‘The Party Is Over.’ Suntory Holdings CEO Takeshi Niinami on Adapting to New Consumer Trends

(To receive weekly emails of conversations with the world’s top CEOs and decisionmakers, click here.)

Takeshi Niinami is not the kind of boss to sequester himself in the plush C-Suite. As CEO of Japanese conglomerate Suntory Holdings, Niinami prides himself on spending time meeting customers and consumers at the business’s coalface. It doesn’t hurt, of course, that Suntory produces not coal but some of the world’s most loved premium spirits, including Jim Beam, Maker’s Mark, El Tesoro tequila, and Japan’s own Yamazaki and Hibiki whiskies.

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

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

A graduate of Harvard Business School, who previously served as CEO of convenience store chain Lawson, Niinami 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 a decade in charge of Suntory. What are some of the key moments over your time in charge?

The most important is the integration of Beam, which [cost] $16 billion. Second, is expanding digital activities across the entire business. And third is further globalization of Suntory Holdings. The trigger was the acquisition of Beam, which created a ripple effect to many business units.

At that time, Beam’s revenue was twice or 2.5 times as much as our spirits division. We learned a lot about how to increase gross margins, and they learned how to improve quality. We put the most emphasis on production quality and commercial activity. Both are related to real cash flow, whereas Beam was very strong in administration, finance, strategy, marketing. So we thought that we should instill Suntory culture to [focus] more on production and commercial activity.

Commercially, Beam uses wholesalers and their relations were good, but they didn’t know what was going on at the touch point with the consumers. Suntory’s focus is basically retailers, bars and restaurants. So the culture was different.

Acquiring Beam obviously helped further internationalize the Suntory brand. What from Beam corporate culture did you bring into Suntory?

The key thing is we had so much frequent dialog between the two to understand differences and try to 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 we don’t want to argue. But they didn’t know that. So unless we discuss candidly, we can’t overcome a lot of things.

So for six [or] seven months there were so many differences between the two entities. So we sent the middle [management], not the high level, so that they’ll be able to learn the culture [of a] global player, staying and working with Beam in Chicago, Kentucky or commercial regions.

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

I still visit the U.S. at least once or twice a month. And not only the U.S. but all the areas where we have businesses, to feel what is going on in the consumer arena. This is the task of a CEO, I believe. I’m still visiting the retail stores, communicating with the consumers, the store managers, the partners, so that I can learn. Not only reading the industry newspaper, magazines, conferences, I go [to markets] and sometimes I feel something wrong is going on, something different. So that is so important, as well as checking data.

Suntory is currently making a big play into ready to drink (RTD) products. What lies behind this shift?

I try to compare data and my feelings [when] visiting operations. And I found, wow, communities, society, is changing a lot and drinking less. So what we can do is make use of our strengths, that is RTD, because we are by far the number one in Asia, and we have the research and development capability in Japan, Shanghai, Singapore, and Kentucky. So make use of our R&D capabilities in adapting to the changing landscape of especially young people.

There appear to be twin pushes: people becoming more health conscious after COVID-19 and also the cost of living crisis. How are these affecting your operations and business plan?

Right after COVID there were so many big parties, [everyone was] drinking a lot! Because at the time of COVID drinking at home was a frequent habit very much embedded in people’s lives. People ended up with a lot of cash because they didn’t spend so much in restaurants, and a lot of people got subsidies from their government, so their pockets were full. So that created a huge party in the industry and very good times. But now the party is over; I think people spent all the money they allocated to drinking premium spirits. Secondly, many of the young generation, like Gen Z, don’t drink or drink less. So, because of those factors, we need to respond to the market and happen to have the good skill sets of RTDs.

Suntory was founded making fortified wine but then moved into whisky 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 keep globalizing, and not only [to serve] the U.S, Europe, ASEAN countries, but also the Global South, like India. And we found that, for example, Brazil was very much reputed to drink scotch, but nowadays they’ve been shifting to American whiskies. So the trend itself over those countries has been changing, and there is an opportunity for us to export from Kentucky to those countries, instead of focusing on the U.S. So we’re always searching for potential countries [and] globalizing means we have to respond to local consumers. Agility is our strength, and unless we are taking action, other parties are thinking the same.

One of the aspects about being a global company is that you’re hostage to geopolitical headwinds, with lots of discussions recently about raising tariffs on whisky. How do you plan to navigate these issues?

First, we have to increase gross margins by efficient operation in our factories. And we have to brush up so that local consumers think that our brands are more premium than before, so that we can ask for higher prices. Second, we produce locally. For RTD, we can find co-partners and we [use] concentrate, just like the [Coca-Cola] model. So we have to make use of innovation to overcome the situation of the higher tariff world.

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

It’s the most serious issue on my mind. Since I became CEO, we’ve doubled production but it’s still too small to match world demand, and that created a vacuum for fake Japanese whisky to create a misunderstanding among whisky drinkers who want genuine, authentic Japanese whisky. Japanese whisky should be distilled in Japan totally, but I would personally estimate three-quarters of those whiskies boasting to be Japanese are not. And quality-wise it’s completely different from our level. But to be honest, we created this vacuum. In the long run, the Japanese government will stipulate 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 assess the overall health of the Japanese economy?

First, we’ve got out of two decades of deflation, which means wage increases will go on, and that helps us [with] raising prices. So once inflation is said to be normal, I think the economy will be better off. Because corporations will keep investing in digital innovation to raise productivity, increase 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 circle is totally different than the time of deflation. Plus, we may need people from abroad too. 

So things are moving toward a significantly better economy. One concern is a lack of labor, so we have to expedite raising productivity [given] a rapid decline in population. So definitely, [we] have to discuss seriously what to do with immigration, and I’m for it.