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Japan Food and Drink Report Q2 2010
Business Monitor International, March 2010, Pages: 82
Business Monitor International's Japan Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's food and drink industry.
While the Japanese economy is showing some signs of recovery following the global economic downturn, BMI is forecasting that this recovery will be long, drawn out and erratic. This news and its impact on consumer confidence, coupled with the fact that the Japanese food, drink and retail sectors are all at an advanced stage of maturity, have resulted in many of the country’s food and beverage producers, as well as its retailers, announcing further international expansion plans this quarter as they struggle with falling sales and profits, as discussed in BMI’s recently published Japan Food & Drink Report for Q210. Japanese brewers have continued to seek geographical diversification as they attempt to reduce their dependence on the country’s stagnant beer market. As such, brewing major Asahi announced that it is to enter into a distribution deal with Danish major Carlsberg in Hong Kong, which should see its Hong Kong sales lift from 180,000 cases in 2008 to 350,000 cases by 2014. Meanwhile, Japanese brewer Sapporo acquired a 65% stake in Carlsberg and Vietnam National Tobacco Corporation 50:50 joint venture (JV) Kronenbourg Vietnam. However, despite volume sales of beer forecast to fall 14.4% to 2014, the sector is still appealing and in February South Korean Hite Brewery entered into a deal with Japan-based foodstuff company Kawasho Foods to enhance its product sales in Japan.
Elsewhere, the country’s retail sector is suffering the effects of the economic downturn. This quarter saw a number of the country’s leading retailers announce poor results for the first nine months of the fiscal year. Industry giants Seven & I Holdings and AEON posted revenue contractions of 11.8% to JPY8.32trn (US$41.3bn) and 3.9% to JPY3.73trn (US$40.4bn) respectively for the period. Seven & I also announced that it would consider downsizing in order to achieve it target of profit growth in FY2011. However, while these results have not been helped by the economic situation, the industry has been struggling for some time as a result of stagnant wage growth and an ageing population, which have forced retailers to turn to international expansion. To this end, in December 2009, Japanese retail major Lawson Inc confirmed plans to increase its Chinese store network tenfold over the next five to 10 years in order to secure 10% market share in the Chinese convenience retail sector. With value sales through mass grocery retail (MGR) outlets expected to increase by an impressive 67.9% to 2014 in China, compared with an increase of just 1.3% in Japan over the same period, this move would appear well founded. As industry activity this quarter demonstrates, the environment for Japan’s food, drink and retail sectors is likely to remain tough and international expansion is likely to increase in the long term as companies seek to grow sales.
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