FEEDBACK FROM JAPANESE RETAILERS 2015

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1 2015 Austrade Japan conducted a presentation of premium packaged Australian Food & Beverage products to leading Japanese retailers and importers in late A summary of the feedback they provided is below for your information. SUMMARY Buyers frequently mentioned taste and price are important and these should be well balanced. They highlight that these are top two priority features most closely considered by Japanese consumers when they purchase F & B products. Most buyers valued the healthy and natural features of Australian products. However, depending on the product category such features are not yet necessarily key selling words for consumers in Japan. An example of this is confectionery. One buyer commented We have imported healthy confectionery - lollies made of vegetables. We thought it would be a good selling item but it wasn t so unfortunately. This is an indication that general consumers are not particularly sensitive about health features when they buy confectionery, or that very sensitive consumers may not consider buying lollies. This type of product does have niche market opportunity at the moment and buyers consider more consumers will express interest in future in this product as general market trends present growth of healthy and disease preventative type of foods. Organic itself is not a strong feature to justify premium prices such as 30% higher than regular products. This could be because products with Japanese organic certification (JAS) are sold at competitive prices. Japanese consumers tend to see organic feature as additional benefit and not what they buy with extra cost. Free from features attracted mixed feedback. Some buyers said Most consumers are not coming to the shop with the thought of buying free from products unless they have a specific food allergy or diseases. Others say If we create a special shelf space and display range of products it would stimulate consumers interest. Gluten free is not as yet an important feature in today s Japanese market but many buyers are now seeing potential growth in demand in the future. We have seen that the level of buyers interest in gluten free products has increased compared with previous years. Sugar Free is easily recognized and appreciated by consumers especially if they have diabetes. However, some consumers consider sugar free is being equivalent in meaning as using sweetener or artificial ingredients and this wording can attract some negative image.

2 There are some market opportunities for high-valued/brand products. However, such products will be sold in the niche market and sales volume especially at the initial stage will be very small. For this type of product importers will ask how much volume the suppliers want to sell in Japan and if the volume is too big or unrealistic they will give up. Importers will only work with suppliers who are patient and ready to work together for long term to create brand awareness and position in the market. SWEET & SAVOURY SNACKS Chocolates, lollies, and savoury snacks attracted some buyers interest. Chocolate market is polarized in Japan. Most frequently sold items are priced around 500JPY (A$5), and products priced over 1,000JPY (A$10) will be regarded as gift items. Gift chocolates are often sold in department stores and their key selling features tend to be associated with history, tradition, and famous chocolatier. Japanese consumers have image of Australia as being a strong supplier of macadamia nut chocolates but not for premium chocolates. They imagine European brands when they hear premium chocolates. Winter is the top-selling season for chocolate products in Japan and many varieties of premium gift chocolates are promoted at this time. Valentine s Day is the most important day as Japan has unique culture with females gifting chocolate to their male friends and colleagues on this day. Since Australia is in summer when Japan is in winter, buyers wish to check if the quality is maintained despite warm temperature because consumers expectation for high quality chocolate is very high. Nuts are usually imported in bulk and repacked by the Japanese importers or wholesalers. This allows flexibility with making several different package sizes, and also changing the sizes upon receiving request from the retailers. Retail packed value-added/flavoured nuts could be marketed as different item from these regular nuts products. However, their unit retail price should be similar to regular nuts products or a can of beer (around A$2 or 3 per package) to achieve good sales volume. To meet such price, value-added products can be packed in smaller size. The photo images of most packages presented on the PPT slide were accepted though some buyers said they need to check quality and thickness of the packaging material before making final assessments. Using image of product s ingredients and/or flavour on the front package design is desirable as it helps consumers easily understand what it is. It would be better to use different colour package for different flavour. Also better to use the design that is not too childish as it will limit target market. (Japan is an aging society.) Competitive prices are very important. Good taste sometimes justify price. Buyers want to check the taste before determining product s market potential. Products with too unique flavour for Japanese are unlikely to attract large sales, nor becoming frequently sold items in Japan. Such items tend to be considered importing only for some special occasions such as country specific promotion Feedback from Japanese Retailers 2

