Japan is a tough nut for foreign food brands to crack. Its consumers may be wealthy, but they are also difficult to please. Intense competition and a complicated retail structure discourage foreign entrants, but Rupert Sutton explores a sales channel that is not only profitable but also surprisingly straightforward, as Waitrose has shown with its private label products.

Japan has long been an attractive market for foreign food brands, mainly thanks to its size and economic wealth. However it is one of the hardest markets in which to succeed: consumers are fickle, competition is intense and it takes years to understand the fragmented trade structure. Of the top 100 food and drink companies in Japan, just two are foreign-owned, and neither of these is in the top ten.

Most foreign brands entering Japan have formed an alliance with a local partner and in addition have adjusted product taste, packaging size and more in a bid to appeal to local preferences. Häagen Dazs is a good example, with popular flavours including Green tea, Azuki and Royal Milk Tea being developed in Japan.

But is it always necessary to change all elements of the marketing mix? Daimaru Peacock, an upmarket supermarket chain with stores in Tokyo and Osaka/Kansai region, thinks not. In 1996 Daimaru Peacock decided to start selling a range of own-label products from UK retailer Waitrose. Starting with a range of just 50 items, today it sells around 260, the most popular being tea, pasta and pasta sauce, olive oil, vinegar and jam. Significantly, the products are identical to those sold in UK stores, with no formula, flavour or packaging change.

Are Japanese consumer tastes that different? Mr. Takei, head of Daimaru Peacock's PR department explains: "More and more Japanese consumers are travelling overseas and develop a liking for foreign brands," he says.

"Over the last ten years, we have noticed a gradual shift away from traditional Japanese taste items towards western products. Product categories like pasta and olive oil didn't exist before western brands entered the market and so Japanese people grew up accepting the original taste."

Mr. Takei emphasises the importance of achieving a strong brand synergy: "Waitrose is a high-class supermarket," he continues, "and its brand image closely matches Daimaru Peacock's."

Overall, import food accounts for 20% of Daimaru Peacock's total sales and its share is growing steadily. Quality and product safety are the most important factors in deciding what to sell, but brands should also have a premium image. In addition, Daimaru Peacock aims to nurture new categories, an aim which informs the store's decision to sell Waitrose-branded items. Mr. Takei believes there is further growth potential for imported food, examples being organic, fresh foods and dairy.

Foreign food brands and specialist import shops are growing steadily in Japan and Daimaru Peacock is far from alone. Chains including Seijyo Ishii, Meidi-ya and Sony Plaza also concentrate on imports, not to mention most department stores, which carry a wide selection of import brands.

Rupert Sutton is an Asia based management consultant and can be contacted at exigo.marketing@yahoo.com