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Japan Food & Drink Report Q1 2008
Business Monitor International, Feb 2008, Pages: 75
The Japan Food Drink Report provides independent forecasts and competitive intelligence on Japans food and drink industry.
The newly-published Japan Food & Drink Report for Q108 examines how Japan’s food and beverage markets remain frustrating for both existing and would-be investors. On the hand this is one of the world’s largest and highest-spending consumer goods markets, boasting buyers that are highly responsive to all innovative new product launches. On the other it is an enormously mature market, in which sales in certain key industry sub-sectors have been stagnating for years in spite of sustained domestic and international investment. This conflict is highlighted by Japan’s position in the new Food & Drink Business Environment Ratings - included for the first time in this report. Placing fifth out of 14 analysed markets, Japan’s appeal to investors is plain and yet market maturity, the absence of clear-cut growth opportunities and severe food import dependency all serve to make investors think twice.
The strategic activities of a number of Japan’s leading industry players, as discussed here, also serve to make the point. Leading breweries Asahi Breweries and Kirin Holdings - struggling in a beer market that the author expects to grow by just 9% in volume terms to 2012 - are both increasingly prioritising product diversification and more importantly international expansion; Kirin frenziedly so. Within the final few months of 2007 Kirin paid US$2.6bn each for local drug maker Kwoya Hakko Kogya, to bolster its pharmaceuticals divisions, and Australian food major National Foods, to improve its geographic diversity. In pursuit of the latter objective, Kirin also expanded its soft drinks interests in China with the construction of a new Shanghai plant, as well as entering into a soft drinks joint venture in Vietnam.
However, while many firms look beyond Japan for growth, others are continuing to prioritise seeking new opportunities within the country. Leading cigarette producer Japan Tobacco International (JTI) - keen to diversify away from what is now a declining industry - has sought expansion in the domestic food market. In November 2007, in partnership with Nissin Food Products Co, JTI acquired frozen food manufacturer Katokichi Co. Yes, frozen food is also a mature market sub-sector, but for both companies it offers sufficient synergies and development potential to be deemed worthy of a US$1bn acquisition.
Seeking a different sort of opportunity, Swiss chocolate giant Barry Callebaut upped its commitment to Japan at the end of 2007, entering into a partnership with local food producer Morinaga. Of course, in this age of health consciousness, the confectionery industry - which the author expects to grow by just 7% by volume to 2012 - is about as stagnant as it comes. However, Callebaut has viewed this as an opportunity, not a risk. Yes, people are consuming less chocolate, but why not then get them to indulge in better quality, more expensive and perceived healthier variants, on which producers make far greater margins?
The following report shows that Japan is, and will remain, a hugely attractive market for food and drink investors, provided they have the capacity to innovate and the willingness to accept sound profits and steady sales over explosive long-term growth.
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