3 CEREAL, MUESLI, AND HEALTH FOOD Bar type cereal or snack items are getting saturated in the market. Many products are sold as single bar and priced around 100JPY (A$1). Boxes containing several bars are not popular in Japan. Cereal category is growing in Japan. Kellogg s, Calbee, Nisshin cisco are the dominant suppliers today. Imported products will have some market opportunities in the area of muesli and granola. There are several different products available for buyers choice. Unique selling point is required to win market opportunity. Package design and taste are also very important. Natural (not roasted) muesli has risks for insects. Importers want to know how manufacturers sterilize products prior to shipment. Some cereal product they considered before contained TBHQ which is prohibited in Japan. Suppliers must make sure products for Japan don t contain this. Functional ingredients such as seeds and powder are not sold in most retail stores in Japan. General consumers have no idea how much volume is ideal for one serving or one day, and may feel troublesome to manually put them in their meals or recipes. It will take time to educate retailers and consumers. In-store promotion will help increasing awareness. If the product s functionality is already well-known by consumers, it would be good to be used as an ingredient of processed foods as it is more convenient and portion-controlled. Importers pointed some raw ingredient material are not easy to handle considering risks for agriculture residue and Cyanogen compound. CAKE MIX Not many Japanese are regularly baking cakes and don t have big ovens in their homes. People having big ovens tend to enjoy all steps of making cakes as their hobby, and dare to source all the ingredients by themselves rather than using cake mix. Valentine s Day on which females sending chocolates to males in Japan would be a special occasion for some people baking cakes in home. Japanese are unlikely host party in their homes. Smaller sized package for 3 or 4 people is ideal. Japanese made pancake mix is reasonably priced (around A$3) and easy to cook with fry pan. Imported cake mix is often too expensive (around A$6-8). Best-selling flavours of imported cake mix would be chocolates and plain/vanilla. Plain/vanilla can be used for the base of decoration cake. Ready-made cakes are available at reasonable price. Also small cakes and desserts are now sold at the convenience stores at 100JPY (A$1) and they are the strong competitors for cake mix and other sweet products in Japan today. Opportunities for cake mix featuring free remain small today but market demands would be increased in the future. Package design and taste are very important for this type of product. Therefore, if the product satisfies these, it would be better to sell as gourmet cake mix and target broader consumer groups. Then free feature to be promoted as additional benefit. Cake mix might also attract interest by small sized cafes and restaurants Cake mix containing functional ingredients look attractive Feedback from Japanese Retailers 3

4 OIL & DRESSING In Japan consumption of olive oil is increasing but market for high-end products is not fully developed. There are so many brands available at competitive prices in the market. Spain, Italy, Greek, Turkey are the major suppliers, and leading Japanese manufacturers also supply with their brand. Most selling size is 500ml and 1L. If you want to achieve large volume sales price must be competitive. An importer have received visit by a group of olive oil suppliers from Portugal recently. The group wants to sell super premium olive oil that is made from limited number of specially grown trees. The importer could imagine its premium quality. However, due to limited and possibly unstable supply, they considered such product is difficult to import as regular commercial item. This indicates something too rare or too unique makes importer feel difficult to handle. Many Japanese don t have image of premium olive oil for Australia. Australia will need to run industry level promotion and establish a unique position in the market in order to sell its premium product. Consumers need to be convinced with why Australia instead of Italy and Spain. Price of bulk olive oil from Europe will be increased in This makes price gap between Australia and these suppliers to be shrunk and may create opportunity for market entry by Australian suppliers. Industry now wonders how much the price of bulk olive oil from Australia is. As for dressing, ambient product is the main stream for Japan market. Major Japanese manufacturers such as Kewpie and Riken are producing wide ranges of flavours and their products are very competitively priced. Nonoil and sesame or soy sauce based flavours are the most popular in Japan. Kuhne is one of the rare foreign dressing brands imported into Japan. Importer said they are mainly targeting consumers who like foreign made taste such as cream and vinegar taste but not general consumers. Japanese consumers tend to be conservative regarding taste of dressing. Taste of imported dressing is unique for general consumers and often tasted too sweet or unfamiliar with herbs/spices contained in the product. Consumers don t want to take risk of making wrong choice of dressing which cannot be finished by one serving. It would be good to start selling trial/small sized package such as one-serve pack priced around A$0.50 during promotion period. In-store promotion will also help increasing consumers interest. Container (bottle and cap) of Japanese made dressing is very well made as it won t allow any dripping around the spout and can be used clean until the end. For imported dressing, spout tends to be too large and likely to drip after serving. SAUCE AND JAM Cordial, chutney, and fruit sauce are not commonly consumed or used by Japanese consumers. Even Japanese manufacturers have failed with own fruit sauce products in the past. MONIN is one of the rare imported brand cordial succeeded the Japan market for over 30years. This is used for cocktail. This type of products is very niche and requires customer education to develop market opportunity. Use of Australia fair or promotion through food service sector will be a good idea. These items are difficult to make sales without tasting sample. Pickles will have some niche market opportunity. Some foreign brands are already imported into Japan. Buyers need to check taste and price to determine market potential. 250g bottle would be good size for Japanese retail sector. Jam category is very competitive as there are so many products available in Japan including retailers private brands. Unless product has very good taste, story, unique feature or serving suggestions, it will be difficult to market high value products. Label design is also important Feedback from Japanese Retailers 4

