Government stimulus and rising wages are keeping Japan’s drinks market steady. However, there’s not enough reason to raise a glass just yet.

The global non-alcoholic beverages market is projected to reach USD 789.6bn by 2030, growing at a CAGR of 5.2%, according to The Business Research Company report (Non-Alcoholic Beverages Market Report 2026). Drink companies can't just rely on old-school drinks to make a buck anymore. This growth has shifted toward functional health drinks, low-sugar options, and premium brands.

That is exactly where a giant like Suntory Beverage & Food Limited steps into the spotlight. The company sells its drinks across, Japan, Asia, Oceania, Europe and the Americas, with Japan locking down 39.4% of the total revenue in Q1 26. While their products match what people want, the financial results show a complicated story.

Downstream

Revenue was the only metric that did well in Q1 26, climbing 11.2% y/y to JPY 406.9bn from JPY 365.8bn in Q1 25. Looking closely at growth, sales bumped up in Asia, including Japan, mainly because the company sold more drinks and hiked up prices. Europe was flat, since people in France didn’t part with their money.

The bump in sales was wiped out by the rising cost of coffee beans, tea leaves and shipping. Consequently, Suntory’s gross profit rose 7.3% y/y to
JPY 148.8bn, up from JPY 138.7bn in the prior year.

In addition, SG&A expenses grew even faster than gross profit, surging 9.1% from JPY 110.3bn in Q1 25 to JPY 120.4bn this quarter, outpacing gross profit gains.

All of these factors ultimately weighed on the company’s operating income, which slipped to JPY 27.2bn down 0.2% y/y from last year’s JPY 27.3bn.

All said, its revenue is growing but earnings just aren’t keeping up.

The aftertaste

Suntory’s stock is stuck in a rut, sitting at JPY 4,329.00 after shedding 7.9% over the past year. This leaves it trading below its 52-week high of JPY 5,399, revealing that the market has possibly turned its nose up over its financials.

Right now, the stock is trading at a forward P/E of 14.9x, based on FY 26 earnings, lower than its 2-year historical average of 16.6x.

The analyst community is pterry divided. Out of 10 analysts, just three are buyers, with seven sitting on the fence with "hold" ratings. Even though their average target price of JPY 4,816.5 implies 12.61% upside potential, the heavy tilt towards "hold" ratings shows that analysts are skeptical.

Running dry

Suntory is facing a brutal mix of global and local risks. First, foreign exchange volatility and raw material cost inflation are driving up their bills for packaging, logistics and ingredients. Second, because they depend entirely on natural water sources, climate change and weird weather are a direct threat to their supply chain.

Finally, the company will also have deal with intense competition, and strict bans on single-use plastics.