EXPLORE FOOD & BEVERAGE OPPORTUNITIES IN JAPAN

Transcription

1 EXPLORE FOOD & BEVERAGE OPPORTUNITIES IN JAPAN DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN BUSINESS SWEDEN, JANUARY 2018 DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN BUSINESS SWEDEN 1

2 EXPLORE FOOD & BEVERAGE OPPORTUNITIES IN JAPAN According to a survey conducted by Asahi Group, 55% of Japanese feel the happiest in daily life when eating good food. Japanese consumers are highly interested in food with superior taste. They are also interested in a wide variety of international food. This report highlights key consumer behaviour and trends for the food and beverage market in Japan. JAPAN HAS A LARGE & SOPHISTICATED MARKET FOR FOOD & BEVERAGES Japan has a population of 127 million. It is one of the wealthiest and most mature consumer markets in the world. The Japanese market for food is large, mature and quality focused. Sales of food and beverage was 81.6 trillion JPY (100 JPY 7,98 SEK as of May 2017) in 2015 and made up about 10% of the total GDP. Food and beverage is the largest expenditure for Japanese households. JAPANESE CONSUMERS FAVOR CONVENIENCE & HIGH QUALITY Consumers tend to buy groceries on a daily basis in local stores. This behaviour is reflected in the number of grocery stores in Japan. There are about 18,400 grocery stores and 54,400 convenience stores throughout Japan. Japan is shifting towards dual income, typically very busy lifestyle, families that has formed the widespread convenient grocery store network. Eating out is extremely popular in Japan. There are approximately 620,000 restaurants and bars in the country. The Michelin Guide has given stars to 227 restaurants in the Tokyo area alone making it the city with the most Michelin stars in the world. These numbers prove Japanese consumers have high interest in food. There is generally high price competition and unique marketing is needed to be competitive. In Japan, the package and gift wrapping are seen as part of the product. Any damage to the package will make the product impossible to sell. To avoid such cases and product losses, imported products are often re-packaged locally after import. Benefits of packing locally are lower shipping cost, increased ease of following product labeling regulation and localized product portion. Japanese consumers prefer to purchase smaller portions rather than bulk, to keep the food fresh and due to a lack of storage space. Imported goods tend to be sold in smaller quantities to keep the retail price competitive. 2 BUSINESS SWEDEN DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN

3 FOOD & BEVERAGE IS THE LARGEST HOUSEHOLD EXPENDITURE IN JAPAN Sales of processed food has increased and reached 29.7 trillion JPY in According to the Ministry of Health, Labour and Welfare (MHLW) the average household was 2.47 persons in 2016, the lowest figure to date. To adress this change in shrinking households, products are often packaged in smaller individual portions. Average household expenditure (for households with 2 or more persons) on food accounts for 23% of total household expenditure, the largest category. Key-take-way: Due to limited household space and smaller family sizes, Japanese consumers prefer to choose smaller portions when grocery shopping. Distributors often import food products in bulk and re-pack to localize the size. JAPAN HEAVILY RELIES ON FOOD IMPORTS DUE TO LOW FOOD SELF EFFICIENCY RATE Japan heavily relies on food imports to satisfy consumption demand. According to statistics of the Ministry of Agriculture, Forestry and Fisheries (MAFF), Japan s food self efficiency rate was only 39% in 2015 while other developed countries have have much higher self sufficiency rates. Geographically, Japan is to 83% made up of mountains and arable land is only 27%. Figure 1 Japanese food self sufficiency ratio 140% 120% 100% 80% 60% 40% 20% 0% 130% 121% 98% 65% Source: Ministry of Agriculture, Forestry and Fisheries 61% 39% Imported food Increased food imports can also be explained by diversified consumer eating habits. Historically, the staple food for the Japanese have been rice. Rice consumption per capita has decreased after reaching a peak in 1962, at kilos. In 2015, the per capita rice consumption only 56.9 kilos, which is less than half from peak levels. This trend indicates that food culture in Japan is globalizing. Meat and dairy consumption is more than 4 times compared to the 1960 s and the government has not been able to fully react to changes in consumer behavior with its agriculture policy. Figure 2 Food consumption change in Japan Rice 345.2g 157.6g (-54%) Meat 18.7g 78.2g +318%) Dairy Products 32.7g 127.6g (+290%) Oil, Fat 6.1g 16.4g (+169%) Source: Ministry of Agriculture, Forestry and Fisheries EXTREMELY SAFETY AND QUALITY CONSCIOUS FOOD & DRINKS MARKET Safety is extremely important for Japanese consumers and a priority concern of businesses. In 2014 McDonald s caused multiple scandals by providing expired chicken nuggets and contaminated burgers. As a result of negative brand image, their performance in 2014 ended with a 9.4 billion JPY loss, which was the first loss since being listed on the stock market. After these scandals, McDonald s suffered two consecutive years of huge losses. Once Japanese consumers lose trust in a brand, the impact on the brand is tremendous. Consumers increasingly pay attention to where ingredients come from, the method of production and use of food additives. In McDonald s case, they disclosed the origin of every ingredient and invited selected bloggers to tour their facilities in order for consumers to understand that their food is safe. Provision of transparent information, especially related to food safety, is important. JAPAN HAS A UNIQUE SEGMENT FOR SUPER PREMIUM FOOD PRODUCTS Japanese consumers are extremely conscious about value in terms of price and quality. Due to past economic downturns, consumers have learnt to be smarter when shopping. Products need to either meet or exceed consumers expections. Although companies experience tough sales during recessions, they also confirm a consumer willingness to pay for premium food. A pack of strawberries is normally sold at about 300 JPY during the season. However, one farmer developed a strawberry called Bijinhime (beautiful princess) and was able to sell a single strawberry for JPY. As a result of higher nutrition, the strawberry grows 4 times DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN BUSINESS SWEDEN 3

