liquor excise tax of 21 cents per liter (based on a 750 ml bottle), and a liquor tax of 5.3 cents per liter. Additionally, a further 5% is added for customs clearance.
US regulations mandate a separation between the roles of importer and wholesaler for alcohol importation. The importer typically applies a markup of around 15%. Following this, the wholesaler sells the sake to retail establishments, adding a 25% margin.
Retailers then mark up the price by about 40%, a margin necessary to cover operational costs and maintain profitability. In restaurants, the final price of sake often triples, reflecting the premium dining experience.
Furthermore, an 8.75% VAT applies to the final retail price of sake in the US. For instance, a bottle of sake priced at 1500 JPY in Japan could end up costing around 6000 JPY (approximately $41) in the US market. This equates to a quadrupling of the original price from the brewery, illustrating the cumulative impact of taxes, markups, and regulations on imported sake.
Current Market Conditions: A Window of Opportunity
The current economic environment, characterized by a cheap Japanese yen, presents a timely opportunity to import sake. For those considering entering the market, this could be an optimal moment to capitalize on favorable exchange rates, which can significantly affect the final cost and retail price.
JETRO's research on the U.S. sake import and wholesale market reveals that imported Japanese sake faces a 40% price increase upon reaching local importers compared to domestic production. With additional markups of 15% by the importer, 25% by the wholesaler, and 40% by the retailer, plus taxes, the final consumer price is roughly four times the producer's shipment value.
Locally produced sake, however, sells at about three times the shipment value. When the importer and wholesaler roles are combined, the overall margin drops to 30%, offering a lower purchase price for the consumer. This significant retailer markup reflects their market dominance. The pattern holds true for other products, not just sake.
Conclusion: The Final Price Point
In the example provided, the final consumer price for imported sake into the US is approximately four times the original price set by the brewery and roughly 3 times the retail price of sake in Japan. While this multiplier effect is significant, it is the result of a complex interplay of margins, taxes, and operational costs. Trade professionals and entrepreneurs must navigate these waters with a clear understanding of the financial intricacies involved in importing sake to the US.
For those looking to import sake or considering using sake shipping containers, the key takeaway is to stay informed of the market conditions, understand the economic framework, and remain vigilant about the current currency advantages.
This example serves as a general guide and may vary based on market conditions, specific products, or other dynamic factors in international trade. Nonetheless, it provides a foundational understanding for those looking to explore the rich opportunities in the burgeoning market of Japanese sake.
Navigating the intricate web of importing can be daunting. If you’re considering expanding your portfolio with Japanese sake, now is the opportune time to act. Our team of sake export specialists is on standby to provide you with a tailored quote, ensuring that your foray into sake importation is as smooth as the beverage itself. Contact us today to explore the rich potential of importing sake from Japan and to capitalize on the favorable market conditions.