5 Use of Australian native food as ingredient is interesting. CHEESE & CHILLED PRODUCTS Taste is very important attribute for cheese products in Japan. Consumers are ready to pay for premium price for imported natural cheese but often don t know its real taste and features because of limited experience. A retailer imported and sold high-value French cheese with strong smell at their special event and experienced some challenges. Consumers who purchased such cheese came back to them for making inquiries and complain for its strong smell with saying product looks expired. Retail stores having special shelf space for imported natural cheese often appoint a wholesaler who specializes in cheese product to manage such space. Therefore suppliers of cheese products had better to approach such specialized wholesalers. Wholesalers of ambient grocery products usually have no facility and experience with to handling and storing chilled and frozen items. In-store promotion will be needed to create awareness of unknown brands 6 month shelf life will be ideal for cheese to sell as regular item at supermarkets Some wholesalers cannot import cheese products made from unpasteurised milk due to company s policy. (They consider it would be too risky to handle such item.) Buyers understand freshness and can imagine premium quality of chilled sauce and dressing. However, such products have no shelf space in the most retail stores in Japan and it would be too costly and commercially not viable to import such products considering current market needs. FROZEN PRODUCTS Unique frozen pastry will have some market potential but it will require consumer education through in-store promotion/cooking demonstration. It could be also used at the deli section of boutique retailers and food service sector. Frozen ready meal will have opportunity in Japan as today s busy consumers are seeking convenient foods. Australian iconic meals will be interesting. Product like Australian style pie could be suggested for take-away shops and small sized standing bars. Taste and price must be well balanced. There are many products made by Japanese manufacturers and these are available at very competitive prices. Premium products from Australia must be differentiated from these. ICE CREAM & FROZEN YOGURT A retailer said they are interested in introducing new Australian brands at the Australia fair. Other retailer said they are looking for frozen dessert products and consider ice cream is one of the interested categories as there are not many imported products available in the market. They have imported some brands from Europe before but these were not sold well. They wish to consider other brands but receiving sample of ice cream is not easy and thus they are not taking proactive action at this moment. 2L size would be too large for many Japanese consumers. 500ml or 125ml will be ideal. This type of product doesn t need free feature as it is supposed to be a special treat for most consumers. Taste will be more important 2015 Feedback from Japanese Retailers 5