4 bigger than an average strawberry and has a well balanced taste. Aesthetics of shape and color are highly important factors for premium products in Japan. Key-take-way: Consumers are willling to pay more for premium products as long as value and quality meets their price expectations. Studying consumer taste preference and utilizing learnings could enable increased selling price in Japan. Figure 3 Price comparison of food items Item Low-end/JPY High-end/JPY Banana 99 JPY 2,000 JPY Melon 498 JPY 1,25M JPY Strawberry 298 JPY 50,000 JPY Beef (100g) 100 JPY 10,000 JPY Saury (fish) 77 JPY 37,800 JPY Source: Ministry of Agriculture, Forestry and Fisheries LARGE MARKET FOR FUNCTIONAL FOODS The Consumer Affairs Agency introduced a new certificate system to encourage consumers to select healthy food and beverages in Japan faces a rapidly aging population with 22% of the population above the age of 65. One of the main social issues in Japan is increasing medical expenditure. In 2014 the expenditure reached 40 trillon JPY. In parallel, the drain of the national pension fund has put further pressure on the society. To increase awareness of healthy foods, the government introduced food with nutrient function claims and food for specified health uses in The market size for food with specified health benefits has since its implementation grown to 638 billion JPY with approved products in Based on scientific evidence, food companies are allowed to claim the designated function on the label and advertisement after notification to the national government. For food with function claims, food with 17 natural ingredients (12 vitamins and 5 minerals) are allowed to be distributed freely based on approved ingredients. Key-take-way: Consumers attempt to maintain their health by selecting higher nutrition products. Certificates supporting health claims add value to these products and could be considered by Swedish companies. Figure 4 Food classification system in Japan Foods in General * Cannot label a function claim Foods with Health Claims *Can label a function claim Pharmaceutical Products Quasi-pharmaceutical products Source: Consumer Affairs Agency ORGANIC & NATURAL FOOD DEMAND STILL IMMATURE, BUT GRADUALLY GROWING MAFF established a specific law with special cultivated food and fruits in 1999, which is known as Tokubetsusaibai (special cultivation, but not organic). The first organic Japanese Agricultural Standard (JAS) law came into effect in JAS organic food market volume is only % out of the total food and beverage market in terms of quantity. The government has not seriously encouraged organic agriculture the last decades and there is a lack of environmental information to steer consumer preferences towards organic food. Japanese consumers are very cautious regarding food safety, but have less knowledge about organic food benefits and as a result see less added value of choosing organic food. Figure 5 Yearly organic food purchase per capita Japan EU USA Foods for Specified Health Uses Foods with Nutrient Function Claims Foods with Function Claims (In JPY) Source: Ministry of Agriculture, Forestry and Fisheries 2015 According to a recent consumer survey, 65% of Japanese consumers answer that they almost never buy organic food. Purchase of organic food in Japan per capita is only 1,040 JPY. Many claim that organic food simply is too expensive. Japanese consumers already have solid trust in domestic produce. 65% answered that they prefer to purchase products of Japanese origin. Consumers in Japan generally have negative views toward food grown in the rest of Asia but Scandinavian products are widely accepted due to a clean and sustainable image in Japan. 4 BUSINESS SWEDEN DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN

