Beverages to Japan

(Last updated: 30 Sep 2008)

Trends and opportunities

The market

Changing tastes among young Japanese have caused a swing away from traditional beverages to low-calorie and natural health drinks. Mineral and spring water consumption has increased and there has been a significant surge in the popularity of beverages that have vitamin and mineral supplements.

With Japan’s ageing population, sales of health drinks are likely to continue to grow, so exporters should focus on product development for this sector.

Brewed effervescent low malt beverages (known as Happoshu) and alco-pops (flavoured alcoholic sodas), are the two major growth areas. Brewed beverages with low malt content, which are not classified as beer (and significantly cheaper than normal beer) have taken up a large share of the market.

Sales of Italian and Seattle style espresso coffee have also increased in recent years, together with the growth of popular coffee chains such as Starbucks.

There are a number of important developments in the market that will favour importers:

• Domestic and international organic certification legislation has been assessed, and a decision on the validity of Australian certified products in Japan has been handed down by the Ministry of Agriculture, Forestry and Fisheries. All four AQIS-approved organic certifying organisations (NASAA, BFA, the Bio-Dynamic Research Institute and the Herb Growers of Australia) have been accredited to certify organic exports under Japanese law.
• Large multi-nationals such as Coca-Cola have begun diversifying into teas and juices as well as their standard effervescent drinks, making competition fierce, but giving Australian manufacturers a cost advantage due to the weak Australian dollar.
• Opportunities exist for Australian companies to establish ties with large players in Japan, with the recent trend for Japanese beverage companies to enter into joint venture projects with foreign companies who provide finished products or technology.

Opportunities

Japan is a very diverse market with a vast number of beverages available, ranging from canned beer to cold green tea to hot sweet coffee. Can sizes also vary considerably, from small sizes (250 millilitres) up to large two litre cans. This huge canned beverage market is unique to Japan, with drink vending machines on virtually every street corner. Such machines carry both hot and cold drinks and recently, recyclable PET bottles have begun appearing as well.

Opportunities in alcoholic and non-alcoholic beverages:

• Alco-pops (fruit flavoured alcoholic soda, spirit mixers)
• Effervescent alcoholic beverages with low malt content (known as Happoshu)
• Low alcohol beer
• Mineral and spring water
• Health drinks (water-based drinks with nutritional supplements, vegetable juices)
• Brewed malt beverages under one per cent alcohol (classified as non-alcoholic)
• Italian style espresso coffee
• Fruit juices

Competitive environment

Many consumers do not drive a car to do their shopping; they travel either on foot, on public transportation or on bicycle. Therefore package size is a critical factor. Many shop four to five times a week and buy and cook in smaller quantities. Japanese supermarkets tend to have more limited shelf space than Australian retail outlets, and overall products are smaller in size.

Competition for consumer attention remains intense and beverage manufactures continue to focus on new product launches and aggressive marketing campaign to boost their sales. For example, recent new products include Zero calorie Cola, soda pops with fruit flavour (eg. lemon, grape, pineapple) and mixed juice like tripleberry (strawberry, cranberry, raspberry). Consequently, manufacturers are increasingly expected to develop value-added beverages to compensate for slowing volume sales. They are also expected to continue to emphasis the use of premium ingredients and advanced processing techniques. Many beverage players continue to focus on their efforts on developing functional and fortified variants of standard beverages in the race to satisfy consumer demand for healthy beverages.

Nearly one thousand new products are launched to the Japan market one after another every year, however only 10 items can survive until next year. National brand (NB) are selling at discounted prices in supermarkets and some Private brands (PB) have appeared on the market.  Increased production/logistics costs hinder manufacturer’s profitability.

While foreign brands have made headway into Japanese beverages, namely in carbonates, fruit/vegetable juice, bottled water and RTD coffee, it is noteworthy that foreign companies, with the exception of Coca-Cola and Nestle, have a very limited presence. Most major foreign beverage companies operate in partnership with a domestic company, preferring to tap into existing distribution networks and expertise.