6 Bulk type ice cream products may go into price competition. Value added products such as ice cream with corn might create unique position in the market. Greek yogurt is now popular among Japanese consumers. Both frozen and chilled Greek yogurt will have market opportunities. Not many Japanese ice cream manufacturers have extra capacity to produce frozen yogurt as of today so this category would be worth developing opportunities for foreign suppliers. There are not many companies who have facility to store and distribute ice cream products in Japan. Companies newly entering this sector will take long time to get ready for import. Australian suppliers should approach companies who have established capacity for handling ice cream products. Price would be a challenge but Australian products usually contain more milk fat and/or real fruits and these can be strong selling points. NON-ALCOHOL DRINK Bottled spring/mineral water is now saturated in the Japanese market. Some unknown brand bottled water were imported into Japan right after the Great Tohoku Earthquake in 2011 but such emergency needs disappeared in a short period of time and lots of product were left unsold for long time. Japan basically has plenty of water so unless there is unique selling feature it is very difficult to be marketed. Major brands partnered with leading Japanese beverage manufacturers already established dominant share in Japan. These are very competitively priced with strong brand image and sold at almost all types of grocery stores as well as vending machines. In general, it would be too late to enter the market for new brands for this type of products regardless of country of origin. Japanese generally drink more (unsweetened) tea than soft drinks. Retail packed beverage products are very competitively priced and most products are available at almost all types of retail stores as well as vending machines. These are priced around JPY per unit (A$1-1.50). Australia s straight juice is sometimes sought by importers but this type of product has risks of containing patulin (in apple juice) or other quality issues because of natural product. Quarantine inspection for fruit juice is very tough and requires in-depth knowledge and experience for importation. Shelf life is also a challenge. Orange and apple juice are most selling fruit juice in Japan. However, not many consumers are aware of the difference between concentrate and straight and still assume all 100% juice are the same. Customer education is important to expand the market for this type of product. Pet bottle is most popular beverage container in Japan and its recycling system is well established. Tetra pack (200ml or 1L) is also accepted for imported fruit juice. Glass bottle and can are not ideal and especially canned products are often seen as low-priced products. Image of fresh fruits or something premium/targeting adult consumers would be more ideal for package design rather than something pretty and targeting children considering size of target consumers. Taste is very important. Flavours that are too unique are unlikely succeed in Japan for long time. Beverage items are usually sold with small margin so unless importing and selling reasonably large volume it won t be a good business. Shelf space for coffee products is not growing in the retail sector while small space remains secured. Japanese consumers buying two types of coffees. One is made from roasted and freshly milled beans and another is instant coffee products. These are main stream in the retail market and pods for Nespresso machines are still considered minor product in Japan though they are also sold at some large retail stores for consumers choice. Nestle has dominant share in Japan for instant powdered/soluble coffee and has well established relationship with retailers. Recently convenience stores started selling freshly milled coffee at 100JPY (A$1) and this is affecting to reduce sales of canned and other sort of coffee drinks in Japan Feedback from Japanese Retailers 6

7 WINE AND ALCOHOLIC BEVERAGES A retailer is selling entry level wine (less than 1,000JPY (A$10)/bottle) at their retail store with displaying bottles on the shipping pallet. Sometimes these wine makers come to the store for in-store promotion and signing on the labels for shoppers who purchased their wines. This is very well received by the shoppers. Liqueur is not frequently purchased item. Special in-store promotion will be needed to stimulate consumers interest. Citrus liqueur would be good promoting in spring/summer and chocolate or milk ones would be ideal for winter. Standard straight shaped bottle would be ideal considering consumers storing leftover in their fridge. Retailer could promote wine together with Australian beef and other gourmet products at special Australia fair promotion + as a spot order Wondering if there is any Australian canned beer (330ml) Would like to see cider products for future consideration. NEXT STEPS If you do not have a current agent in Japan and would like to participate in the 2015 Japan Retail Showcase, please contact: Contact Name: Ariel Yesberg Title: Food Trade Adviser, Sydney T E ariel.yesberg@austrade.gov.au Please note that Austrade will only work with clients that maintain appropriate business ethics, and demonstrate a commitment to legal obligations including anti-bribery laws, both in Australia and overseas markets. Review further information on anti-bribery at Austrade reserves the right to decide who will participate in the project based on in-market feedback. Only a limited number of companies will be able to participate. Austrade will profile your company in good faith but cannot guarantee that customers will respond or place an order and in some instances is unable to provide individual tailored feedback. If you have any other questions on the Japan market, please contact: Contact Name: Kazuko Nishikawa Title: Business Development Manager, Tokyo T E Kazuko.Nishikawa@austrade.gov.au Disclaimer Austrade does not endorse or guarantee the performance or suitability of any introduced party or liability for the accuracy or usefulness of any information contained in this Report. Please use commercial discretion to assess the suitability of any business introduction or goods and services offered when assessing your business needs. Austrade does not accept liability for any loss associated with the use of any information and any reliance is entirely at the users discretion Feedback from Japanese Retailers 7