Global drinks maker Suntory aims to sell local to avoid tariffs, president says

By Rocky Swift

TOKYO (Reuters) - Japanese drinks maker Suntory is looking to shift where it markets its spirits across the globe as it girds for a potential trade war, its new president said on Thursday.

Nobuhiro Torii, great-grandson of the company's founder, takes the reins at a raucous time, with new U.S. tariffs poised to affect everything from Toyota's sedans to Suntory's aged whiskies.

The company's soft drinks are mainly produced in their destination markets, but spirits such as tequila must be made in specific locations and are more vulnerable to excise duties, Torii said. That means making bourbon for the American market in the United States, and Japanese whisky domestically for consumption at home.

"We will produce and try to sell locally," said Torii, who took over as president at the closely held consumer conglomerate on March 25. "That's the key strategy with the tariffs."

U.S. President Donald Trump revealed on Wednesday a broad set of new tariffs on trading partners, including a larger-than-anticipated 24% levy on Japanese goods. Trade Minister Yoji Muto said on Thursday Japan is leaving all options open to respond to Trump's new tariffs.

The trade rift presents a dilemma for Japanese companies like Suntory, which has spent decades expanding its global footprint as a hedge against an ageing, shrinking consumer market at home.

Suntory spent $16 billion in 2014 to buy U.S. spirits maker Beam, but the group also makes wine and Orangina-branded soda in Europe, as well as Pepsi drinks and canned coffee in Southeast Asia.

As for disruptions from tariffs, Suntory is somewhat protected by the defensive nature of the drinks sector, Torii said. 

"People become thirsty when it's hot, and people want to drink beer for relaxing," he said. "Of course, business and the economy itself is possibly becoming more volatile, and there might be a trade war, but still we have to manage that."

As Trump has ramped up tariff rhetoric in recent months, Suntory shipped extra supplies of tequila from its Mexican factories into the U.S. to get in before the excise increases. The company is also considering shifting sales of Scotch whiskies to Europe from the U.S.

Suntory founder Shinjiro Torii established Japan's first whisky distillery in the western city of Yamazaki in 1923. The company name is a combination of "sun" and his surname.

Nobuhiro Torii, 59, earned degrees from Keio University in Tokyo and Brandeis University in Massachusetts, and worked at the Industrial Bank of Japan, now part of the Mizuho banking group, before joining Suntory. 

As president, he succeeds Takeshi Niinami, who in 2014 became the first person outside of the founding family to run the group. Niinami, one of Japan's most influential executives, is staying on as chairman and CEO.

Niinami last year said Suntory could be in the market for an overseas purchase on the order of $10 billion, and often spoke of business growth in India and China.

By contrast, Torii said he's more focused on investing in Suntory's existing brands, and has no acquisition candidates in mind.

"It's very easy to say that China and India are attractive, but I still don't know how to make money over there," he said. "Organic growth is our priority at this moment."

(This story has been refiled to cut the extraneous word 'for' before 'domestically' in paragraph 3)

(Reporting by Rocky Swift; additional reporting by Irene Wang; Editing by Christian Schmollinger)