15 October 2020

Key points

Japan – Supermarket sales continue to increase as stay at home consumption remains high. Major Japanese corporations have announced plans to permanently reduce rented office space in Tokyo, to increase work-from-home arrangements, and/or to shift staff and headquarters functions to regional areas of Japan.

Japan – Japan’s food service industry recorded a record 538 bankruptcies from January to August 2020. According to Values data marketing consulting firm, the number of people using food delivery services has increased by 70%, from 3.5 million in March to 6 million in July. Two major fast-food chains – Yoshinoya Holdings and Royal Holdings – have inaugurated delivery-only/take away-only restaurants in Tokyo.

Korea – Strict social distancing and travel guidelines over Korea’s largest holiday period, Chuseok, will continue to impact the food service sector. This may impact Australia’s food and beverages exports, including beef exports.

Korea – Weekly IFAM flights to Seoul are to be extended. This will benefit Australian exporters of beef, chilled salmon and kingfish, asparagus and broccollini.

Market opportunities

Resources

Japan – According to sources, investment in Japan’s oil and gas exploration sector is dropping precipitately as the country’s de-carbonisation policies force an energy pivot towards renewables. Liquefied natural gas is seen as preferable to the traditional hydrocarbon sector.

Fin-tech

Japan – Japan’s Ministry of Economy, Trade and Industry (METI) says that one of its key priorities during the next fiscal year will be ensuring the digital transformation of Japanese businesses. Concrete policy proposals will be formulated by year end. The announcement underlies an expected surge in demand for ICT and digital solutions in Japan, especially for tools and software that facilitate remote working.

Japan – The Japanese Bankers Association is considering opening up access to Japan’s bank transfer system to fintech companies. This would encourage competition and potentially lower transfer fees. The existing bank-transfer system processes approximately 6.5 million payments per day. Access is currently limited to deposit-taking financial institutions (banks and credit unions) operating under strict regulations. This would create a major opportunity for Australian fintech companies that specialise in money transfers and payments. A decision is expected by April 2021.

Ed-tech

Japan – Japanese universities are developing online programs in collaboration with their overseas partner institutions as an alternative to study-abroad programs. For example, Meiji University confirmed it will recognise credits that its students obtain through online courses delivered by partner institutions. Such programs also include collaboration with students from other countries through virtual joint projects.

Japan – The Financial Services Agency is trying to promote a more efficient financial settlement system in Japan, including through the Zengin Data Telecommunications System. Customers of this interbank money-transfer system have traditionally incurred high commission fees.

Korea – Korean demand for edtech is growing and the Korean Government plans to invest KRW 1.3 trillion (A$1.5 billion) to digitalise Korean education delivery by 2025. So far, content quality, server issues and copyright have been bottlenecks. According to EdTechX Global, Korea’s edtech market was worth KRW 4.0 trillion (A$4.6 billion) in 2019; it is projected to grow substantially in the next three years.

Korea – Korean Air Lines (KAL) reported a surprising US$125 million profit in Quarter 2, thanks to a 95% increase in cargo revenue. KAL is seeking new government approvals for additional converted cargo carriers. The capacity of KAL’s converted passenger jets is 33 tons per plane.

Food & Beverage

Japan – A new ‘Go To Eat’ campaign has commenced to support the restaurant trade. The program is sponsored by the Ministry of Agriculture, Fisheries and Food, and has a budget of ¥148.4 billion (A$1.98 billion). The points and coupons scheme will subsidise restaurant dining until March 2021. According to sources, reservations are already increasing. Across the food service sector, fast food is the least impacted by COVID-19: sales in August were down just 4.4 per cent, year-on-year.

Japan – Supermarkets report a 6.7% increase in sales compared with the same month last year. All food categories except ready-to-eat/cooked meals increased their sales. Sales of fresh fruits and vegetables increased the most, by 16.7%. Seafood, meats and other foods increased by 7.9 percent, 10.3 percent and 4.5 to 7.6 percent respectively. Consumers continued working from home as the number of COVID infections increased across Japan again in August, and this has been the key factor supporting the continued growth of sales by supermarkets.