5 Animal rights are rarely debated in Japan and veganism is also uncommon although there are recently more vegan restaurants and food in central areas due to the inbound tourism surge. Key-take-way: Compared to Western markets, the organic and natural food trend has not taken off due to lack of environmental considerations and high perception of regular domestic food. Organic food products from Sweden can be sold in Japan without acquiring additional certificates as EU organic certificates are compatible with JAS organic certificates. EPA WILL ABOLISH TARIFFS & BENEFIT CERTAIN IMPORT SEGMENTS IN 2018 The Japanese government is negotiating a EPA (Economic Partnership Agreement) with the EU. Japan is seeking opportunities to export vehicles and electrical devices without tariffs, while the EU is highly interested in exporting agricultural products by eliminating existing tariffs on processed foods such as cheese and ham. Simplification of custom procedures is also expected to be a part of an EPA agreement. Figure 6 Import tariffs of main processed food Item Tariff Cheese 22%-40% Ham 10% Wine 15% or 125 JPY per liter Chocolate 10%-25% Biscuit 13%-24.4% Ice cream 21%-29.8% Source: Japan Customs, 2016 The market size for cheese was 274 billion JPY in 2015, a 6% increase from High tariffs on cheese strongly protects domestic cheese producers and five major companies dominate with more than 75% of the market. CERTAIN PRODUCT SEGMENTS INDICATE STRONG GROWTH & MARKET POTENTIAL The concept of Fika has been introduced in Japan, not only for socialising but also to increase productivity by sharing necessary work information in an informal way. The department store Isetan Shinjuku opened a Scandinavian pastry and confectionary shop called Fika in March Almost 4 years later there is still often a queue to buy cookies and hallongrottor, indicating a demand for Swedish confectionary. The market for chocolate was 450 billion JPY in 2014 and growing 2-3% annually. One main trend is chocolate with high cacao content. High cacao chocolate is recognized to have health benefits. Many confectionery companies have aquired functional food certificates in order to differentiate in the competition. These newly segmented chocolates are targeting a more mature target group at a higher unit price. The biscuit market was 298 billion JPY in 2014, increasing by 4% since Even though the market itself is mature, confectionary companies have developed new products in short cycles such as fermented butter and smooth texture biscuits. Biscuits is a slightly more price sensitive segment compared to other food segments. To keep the same price level as before, companies redesign the packaging with smaller portions. Changing breakfast habits are influencing the expansion of the biscuit market positively. Frozen foods used to be categorized as junk food but there is now an expanding premium frozen segment in Japan. 7Eleven, the biggest convenience store chain in Japan, expanded their frozen food section and achieved a 20% sales increase. The biggest food retail chain, AEON, is also aggressively entering into the premium frozen food segment and made an exclusive sales agreement with French frozen food chain Picard in Three stores have been opened in prime locations in Tokyo and the aim is to achieve 10 billion JPY in sales with 20 to 30 additonal stores withing the coming years. Low carbohydrate food is another expanding segment with forecasted annual growth rate around 7%. This trend is fuelled by a boom of the exercise and diet industry in Japan. Non-alcoholic drinks is another emerging segment in Japan. Since 2008, the non-alcoholic beverage market has grown by 1600%. Many Japanese have a low alcohol tolerance making non-alcoholic beer and cocktails highly interesting alternatives to regular alcoholic drinks. Global Japanese beverage companies have invested to create new business segments, or acquired niche players, for further expansion. DISCOVER THE FOOD & BEVERAGE MARKET IN JAPAN BUSINESS SWEDEN 5

6 BUSINESS SWEDEN Box 240, SE Stockholm, Sweden World Trade Center, Klarabergsviadukten 70 T F tokyo@business-sweden.se Business Sweden s purpose is to help every Swedish company to reach its full international potential and help companies abroad to reach their potential by investing in Sweden. The purpose is operationalised through 450 staff deployed at 14 offices in Sweden and at 55 offices in 49 key markets abroad. Feel free to contact us for any questions regarding Swedish international trade or foreign investments in Sweden.