The Characteristics and Latest Trend
of the Food Market in Japan (1/2)
Contributed by: Mr. Taketoshi Arikawa (Chairman of FTA committee, JTBF)
・・his article is a transcript of lecture given to the food industrialists of East Asian countries in AOTS seminar of March 12, 2008.・・/p>
- The characteristics of the Food Market in Japan
Transition of Market Size /
Transition of Market Size & Share by Food Categories /
Consumers' Price Index /
Self-sufficiency Rate of Food /
Population Problem /
- Recent Issues (Food Safety and Peace of Mind)
Consumers' Concern on Food Safety /
Foreign Material Contaminants /
Labeling of Genetically Modified Organisms (GMO) /
Labeling Obligation of Allergenic Material /
Mad Cow Disease (BSE) /
Bird Influenza /
Positive List of Agricultural Chemicals /
Fraud Labeling /
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1. The characteristics of the Food Market in Japan
In Fig.1-01, the blue line indicates import of food goods. It also grew from 0.921 trillion yen of 1970 to 3.326 trillion yen of 1980, namely 3.6 times growth in 10 years. It reached 4.572 trillion yen in 1990. Both charts. however, show the growth has slowed down since 1990. It was because Japanese economy faced an end of the booming period and entered a stagnant phase. So called deflation as well the population problem contributed to the slow-down to a certain extent.
In general, both charts show similar growth trend, which suggests imported food items were used as raw material for various food fabrications.
Fig.1-01: Transition of market size (Nikkan keizai Tsushinsha, MOF for amounts of import・・/p>
Transition of Market Size & Share by Food Categories
An upper part of Fig.1-02 shows transition of market size segmented by food categories, while a lower part shows transition of market share among the categories.
Fig.1-02: Market size & share by food categories (Nikkan keizai Tsushinsha incl. estimation of 2000・・/p>
Let me go further to look at food categories which are growing in market share.
In the soft drinks market (light blue), the major player has been changing over the time. In 1950, 80% was occupied by carbonated beverages such as lemon soda and soda pop. Then, the vending machine became more and more popular in Japanese life style, which promoted big growth of fruit juice, coca cola, canned coffee, and so on.
Fig.1-03: Transition of soft drinks market (Association of Soft Drinks Industry・・/p>
Recently, categories of tea, such as green tea and oolong tea, and mineral water are in a growing trend, while carbonated beverages and fruit juices are in a decreasing trend. While competition is getting harder, differentiation of the product has become more and more important. Packaging has also become important. Plastic bottles which have easiness of capping/uncapping or wide-mouthed cans are more appreciated than the traditional bottle or can. Recent trend is to put higher priority on appearance and easiness-of-use over product content itself. A typical new example is the plastic bottle which has resistance to high temperature deformation, convenient for containing hot drinks in the winter season. It is a success story of technology advancement which has acquired a wider appreciation of consumers.
Frozen foods (yellow) have increased the market share greatly in the 1980s since the full-fledged type was born late in the 1960s. The growth was supported by establishment of distribution network of frozen goods as well as growing home use of refrigerators and microwave ovens. It grew to 740 billion yen in 2000.
Fig.1-04: Transition of frozen food market (Association of Frozen Food Industry・・/p>
Fig.1-04 shows transition of frozen foods by category. Cooked food is in the first ranking, more than 10 times larger than others. The cooked foods are broken down to croquette (1st), noodle (2nd), fried rice (3rd), cutlet (4th), hamburger (5th) and so on.
Now, let us look at food category which has emerged since 1970. The start of retort food (watery color) goes back to lunching of curry roux in 1968. Since then, it was expanded to Ma-po Dou-fu paste, which was well accepted by consumers. Recently, diversification has been accelerated in this food category, as seen in application for Chinese food paste, pasta source, Asian food paste, etc. Shift of demand from canned food to retort food was also a driving factor. The market size has grown to 270 billion yen. The biggest selling point of the category is easiness of use and a longer shelf life, which enables attractive product offering for single house holders, young as well as old generation.
Health-food industry is colored in purple in Fig.1-02. Growing health-consciousness of consumers, together with new entry of food companies into this market segment, has contributed to growth of this category.
Fig.1-05: Transition of health-food market (Newspaper of Health-Food Industry・・/p>
The growth continued and reached 1.285 trillion yen in 2005. In 2006, however, the market recorded a negative growth rate for the first time. Introduction of the positive list (agricultural chemicals), maximum intake regulations of some sorts of health-foods, etc. are considered to have held down the consumption. Or, restriction of TV programs in dealing with health-food has considerably contributed to the negative growth also.
But, even under the situation as such, a number of products which are qualified as "food for specified health use" are well accepted by consumers. Because positive effect for health is proved with these products by Health, Labor and Welfare Ministry, many health conscious consumers are willing to purchase in spite of higher prices.
Fig.1-06: Market size of food for specified health use (JHNFA survey)
You will find qualification mark of "food for specified health use" as well as its market size in Fig.1-06. While new products are expected to emerge in preventing metabolic syndrome, this category is expected to grow further.
Fig.1-07 shows the latest trend of transition of food categories since 2001. There has been very small movement in the market size in these years. A declined consumption trend due to the stagnant economic growth, the stagnated population growth and other factors are considered to explain the trend.
Fig.1-07: Recent trend of transition of food categories, 2001-2007 (Nikkan keizai Tsushinsha)
Now, let us look at the current food industry from different view angles.
Consumers' Price Index
Fig.1-08 shows consumers' price index (change over the year %) consolidating food, garment, electronics and various services.
