Health and functional foods to Japan
(Last updated: 23 August 2013)
Trends and opportunities
The market
Japan is one of the largest functional food and beverage markets in the world with a market size (2012) of JPY1.8 trillion (approximately A$20 billion). The key trends supporting the market are a rapidly ageing society, an increase in lifestyle related health issues and a strong interest in health and beauty. In particular, products featuring disease prevention, boosting immunity and those labelled with Food for Specified Health Use (FOSHU) are major contributors to the 2012 growth. Examples include cola drinks which assist with fat burning and yogurt which improves influenza immunity.
The top three categories, based on sales were intestinal regulation (JPY284 billion or A$3.2 billion), lifestyle disease prevention (JPY228 billion or A$2.5 billion), and nutritional fortification (JPY219 billion or A$2.4 billion).
For other major categories, beauty skin care products reduced in-market share from 195 to 118 billion yen, while bone and joint support, and multi balance products also increased their market share.
Figure 1: Market share by types of product’s key functional claim
(Source: Fuji Keizai Group, H.B Foods Marketing Handbook 2013 Vol.3)
Distribution
A large percentage of health and functional food products are sold online, in catalogues and through TV shopping. These are called correspondence retail businesses and represent approximately 23 per cent of total sales (see Figure 2). Most suppliers provide special discounts for long term repeat purchases, encouraging consumers to place repeat orders. However, the ratio of these repeat purchases has recently decreased due to intensified competition among all types of the retailers selling health and functional food products.
Figure 2: Distribution channels for health & functional foods 2012 (JPY million)
(Source: Fuji Keizai Group, H.B Foods Marketing Handbook 2013 Vol.3)
Key drivers for consumer purchases of health and functional foods
- Scientifically proven health benefits
- Positive consumer experiences: a crucial point for repeat purchases
- Type of health benefit
- Name and content of key functional ingredients
- Country of origin: ‘Made in Japan’ usually has strong appeal, while Australia is generally seen as a producer of natural and high quality products
- Naturally derived ingredients: no artificial ingredients, and a simple and/or minimal production process
- Product brand name
Opportunities
In Japan, Australia is generally seen as a trusted, secure, and safe supplier of food and beverages due to its strict quarantine policy and advanced food safety and quality assessment system – a key competitive advantage.
Below are other key features and areas of opportunities for Australian suppliers:
- Food ingredients will have more potential in the Japan market. Marketing of overseas branded products in Japan requires a long term commitment due to regulatory requirements, awareness levels and understanding consumer preference in package designs and tablet size. For this reason, food ingredients may be a more appropriate opportunities for Australian suppliers. Materials that are unique to Australia, with scientific evidence of health benefits, and confirmed safety use as food ingredients provide further opportunities in a competitive environment. Examples of such products include:
- Bovine cartilage powder
- Freeze dried young barley grass or other fruit/vegetable powders
- Fish and shark liver oil (EPA)
- Herbs and spices derived from native plants that have proven health benefits
- As an ingredient supplier, becoming a ‘back up supplier’ can be a good way to initially enter the Japanese market because Japanese manufacturers are continually looking for ways to increase their production - especially if they plan to sell their product overseas. Manufacturers require a stable supply of quality ingredients, so they often secure two to three trusted supply sources for key ingredients as backup. Ingredients manufactured with advanced technologies are of interest to Japanese manufacturers, as well as special technologies that maximise production efficiency.
- Organic certification is an attractive feature, especially if the material is derived from plants. This is not always necessary, but the input of organic ingredients must be well balanced against the price accepted by the market. To be marketed as an organic product the product must have JAS certification. As of 8 June 2013, ACO and NASAA are the authorised certifiers of JAS under equivalence arrangement with Japan Ministry of Agriculture, Forestry, and Fisheries (MAFF). This agreement is limited to plant and plant products excluding wine and other products. Livestock and dairy products need to be assessed separately by these certifiers outside of the equivalence arrangement.
- Contract manufacturing is another option for market entry. Some Japanese manufacturers only develop their product standards and specifications, but do not have their own production facilities and are therefore reliant on outsourcing production overseas - particularly in Asia. Their manufacturing standards require GMP/HACCP/ISO certified facilities. Australia’s advanced food safety standards are a strong selling point, though cost of production is a challenge.