Japan – Plant protein is a growing trend. In recent years, the number of people who avoid eating meat is increasing, particularly among the younger generation. Motivations are mixed and range from health-related to environmental. ‘Meat-free-Mondays’ are popular. Though relatively small, the vegan population in Japan has more than doubled compared to two years ago. In the post-COVID-19 world, vege-meat business is likely to expand.

Japan – IFAM-supported shipments of fresh Asparagus to Japan have recommenced without major issues. Australia is the dominant supplier of fresh asparagus from September to November, and Australia usually accounts for over 80% of the entire supply in Japan during this period. Mexico is the principal competitor; from September to November 2019, the CIF price per kilo of Mexican asparagus almost matched Australian asparagus.

Japan – The price of Australian beef is falling, following lower global demand in the food service sector and lower demand from China. Beef flank is currently selling at around ¥600 (A$8.00) per kilo in wholesale markets indicating an 8% drop from July. In the last few years, Japan’s beef imports have shifted from Australia to the US and Canada, owing to higher Australian prices and a preference for grain-fed beef. An uptick is unlikely because of a huge over-stock of beef from Japan’s struggling food-services industry.

Japan – Meanwhile, cheese sales have soared. This is due to increased alcohol consumption, which apparently triggers increased demand for cheese. Typically, household consumption of cheese drops during the summer, but demand has exhibited double digit growth for five consecutive months. According to Nikkei POS information, sales per 1,000 customers in July were JPY16,400, up 20% compared to the same month last year and the same volume as Christmas time, which is peak cheese season in Japan.

Japan – The import of frozen farmed Southern Bluefin Tuna from Australia has re-commenced The estimated amount of frozen product to be imported into Japan in 2020 is 7,500 tons. This is a slight drop from the 8,000 tons imported last year. Price negotiations with Australia this year began with extremely low prices giving rise to speculation that consumption will increase over the Japanese summer and autumn period. A rise in prices is anticipated as consumption increases.

Japan – Health and wellness considerations are influencing food trends in Japan. Japanese food and beverage companies have developed new foodstuffs for the coming autumn and winter seasons in response high demand for wellness and immune system-boosting consumables. For instance, new vegetable beverage products contain functional ingredients such as vegetable lactic-acid bacteria to improve the immune system. This implies greater potential receptivity to Australian health and wellness goods.

Korea – Korean conglomerates are exiting family restaurant businesses and focusing more on home meal replacement (HMR) offerings. Eland Eats has closed 30 stores this year and started a HMR businesses; CJ Foodville is in the process of selling two major F&B chains and transitioning some of its food processing plants into HMR production facilities. Demand for HMR and new F&B services models such as shared kitchens will continue to increase.

Manufacturing

Korea – Korean factories are seeking smart manufacturing technologies. On July 23, the Korean government announced a plan to build 1,000 5G and AI-equipped smart factories by 2025. This follows a 2018 plan to build 30,000 smart factories by 2022, in partnership with the nation’s major manufacturers and telcos. However, there have been concerns that to date, over 80% of the planned transformation related to basic automation, as opposed to technologies such as connected data, predictive and prescriptive analytics, and AI-driven automation.

Korea – Korea is actively looking for investment opportunities that will help the country to diversify input sources for its three key manufacturing industries – semi-conductors, cars and ship-building. The Korean Government’s investment-promotion agency, Invest Korea, is actively helping Korean companies – especially in the field of mergers and acquisitions – to strengthen the supply security of key materials.

Industrial

Korea – Under the Green New Deal project action plan announced last month, the Korean government pledged to invest KRW 73.4 trillion (A$85.5 billion) in renewable energy infrastructure and eco-friendly businesses. However, there’s a concern that local companies are relatively new to the green industry and may not be competitive against foreign firms. Australian service providers with expertise in offshore wind, electric vehicle (EV) infrastructure and green building could benefit.

Transport

Korea – E-scooter and e-bikes are gaining popularity in Korea. The country’s major mobility players – which range from manufacturing (Hyundai Motors), internet (Kakao Mobility) to car-sharing (SoCar) – are investing continuously and conducting trial services to find new business opportunities. Korea’s micro mobility market is expected to grow 20% on average per year and is expected to reach KRW 600 billion won (AUD 700 million) by 2022.

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