Fig.1-08: Consumers' price index (Statistics Bureau Ministry of Internal Affairs and Communications)
In Japan, after the collapse of bubble economy, which continued till decade of 1990's, the index lowered year by year and marked the negative growth in 1995 for the first time since 1971. Comparing with other advanced countries, Japan alone indicates the negative transition. In such environment, the salary of workers has had no way of increase in past several years, which drove consumers look after cheaper prices. Some said the economy had fallen into a deflation spiral. It is in an up-trend since 2003, but still lower than other advanced countries.
Self-sufficiency Rate of Food
Let me refer to self-sufficiency rate of food, which is one of fundamental elements of food industry. Self-sufficiency rate is an index which shows food consumption containable within the country. If all consumption is containable within the country, the rate is 100%. If half of the consumption depends on import, the rate is 50%. USA and France, whose indexes are over 100%, are export countries.
Comparing calorie-based self sufficiency of Japan among major advanced countries, Japan's rate is getting lower year by year. It used to be 60% in 1970. It came down close to 40% in 2003. According to the recent report, it has become lower than 40% already. Japan has a handicap of narrow land in relative to population. Increase of meat demand in line with westernization of food-style has also contributed to low level self-sufficiency. Comparing with 173 countries over the world, Japan is in the 130th position. Comparing with OECD member countries, 28th out of 30 countries. Japan consume 10% of the total agricultural import amount of the world.
Fig.1-09: Self-sufficiency rate by country (Ministry of Agriculture. Forestry and Fisheries)
Fig.1-10 shows transition of self sufficiency rate by major food categories. As compared to 1970, rice keeps a high trend. But, meat and sea-food are in a lowering trend.
Chicken, pork, seafood and beef are in a sluggish trend impacted by increasing import. In regard to lowering trend of seafood, decrease of fish catches is remarkable in recent years. On the other hand, European and other countries have turned to be consuming countries, which makes the supply to Japan unstable than before. With these circumstances in the background, fish farming is increasing year by year. Grains undergo low transition namely 3% of soybean and 14% of wheat. Self sufficiency rate of sugar has been increasing. Chicken and beef are in an up-trend in recent years. This is because the bird influenza and BSE problems have prompted consumption of domestic meat.
Fig.1-10: Self sufficiency rate by major categories (Ministry of Agriculture. Forestry and Fisheries)
So far we have seen the food industry of past years in relationship with self-sufficiency rate. In the future, the food industry will face a turning point as driven by a population problem. Fig.1-11 shows transition of population in 100 years, from 1950 through 2050. Each bar is segmented by age, namely 0・・9, 20・・4 and over 65. Population increase rate, which used to be high enough to support fast growing economy, started to slow down in 1990 and entered stagnation period from 2000.
Fig.1-11: Transition of population (Statistics Bureau Ministry of Internal Affairs and Communications)
According to population forecast based on the recent census of Japan, it will hit a peak of 127 million in 2006 and then will be in a decreasing trend. In the mean time, ratio of aged population will increase, namely 1 out of 5 will be over 65 years old. Birth rate is a critical factor. According to the latest report, it was 1.29, record low, in 2003. Then, there is no positive factor in regard to population problem.
The population problem as such will impact the society in view of labor shortage, aging society, women's social advancement, increase of nuclear families, increasing need of child-raising support, and so on. It inevitably will affect the food industry also.
Next, let me refer to trade negotiation which is under way between Japan and other countries. 151 countries participate in WTO (World Trade Organization). Many countries including Japan conduct multinational negotiations of trading treaty via WTO. The negotiation with many countries in one time, however, takes a time and makes it difficult to put a timely focus in the negotiation. Then, attention has been shifted to "FTA EPA" which is to negotiate with specific country or region.
EPA is an abbreviation of Economic Partnership Agreement and has a wider objective of enhancing international relationship regarding investment, movement of people, intellectual property and so on, not limited to duty matters. On the other hand, FTA is an abbreviation of Free Trade Agreement and focuses on export/import duties. Then, if movement or exchange of people is required in concluding FTA between Thailand and Japan, EPA must also be concluded.
As seen in Fig.1-12, EPA/FTA, which has been put into effect, has increased sharply since 1990. In line with this trend, Japan switched from multinational negotiations via WTO to FTA negotiation with growing east-Asian countries. So far, EPA/FTA is in force with 5 countries namely Singapore, Mexico, Malaysia, Chili and Thailand.
Fig.1-12: EPA/FTA world wide ・・s of 2007.7・・(Ministry of Foreign Affairs)
So far, I have covered "Transition of Japanese food industry", Consumers' price index", "Self-sufficiency rate of food", "Population problem" and "FTA". Summing up all of those, I would forecast a future trend of Japanese food industry as following.
- Japan is prompting FTA with an increasing number of countries. Other than 5 countries with which FTA is already concluded, negotiations are under way with ASEAN countries, Australia, Vietnam, India and so on. Even though FTA is concluded with Thailand, it will have to be relooked to expand the coverage of items. Japan will see shortage of various items, not limited to goods but also labor forces. The most important is to make the FTA beneficial for both parties and to establish an "Win-Win" relations with those countries.
- Self-sufficiency rate of Japan is quite lower than other advanced countries. There is no positive outlook for increasing grain production except for rice. Then, livestock farming will also be restricted. Japan will continue to depend on import. On the other hand, Japanese would probably be the people who are most sensitive to safety of food. While each country has its own sense of safety and standard of safety in regard to food, both of export and import countries must pursue a common understanding of safety and peace of mind on this point.
- In these days, health foods, which appeals to health-maintenance and health-promotion, are increasing. Key word is "tasty" and "healthy". This trend will match with the need of Japan, which has the highest longevity in the world. Increasing new entry will be seen to this market segment from various genre. Market share will increase as well.
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Date of publicity:
Current Adviser to & Former President of Dai-Nippon Meiji Sugar Co.,Ltd.
Former President of Mitsubishi Company (Thailand) Ltd.