An economy in the doldrums for years, stagnant consumption, a falling population. To some, Japan may not appear the most attractive market for international food companies. Food imports have also fallen in recent years. However, the country still has to import 60% of its food, while export bodies believe there are growth opportunities to exploit. Dean Best reports.
Japan has lost some of its lustre in the last decade and more, particularly among international companies eyeing what many have believed are stronger growth prospects in Asia, not least in China.
There is no denying China’s economic muscle. China overtook Japan as the world’s second-largest economy in 2011 while, according to some estimates, it is set to leapfrog the US and become the world’s number one economy this year, when measured at PPP rates. China’s growth trajectory also looks rosier than Japan’s and other markets in south-east Asia, including Indonesia, appear to have stronger prospects.
Zeroing in on the food sector, Japan does represent a sizeable market for the targeted international food company or exporter. At the most basic level, Japan is an obvious destination for food exporters. Around 60% of what the Japanese eat is imported. The country’s food and beverage market is worth US$821bn.
However, stagnant consumption and an ageing population, as well as stringent regulation on exports, have given Japan a reputation as a difficult place to do business. And, in recent years, food imports to Japan have fallen.
Nevertheless, when speaking to some of the nations among the leading food exporters to Japan, there is an insistence that food companies should continue to place importance on the market.
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“While Japan is not growing at the rate China is, it offers a market that is mature, very stable and reliable – and does have that demand for quality, for premium and safe food. While there is a lot of interest in the enormous growth of China and Indonesia, a lot of exporters are interested in having Japan in that export portfolio,” Tanya Barden, trade policy director at the Australian Food and Grocery Council, tells just-food.
Japan, Barden says, is Australia’s largest food and beverage market. Australian food businesses sold A$3bn (US$2.79bn) worth of food and drinks to Japan last year. According to UN Comtrade data compiled by the AFGC, Australia is among the top four exporters of “substantially transformed” food to Japan. That said, Barden concedes Australia’s market share has “plateaued over the last 20 years or so”. The data for 2012 showed Thailand had leapfrogged Australia into third place, behind China and, at number one, the US.
A “significant proportion” of Australia’s exports to Japan are agribusiness products, led by beef and dairy, Barden says. However, the country’s food manufacturers want to build their share of sales of imported processed foods and Barden has identified potential growth categories. “The Australian food industry is very much interested in value-adding and not just being an exporter of bulk commodities,” she says. “In terms of the more processed side of foods, where they are heading with Japan’s ageing pop and more single-person households, there’s more focus around healthier foods and ready-to-eat meals. There’s increasing focus on healthy foods, natural foods, organic foods and functional foods.”
Susan Powell, president of the Canadian Food Exporters Association, agrees health should be an area on which companies interested in doing business in Japan should focus. “Anything they deem as a healthy or functional food is definitely going to have opportunities, Powell says. “I think gluten-free is going to take off there.”
The organisers of the Biofach Japan expo set to take place in November say demand is growing for organic products, with particular demand for products from Europe due, they say, to the strict certification requirements they have to meet. At present, 0.4% of Japanese cultivable farmland is certified organic but, in a sign of the confidence of the growth of the sector, the country’s government hopes that percentage will double by 2018. There is, however, scope for international organic food producers.
Akiko Yanagisawa, senior trade adviser at UK Trade & Investment in Tokyo, acknowledges demand is growing “gradually” in Japan but argues consumers have been slow to accept organic food. “When the Japanese think of organic food, they think it might be good for your health but not necessarily tasty, so they don’t want to pay a higher price for what might not necessarily be delicious food,” she says.
The UK does not rank among the top ten food exporters to Japan. Yanagisawa reels off a number of British brands and businesses that have had “success” in Japan, from the now mass-market Cadbury, to Walkers Shortbread, and more recent entrants like Tyrrells and Churchill Confectionery.
She cites taste as key to a brand’s success in Japan and believes companies should focus more on upmarket retailers. “If you try to target the mass market, you may not be able to compete on prices,” Yanagisawa tells just-food. “The opportunity is not in mass market but in the mid-to-upmarket supermarkets and also department stores.”
UK exporters, Yanagisawa says, must target their products carefully. If they do, they can reap rewards, even in a competitive market. And, in some ways, it is advice exporters from other nations could do well to take in.
“We have a sophisticated market. It has two faces. Because we have a sophisticated market, with a very strong local industry and the competition is keener but we have good consumers who may be able to appreciate the value of British foods if they have the right products. If you are trying to target the mass market, maybe Japan is not right.”
According to the UN Comtrade data, beyond the top four of the US, China, Thailand and Australia, the top nine food exporters to Japan consist of France, then Canada, followed by Brazil, Denmark and South Korea.
Six of the top nine export countries would be classed as developed markets but how does a leading emerging-market exporter view Japan?
Brazil is a significant exporter to Japan. It has become the second-largest corn supplier to Japan and is responsible for 90% of the country’s chicken imports, according to export promotion agency Apex Brasil.
It had been enjoying steadily rising sales to Japan up until and including 2011 but that fell back in 2012 and 2013. However, Apex Brasil says total food imports into Japan fell in those years and, while Brazil’s decline in 2012 was steeper than the market, last year, the drop (6%) was less than the market as a whole (8%).
“Japan is our eighth biggest export market for food products, with a 3.1% share in our total food exports in 2013,” Apex Brasil says. “In Asia, it is our third-biggest market, behind China and Hong Kong.”
Brazil’s major products appear more commodity-focused – like chicken meat and coffee – and Apex Brasil says there are now “good growth prospects” for pork after Japan recently opened its doors to the country’s pork. However, the agency notes sectors like organic food are “promising”.
Speaking to representatives from some of the major food exporters to Japan, there was, despite recent falls in import sales and challenging demographics, a call for companies in their home markets to continue to look at the market.
And, as this management briefing outlines, Japan’s economy is showing signs of recovery. As Japan’s economy picks up, disposable income could rise, giving more opportunities for exporters to Japan armed with health-focused or more premium food products.