Nestle has sought to develop Kit Kat lines for local consumers - including green tea-flavoured Kit Kat Otona Macha

Nestle has sought to develop Kit Kat lines for local consumers - including green tea-flavoured Kit Kat Otona Macha

The Japanese food and drink industry is worth US$821.3bn but the country's population is ageing and growth sluggish. Distinctive tastes also mean Japan can be a challenging market and requires careful and innovative thought. Hannah Abdulla speaks to the teams behind three of the global heavyweights in the packaged food industry: Nestle, General Mills and Kellogg to learn how they managed to succeed in the market.

j-f: When did you break into Japan? 

Bela Schweiger, vice president, Haagen-Dazs Japan for General Mills: General Mills has had a presence in Japan for several decades with a growing portfolio of brands that meet consumer needs.

Eri Nakhata, PR manager Kellogg Japan: Kellogg Japan was established in 1962 with an aim to offer well-balanced and nutritious cereals to Japanese consumers.

Melanie Kohli, corporate spokesperson, Nestle Japan: Nestle has been present in Japan for over 100 years. In 1913 Nestlé opened a branch in Yokohama to sell condensed milk and other milk-based products. In 1922, the branch was moved to Kobe, where Nestlé Japan still has its head office today.

j-f: Why is Japan such a key market for you?

Schweiger: Japanese consumers appreciate brand heritage, quality and craftsmanship, attention to details - all of which General Mills values and offers in such products as Häagen-Dazs, Green Giant, and Cheerios. We have found that our consumers also like to try new products and will reward those that offer an exceptional experience with their loyalty. We value their loyalty and work constantly to ensure we continue to offer that experience for them.

Nakhata: The cereal market in Japan has been showing double-digit growth in the past few years. Our sales have been increasing as well. Our market share in Japan is approximately 30%.

j-f: Is it the whole product portfolio that you sell here or did you have to be selective?

Schweiger: Our portfolio includes Häagen-Dazs, Green Giant, Bugles under license with a Japanese brand name: Tongari Corn, Old El Paso, Nature Valley, Betty Crocker, Cheerios and Curry Tree.

Nakhata: We produce a wide range of cereals for children and for grown-ups, including Corn Frosty, Coco series, All-Bran series, Fruit Granola, and more.

Kohli: The main brands today are Nescafé and Kit Kat, but Nestlé is also present in Japan with beverage systems such as Nespresso, Special.T, pet food or Nestlé Health Science products for special dietary needs, some Maggi products and other confectionery including Aero and Crunch. We also launched our first Japan-based research unit Nestle Research Tokyo, in 2009. It focuses on fundamental research in nutrition and health.

Schweiger: We are growing steadily in Japan, with double-digit sales growth in all categories. Awareness of our brand steadily grows each year, with Häagen-Dazs as the stand-out. With its high quality and broad distribution, it has nearly 100 percent in brand awareness among consumers across Japan. In May, General Mills launched a vegetable-flavoured Haagen-Dazs variant in Japan available in Tomato Cherry and Carrot Orange flavours.

Kohli: Nestlé's sales in Japan amounted to CHF1.6bn in 2013. Nestle's success is based firmly on the concept that food is a local matter. Although our products are available in virtually every corner of the world, we don't believe in a standard worldwide taste. On the contrary we go to considerable lengths to adapt our products to local consumer tastes.

j-f: What would you say have been some of your key successes since arriving in Japan?

Schweiger: We've had many successes. Häagen-Dazs is, of course, the star performer, but we are also growing with Old El Paso, Nature Valley and Cheerios.

Nakhata: We innovated with Fruit Granola Half which cut fat more than 50% compared to the regular Fruit Granola. This "Fruit Granola Half" has sold very well.

Kohli: Kit Kat is a good example for a global brand and its local uniqueness. Not only is it available in Japan in many different varieties, such as green tea, strawberry or wasabi. It is also very popular as a good luck token at school entry exams because the Japanese pronunciation of Kit Kat (Jap: Kitto katto) is similar to "Kitto kattoh!" or "you will surely win!" in Kyushu dialect. This year we also opened the world's first Kit Kat boutique in Tokyo, a shop-in-shop where we offer premium Kit Kat chocolate bars, and we introduced the first Kit Kat that can be baked in the oven like a cookie. These initiatives are an answer to the Japanese consumer's openness to discover the same brand in new and unexpected ways.

j-f: What would you say have been some of the biggest challenges presented to you since you started operating in Japan?

Kohli: To adapt to the local reality, as for example with Kit Kat. The majority of Nestle's products are tailored to local needs, Nescafe is another example.

Schweiger: As a US-based food company, our challenge in any international market, including Japan, is to recognise the fact that food is deeply rooted in culture and tradition. We cannot expect to export all our US brands into a foreign market and succeed, especially not in Japan with its rich food heritage and people with discerning taste for high quality. We take great care with our product offerings, and we listen. We listen to our consumers, and we keep an open dialogue with everyone we work with, ranging from our suppliers to customers to government regulators.

Nakhata: Compared to western countries, the penetration rate of cereal in Japan is still lower, partly because Japanese consumers have a wide choice for breakfast, including rice and bread. However, as mentioned above, the cereal market in Japan has been growing and expanding, and we believe the penetration rate of cereal will be continuously increasing and there will be more opportunities for us.

j-f: And how about competition?

Schweiger: At General Mills, we take a 'consumer first' approach to our business, focusing on serving people to ensure our brands excite and engage them. If our products can deliver the exceptional experience that our consumers wish to have again and again, they will always be the consumers' first choice.

Kohli: Nestlé's strong global brands and its unmatched R&D capabilities are a strong competitive advantage for the company as a whole, including its local subsidiaries. At the same time Nestlé is a highly decentralised company. While the overall direction is defined globally, the execution of the strategy depends on the local requirements. In the end, food is local, and consumers' needs vary from country to country. The strong roots and the creative flexibility are two important advantage for us.

j-f: Do you think the market has changed much since you got here?

Kohli: Japanese lifestyles are changing. While the population is decreasing, the number of households in Japan is increasing, because of a growing number of single-person and two-person households. With less people per household, eating habits change.

Nakhata: The cereal market in Japan has been showing double-digit growth in the past few years. Our sales have been increasing as well.

j-f: What's next for you in this market?

Nakhata: We will continuously study Japanese consumers' needs and innovate and offer a wide variety of products with high quality which meet their needs. We'll keep enlightening Japanese consumers that cereal has many nutritional benefits such as containing fibre, vitamins and minerals.

Schweiger: The Japanese food market will continue to grow, and we welcome the opportunity to grow with it and serve our consumers with a broad portfolio of products that meet their many needs through the years.