Health and functional foods to Japan

Trends and opportunities

The market

The growth in the Japanese market for health and functional foods can be attributed to a number of key population trends including the rapidly ageing society, an increase in lifestyle related health issues and a strong interest in health and beauty.

Major contributors to this recent market growth include products for intestinal regulation, lifestyle disease prevention, nutritional value, bone and joint support, dietary management, skin and beauty enhancement, and those labelled with Food for Specified Health Use (FOSHU).

Examples of these products include:

• ‘Tokuho’ drinks such as Lemon Tokucha (green tea by Suntory), Juuroku cha (blended tea by Asahi) and Karada Sukoyaka cha W (blended tea by Coca Cola)
• yoghurt products containing special lactic acid bacterium which improves immunity from influenza and/or improves intestinal regulation
• energy drinks which claim nutritional value.

With the prospective of a consumption tax increase in 2019, higher priced products have tended to struggle and the growth of the health foods market is expected to slow down in the next few years. (Source: Fuji Keizai Group, H.B Foods Marketing Handbook 2015 Vol.3)

Food business operators are responsible for supporting their health claims with scientific evidence and pre-market review by CAA is not required. (Source: Consumer Affairs Agency, Government of Japan, 'What are "Foods with Function Claims"?', December 2015). This simplified process compared to FOSHU, helps food manufacturers and distributors enter their products in the market with less cost and shorter lead times which enhances market expansion.

Opportunities

In Japan, Australia is seen as a trusted, secure and safe supplier of food and beverages because of its strict quarantine policy, advanced food safety and quality assessment system.

Food ingredients

The 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. Materials that are unique to Australia, with scientific evidence of health benefits and confirmed usable food ingredients, offer further opportunities in a competitive environment, including:

• bovine cartilage powder
• whey protein 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 benefit

Japanese manufacturers are continually looking for ways to increase their production. Manufacturers require a stable supply of quality ingredients and 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.

Some Japanese manufacturers develop their product standards and specifications, but do not have production facilities instead outsourcing, particularly Asia. Manufacturing standards require GMP, HACCP and ISO certified facilities. Australia’s advanced food safety standards are a strong selling point, though cost of production is a challenge.

Competitive Environment

The health and functional foods sector is still very competitive in Japan. Despite Australia’s reputation as a safe and trusted supplier, the economic downturn and increased competition amongst supermarkets, grocery stores and pharmacies who sell food products has reduced the price of regular food and beverage. Continued discount of health and functional foods at pharmacies have reduced the value of sales and is becoming the key attraction for consumers entering the stores.

Japanese food and beverage manufacturers are struggling to secure profits. More Japanese manufacturers are entering into the health and functional food sector, which is considered to generate relatively more profit.

Marketing your products and services

Market entry

Some Australian food and beverage companies have achieved success in the sector by developing an understanding of the market. Some key considerations and actions when exporting into the Japanese health and functional food market:

• 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.
• Make sure 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 consumer interest. Products satisfying all these things will have more chance of success. Examples of such products include those that contain glucosamine, chondroitin, collagen or a combination of both.
• Most Japanese companies prefer to have a direct business partner/ingredient supplier rather than dealing with a consolidator or agent to secure efficient communication and logistic arrangements. The Japan Food Sanitation Act sets tough specifications and standards for foods imported into Japan. Suppliers will need to regularly communicate on these specifications with their importers.

Organic certification

To be marketed as organic, the product must have Joint Accreditation System (JAS) certification. As of 15 November 2013, Australian Certified Organic (ACO) and The National Association for Sustainable Agriculture, Australia (NASAA) are the authorised certifiers of JAS under an equivalence arrangement with the 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.

Distribution

A large percentage of health and functional food products are sold online, in catalogues and TV shopping channels. These are called correspondence retail businesses and represent approximately 24 per cent of total sales. The two major categories in 2013 consisted of ‘healthy diet/weight reducing’ foods containing enzymes and ‘beautiful skin’ products containing placenta. Door to door sales channels remains strong with senior citizens.

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 contracts. Regulations applicable to imported processed food include:

• Food Sanitation Law
• Japan Agricultural Standards
• Product labelling regulations
• Product liability law
• Organic standards
• Other regulations may also apply in special cases

Depending on the product, any of the following may be required as part of customs procedures:

• certificates of origin for 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.

Detailed information is required for complex and processed food.

Links and industry contacts

Government, business and trade resources

Ministry of Agriculture, Forestry and Fisheries of Japan
Ministry of Agriculture, Forestry and Fisheries of Japan (JAS organic law)
Ministry of Health, Labour and Welfare: Food Sanitation Law
Japan External Trade Organization
JETRO: Guidebook for Export to Japan 2011: Health Food and Dietary Supplements
JETRO: Specifications and Standards for Foods, Food Additives, etc. Under the Food Sanitation Act (Abstract) 2010

Australian resources

Department of Agriculture and Water Resources
Australian Certified Organic (ACO)
The National Association for Sustainable Agriculture, Australia (NASAA)

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
• strengthen Australia's tourism industry
• seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.