Demographic shifts within Japan – notably shrinking consumption due to an aging population and declining birthrate – have forced the Japanese food sector to look outward for growth. Katy Askew surveys some of the country’s biggest food exporters and the strategies they are employing to grow overseas.
Japan’s food sector is facing something of a slow-burning crisis. Domestic sales are coming under pressure and consumption is shrinking – and this trend looks set to continue in the long-term.
As Euromonitor International, a research firm, notes factors such as an ageing population and declining birthrate are exerting pressure on food sales volumes despite an improvement in Japan’s current economic outlook.
“Towards the end of 2013, there were signs that the Japan economy is on the road to recovery. The government appears committed to inflating the economy which will likely boost wages and consumer expenditure. Consumers who have cut back expenditure on non-essentials are expected to increase spending on packaged food,” the researchers note. “However, the increase is likely to be offset by a declining birthrate and ageing population which reduces volume sales.
In the face of a contracting domestic market, many of Japan’s largest food makers are adopting expansionist strategies to grow sales overseas. Japan’s food majors have stepped up their efforts to expand internationally and exponentially increased the level of investment dedicated to their international operations.
Currently, Japan’s largest overseas market for food products is Hong Kong, which accounts for 20% of food exports, followed by the US which imports Japanese food products to the value of JPY80bn annually.
The country’s food makers are working to exploit growth opportunities in the emerging markets in southeast Asia, such as Thailand Thailand, Vietnam and Indonesia, a representative for trade association JETRO tells just-food.
The country is also focused on leveraging its reputation for producing high quality, healthy food products to grow in developed markets where consumers benefit from higher purchasing power. Meanwhile, a rise in Halal certification also sees the country’s food industry moving in on Muslim consumers, the spokesperson continues.
“Firstly, we focus on the Asian countries. Secondly, on the EU. We also want to export our food to areas such as Russia and the near-east, which is a very new market for us. We believe there is a lot of potential for Japanese food in Muslim countries like the UAE and Saudi Arabia.”
While Japanese food makers offer a wide variety of products, the country is promoting some key messages around quality and safety. “We would like to offer you a Japanese brand which is delicious and safe,” the spokesperson stresses. Japanese food makers also frequently work to leverage their technical expertise, particularly in areas such as functional foods and health and wellness.
Here is a round-up of the export strategies employed by some of Japan’s largest food makers.
Meiji Holdings defines its group philosophy as the promotion of “tastiness and enjoyment” through products that are healthy and safe. The company aims to contribute to consumers “physical and emotional well-being” with products targeting all age groups, from infants to the elderly.
In the group’s “2020 Vision” strategy, Meiji aims to strengthen its domestic business while supporting overseas growth as it works toward the goal of net sales of JPY1.5trn and an operating income ratio of 5% or higher.
The company has targeted growth in China, Asia and the US. With a “sense of urgency” Meiji intends to “foster businesses and quickly reach profitability” in these markets.
Yamazaki Baking Co.
Yamazaki Baking Co. manufacturers a wide range of confectionery and bakery products. The company aims to grow its operations by using technological advances to develop new and innovative products.
“We will also broaden our global operations, which center on Southeast Asia, Europe and the United States,” the company states in a strategy document.
Yamazaki established its first overseas operations in 1981. Today, the firm operates bakeries in Hong Kong, Thailand, Taiwan, and Singapore. It also has representative offices in Los Angeles, Paris, Taipei, Shanghai and Jakarta. “These offices are gathering information and carrying out market research in overseas food markets, and acting as gateways for the export of raw materials to Japan,” Yamazaki says.
Nissin Food Holdings
Nissin Food Holdings established the clear goal of developing and accelerating its overseas growth agenda. The instant noodle maker has invested heavily in extending its international reach, with a particular focus on emerging markets where it says it is witnessing growing demand for instant noodle products.
“As demand for instant noodles increases worldwide, the Nissin Foods Group must of course accelerate its global development,” Nissin president Koki Ando says. “Demand for instant noodles, a safe, delicious, reasonably priced product that can be simply prepared and stored at room temperature, is growing in nearly every part of the world. Total worldwide demand in the calendar 2012 exceeded 100bn servings.”
In the US, Nissin is investing in strengthening the Nissin brand, while in Europe the company is working to extend market coverage. The company is also targeting higher sales in what it defines as the “growth markets” of southeast Asia, China and India. At the same time, Nissin is laying the foundations for future growth in the “new markets” of Africa and South America.
The confectionery arm of the Japanese and South Korean conglomerate Lotte Holdings produces more than 200 confectionery products sold in more than 70 countries worldwide. It claims to own the number one chewing gum brand in Asia and operates ten subsidiaries, such as Lotte USA and Thai Lotte.
As Lotte drives overseas growth, the group is expanding into business in a “wide range of areas” ranging from foodstuffs to hotels, construction and even professional baseball.
Ezaki Glico operates in various categories, from snacks and ice cream to infant formula. The company’s global network is focused on Asia – with operations in Thailand, Vietnam, Indonesia, China and Korea. Glico also has subsidiaries in North American and Europe.
The company is increasing its investment overseas, where expansion has largely been achieved on an organic basis. In particular, the firm said it is focused on growing its presence in the China, which offers “tremendous potential for economic growth”. Glico stresses: “We will make continued efforts to further expand Glico’s business in China.”
Most recently, in June last year, Glico established a joint venture ice cream company in Indonesia. In partnership with PT Mitrajaya Ekarajaya, part of the Wings Group, the JV will begin trading in January next year. The firms have targeted sales of IDR1trn by 2020.
Yakult Honsha sells its well-known probiotics products in various markets across Europe, Asia, North America, Latin America and Oceania.
Under its strategy to 2020, Yakult plans to promote global consumer awareness of digestive health issues, expanding and cultivating worldwide markets. By 2020, Yakult aims to generate group-wide volumes growth of 38%. According to management expectations, Japanese sales will increase by 22% and international sales will grow by 46% – meaning that the company will generate a larger proportion of its revenues overseas.
Between 2014 and 2016, Yakult intends to support a “dramatic growth phase” that will see it “accelerate growth in international”.
Internationally, Yakult is focused on “solidifying” its existing operations in established overseas markets. The group is also expanding in emerging markets with the target of “building operating bases in China, the US and India and pursuing their planned expansion”.
Seasonings firm Ajinomoto aims to become “global group of food companies centered on the world’s No. 1 seasoning business”.
According to the company’s medium term business strategy, to 2016, the group intends to accelerate growth through two levers: international expansion and R&D. In this way, Ajinomoto aims to become a global top-ten food company.
“We will increase operating income from today’s JPY62bn (6.1%) to JPY91bn (8%) in FY2016, and then to JPY150bn (10%) after FY2020,” management forecasts.
Ajinomoto has targeted growth in the Asean countries and Latin America. “Business expansion [will be achieved] in tandem with a rising standard of living in ASEAN and Latin America, where the business foundation is strong,” president Masatoshi Ito says.