Tariffs, regulations and customs

Although customs duty on beer and low malt effervescent alcoholic beverages has been abolished, customs duty and liquor tax apply on all other alcoholic beverages. This tax varies according to the level of alcohol present and should be calculated on a case-by-case basis.

The Japan Tariff Association has further information on current import tax rates, tariffs and regulations in the ‘Publications’ section.

Industry standards

Strict standards and regulations apply regarding preservatives and colourings, and on packaging materials.

Labelling must be in Japanese and include details on the ingredients and the importer. Standards for products vary, and requirements should be identified on a case-by-case basis.

Marketing your products and services

Market entry

Japan’s beverages industry is highly competitive, but opportunities exist via regional importers and distributors as well as through the traditional channels of major beverage companies such as Kirin, Asahi, Suntory, Sapporo or Takara. As Japan is such a large market, it is recommended that regional markets be seriously considered as a point of entry.

When marketing your product in Japan, consider the following:

• Regular visits to the market are essential
• Commitment to relationship building is pivotal to success in Japan
• Presentation of any product is crucial, so careful consideration must be given to size, colour and packaging material
• Identifying the most suitable partner is a key factor to long-term success

There are numerous trade fairs in Japan, including FoodEx, which is a major food and beverage exhibition, held annually.

Potential exporters are recommended to consider trade exhibitions to assist market entry as part of their strategy. Other small scale and targeted trade fairs include, Bio Fach (organic and natural trade fair), the Supermarket Trade Show, IFIA (international food and beverage trade fair), FABEX (the World Food and Beverage Great Expo) and Gourmet & Dining Style Show.

Online opportunities are developing in some areas, but due to language problems and the reluctance of Japanese to divulge credit card details online, the volume of business-to-customer (B2C) sales is still small compared to Western countries.

An increasing number of beverage companies are constructing English sites, so it is expected that business-to-business (B2B) opportunities will increase for Australian exporters in the future. There is potential for exporting online, but at this point in time the major opportunities are in commodities rather than manufacturing.  

Distribution channels

The distribution system in Japan is complex and multi-layered. Specialist importers and distributors exist for each sector (Retail and FS), so careful consideration is necessary when choosing a business partner. The major beverage companies have national distribution systems in place but don't spend as much time or energy in developing the market share of a specific brand/product compared to a smaller importer/distributor who has fewer products on which to focus.

It is strongly recommended to consider smaller medium-sized specialist importers, who can direct more time to particular brands and also, importantly, develop business with end-users outside major cities. There is considerable business to be won in regional areas, as there is less competition from other overseas suppliers, but it is vital to work with a local partner (ie. smaller medium-sized importers) who can deal with these usually more conservative end-users.

Links and industry contacts

Beverage–related resources

Unfortunately, almost all useful industry sites are in Japanese.
One example is Beverage Japan - www.beverage-j.co.jp

FoodEx - www2.jma.or.jp/foodex/en/index.html

The Japan Soft Drinks Association
Tel: +81 3 3814 0666
Fax: +81 3 3813 9739

Japan Import Beer Association
Tel: +81 3 5489 8888
Fax: +81 3 5489 8889

The Mineral Water Association of Japan
Tel: +81 3 3350 9100
Fax: +81 3 3350 7960

Government, business and trade resources for Japan

Japan Tariff Association - www.kanzei.or.jp/english/index.html

Australian resources

Japan External Trade Organization (JETRO) Sydney - www.jetro.go.jp/australia 
Level 25, Gold Fields House
1 Alfred Street
Sydney NSW 2000
Tel: +61 2 9276 0100

Japan External Trade Organization (JETRO) Melbourne - www.jetro.go.jp/australia/melbourne/index.html
Level 21, 101 Collins Street
Melbourne VIC 3000
Tel: +61 3 9654 4949
Fax: +61 3 9654 2962