Tariffs, regulations and customs
Japanese importers are usually responsible for ensuring that imports comply with relevant regulations. However, Australian exporters need to be aware of any/all applicable regulations as legal responsibility could be incurred by the exporter through a contract. Regulations applicable to imported processed food include:
Note: Note: While the Japanese importer is generally responsible for ensuring imported products comply with regulations, exporters should be aware that this is not always the case and check whether any contract places the legal responsibility for regulations with them.
Depending on the product, any of the following may be required as part of customs procedures:
- Certificates of origin of major ingredients used
- Specification of colours, preservatives and additives
- A list of all ingredients used with the percentage breakdown
- Product process information
- Laboratory test results – types of tests vary according to nature of products
- Factory production quality control records
- Any chemical residue applied to crops
- Other certificates such as AQIS documents
- Tariffs on processed food vary according to products, ingredients and the degree of processing
The more complex and processed the food is, the more detailed the information required needs to be.
Marketing your products and services
Market entry
The economic downturn and increased competition amongst supermarkets and grocery stores has reduced the price of regular food and beverage products. Japanese food and beverage manufacturers are struggling to secure profits through product differentiation strategies or development of value added products. Therefore, more Japanese manufacturers are entering into the health and functional food sector - which is considered to generate more profit.
Some Australian food and beverage companies have achieved success in this sector through continuous approaches to Japanese customers and development of an in-depth understanding of the market. The health and functional foods sector is still very competitive in Japan. The keys to successfully exporting into this market are:
- Draw up a comprehensive export-marketing plan covering target segments, your strengths and weaknesses, external threats and opportunities
- Find the right partner (importer or distributor) and establish the foundations for a long-term relationship
- Ensure that you exercise the most stringent quality control on your product, especially in terms of product safety
- Ensure that you can supply consistent quantities within agreed timeframes
- Demonstrate a willingness to support promotional activities to market your product
- Clearly address your product’s competitive advantages and scientific proof of health benefits. Although Japanese companies usually show interest in new ingredients, materials and ideas, they are unlikely to use them unless the product has a proven safety record and health benefits, plus a high potential to win consumers’ interest. Products satisfying all these things will have more chance of success in Japan. Examples of such products include those that contain glucosamine, chondroitin, collagen, or a combination of these. These functional ingredients are well known by general consumers in Japan.
- Most Japanese companies prefer to have a direct business partner/ingredient supplier rather than dealing through a consolidator or agents to secure efficient communication and logistic arrangements. The Japan Food Sanitation Act sets very tough specifications and standards for foods imported into Japan. Suppliers will need to regularly communicate on these specifications with their importers.
The Austrade team based in Japan can assist with initial market entry, potential product launches, and in extending market opportunities for those companies already operating in the region.
To help us convert enquires into prospective business for you, tell us what your products offer. We are seeking interest from Japan market-ready and market-appropriate companies to:
- Present your product information to health and functional food manufacturers and seek feedback
- Present commercial opportunities to you that may arise from these introductions
Alternatively, we can tailor a market visit program and market research to meet your specific requirements on a
fee-for-service basis.
Links and industry contacts
Government, business and trade resources for Japan
Ministry of Agriculture, Forestry and Fisheries of Japan – www.maff.go.jp/e/index.html
Ministry of Agriculture, Forestry and Fisheries of Japan (JAS organic law) – www.maff.go.jp/e/jas/index.html
Ministry of Health, Labour and Welfare: Food Sanitation Law – www.mhlw.go.jp/english/topics/importedfoods/index.html
JETRO: Guidebook for Export to Japan 2011: Health Food and Dietary Supplements – www.jetro.go.jp/en/reports/market/pdf/guidebook_food_health_foods_dietary_supplem.pdf
JETRO: Specifications and Standards for Foods, Food Additives, etc. Under the Food Sanitation Act (Abstract) 2010 – www.jetro.go.jp/en/reports/regulations/pdf/foodext2010e.pdf
Australian resources
Japan External Trade Organization – www.jetro.go.jp/australia
Department of Agriculture, Fisheries, and Forestry (DAFF): Organic and biodynamic – www.daff.gov.au/agriculture-food/food/organic-biodynamic
Australian Certified Organic (ACO) – www.aco.net.au
The National Association for Sustainable Agriculture, Australia (NASAA) – www.nasaa.com.au
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.
Sources