Overall Market Summary
M arket entry takes time in Japan, especially for ingredient suppliers. Manufactures are frequently searching for specific ingredients but can be unwilling to disclose new product development plans, and may be reluctant to candidly discuss product sourcing needs.
T he challenge for U.S. ingredient suppliers, therefore, is to build a relationship with potential manufacturer partners so that when new product needs arise, you will have a pre-existing relationship. In order to capitalize on those opportunities it is important have product and representation in-country. Therefore, building a relationship with a local importer is a critical early step.
The Japanese food processing industry is dominated by 15 major companies of which Kirin Holdings Co., Ltd is the largest (See Company Profiles). Total production of processed foods, excluding beverage and alcohol, has risen continuously except for a short-term slump from 2008 to 2011.
Ready-to-eat meals, processed grain products, and livestock products have been the main drivers of that growth. Growth in production of ready-to-eat meals in particular has been strong, increasing 54.1% from 2010 to 2017 per the Ministry of Agriculture, Forestry and Fisheries.
Key Market Drivers
Key market drivers for the food processing sector include:
Continued diversification of the Japanese diet.
As the number of women entering the workforce continues to increase– and marriage and fertility rates continue to decline– it is increasingly common that Japanese consumers purchase prepared foods instead of cooking at home.
A declining and aging population.
Weak economic environment, causing processors to seek out lower-cost food inputs and international processing options to maintain competitive prices. (However, a weak Japanese yen has recently caused a slowdown in import growth).
Heightened consumer and retailer food safety concerns.
Increasing interest in health and functional foods with an emphasis on the needs of the growing senior population.
Large food processors and retailers are increasingly purchasing sizeable quantities of product directly from trading companies.USDA Foreign Agricultural Service. GAIN Report Number: JA8503
Check list for market entry.
Check list for market entry.
Market Structure & Entry
The Japanese market structure and distribution system is different from the U.S. or European Marjet. The following illustration is a basic flowchart showing how imported products tend to enter and move through the traditional Japanese distribution system (US point of view):
Ingredient products will most likely be handled by a:
- General trading company
- First-line wholesaler
- Second-line wholesaler
- Food processor
It can be difficult to enter the Japanese market. Regulations on ingredients and additives are very strict, and exporters must ensure that their products are permitted in Japan. For additional information, please see below (Section C. 1.). As part of the product clearance and approval process, it is also common that local processors and the Japanese government request a great deal of specific information regarding product handling and composition. In addition, Japanese manufacturers have a reputation for demanding very high standards of product quality and consistency; while also having a reputation for working collaboratively with suppliers to develop long term supply relationships.
Despite the work involved, the Japanese market has enormous potential.
Strategies for entering the Japanese market will vary depending on product characteristics, competition, and the market environment. However, buyers in the food and beverage industry often prefer to find new products at large trade shows, or specially-targeted trade showcases, where they can look at many products at once. Therefore, the best way to learn about the market while getting the chance to talk to potential business partners is to participate in one of Japan’s many trade shows.
The largest food related trade show in Japan is FOODEX Japan, which takes place every March. Depending on your target market, other smaller trade shows can also be useful
Before You Start:
- Ensure your company has the production capacity to commit to the market.
- Ensure your company has the financial and non-financial (staff, time, etc.) resources to actively support your exported product(s).
- Evaluate whether your company has the ability to tailor your product’s packaging and ingredients to meet foreign import regulations, food safety standards, and cultural preferences.
- Evaluate whether your company has the necessary knowledge to ship overseas, such as being able to identify and select international freight forwarders, manage climate controls, and navigate export payment mechanisms, such as letters of credit.
Products that offer health and beauty or anti-aging benefits have always been popular in the Japanese market. A recent study showed that over 70% of Japanese feel the need to live a healthy lifestyle, and over 90% of women have experience dieting. A healthy diet is an extremely valued concept. The official definition of functional foods (FOSHU) and drinks in Japan is “food which is expected to have a specified effect on health due to the relevant constituents or food from which allergens have been removed” such as dietary fiber, oligosaccharides, non-calorie sweeteners, calcium, iron, mineral absorption promoters, beta-carotene, chitosan, specified soy protein, collagen, polyphenols, lutein (e.g. blueberry smoothies) lactic acid bacteria cultures (e.g. yogurt or chocolate), soy isoflavones, and germinated brown rice (GABA) have been included.
Research has shown that over 80% of Japanese women are aware of the term “anti-aging.” Japanese green tea (maccha) has a well known reputation for containing ingredients to make skin beautiful. Maccha products contain the entire leaf, ground to powder. Through mass media and SNS, maccha- based beverages and foods have enjoyed continued gains in popularity.
Another example of such products is a popular gummy candy that has added collagen to improve skin health. Food manufacturers are
always looking for the next anti-
aging breakthrough ingredients,
so exporters of ingredients with documented anti-aging properties are well positioned ot take advantage of that demand. It is especially helpful if exporters can offer something that is not yet widely available.
The major distribution line for these functional food products is through supermarkets and convenience stores.