Japanese Retail Food Sector Report 2011

An Expert's View about Retail Sales in Japan

Posted on: 12 Jan 2012

Total retail sales including food & beverages, general merchandise, and fabrics/apparel & accessories in Japan amounted to $752.6 billion in 2010.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/21/2011 GAIN Report Number: JA1524 Japan Retail Foods Update 2011 Retail Food Sector Approved By: Steve Shnitzler, ATO Director Prepared By: Sumio Thomas Aoki, Senior Marketing Specialist, Paul Miyamoto, Intern Report Highlights: Some say that Japan was moving into a period of economic growth right until March 11, 2011 and the Japanese retail industry was poised to improve on sales and revenues. But sales were severely restrained because of the Great Northeast Japan Earthquake and Tsunami. However, changes in the retail industry impacted industry alliances with the merger of department store giants Mitsukoshi and Isetan; the expansion of the Mitsubishi group food distribution network; the tie-up of two Eastern Japan supermarkets, Arcs and Universe; and headstrong competition between AEON and Seven & i Holdings. Post: Tokyo ATO Japanese Retail Food Sector Report 2011 U. S. Agricultural Trade Office JAPAN I. Japanese Retail Sales 1. Overall Total retail sales including food & beverages, general merchandise, and fabrics/apparel & accessories in Japan amounted to $752.6 billion in 2010. The total food and beverage retail sales amount was $472.6 billion. Total retail sales have increased each year since 2008. 2007 showed a total retail sales of $614.6 billion and food & beverages sales of $370.6 billion. The exchange rates used in this report are 104.46 yen/$ for 2008, 94.57 yen/$ for 2009, and 88.81 yen/$ for 2010. Figure 1a. Total Retail Sales (million US$) Yea & General Fabrics, Apparel, & r Tota Foodl Beverage Merchandise Accessories 2008 651,215 399,971 151,043 100,201 2009 703,743 437,940 155,123 110,680 2010 752,572 472,638 160,094 119,840 Source: METI Figure 1b. Chart of Total Retail Sales (million $) 2. Retail Food Sales A. 2011 The retail food sales increased from 2009 to 2010 for the three retail categories listed in Figure 2, according to the Current Survey of Commerce* conducted by The Ministry of Economic, Trade and Industry (METI). An explanation of the Current Survey of Commerce is in the below chart. Figure 2. Food Retail Sales of Three Categories* for 2008-2010 (Million US$) Yea Large-scale Supermarket & Department Convenience r Total Conventional Supermarkets Stores Stores 2008 196,735 76,425 70,662 49,648 2009 208,228 84,919 69,622 53,687 2010 221,535 92,567 70,849 58,119 Source: METI http://www.meti.go.jp/english/statistics/tyo/syoudou_nenpo/index.html, Japan Department Stores Association http://www.depart.or.jp/common_department_store_sale/list * Food & beverages definition Drinks, Japanese and Western alcoholic drinks, seasonings, meat, fresh fish, dried provisions, vegetables, fruits, sweets, bread, dairy products, etc. B. Food & Beverage Sales in Japan Overall sales growth was observed in most regions of Japan as many households spent more time and money purchasing food items to consume at home rather than spending money at restaurants. Five out of eight prefectures showed positive sale growth rates from 2008 to 2010. Also, in each prefecture, the number of large-scale retail stores increased during this time. Japanese real economic growth rate is estimated at 3.9% in 2010. It is important to keep in mind that even in an environment of stagnant sales geographic markets in Japan are quite sizable - often exceeding that of entire countries. For example, the Kyushu prefecture alone had a GDP that exceeds that of South Korea, Australia and the Netherlands. Figure 3. Regional Sales and Population Trends Overall Food & 2009 Food Purcha Sales sing Prefe Beverage Number of 2009 cture Year Sa per Growth les Establishments Population househo Rate ld (million '08-'10 yen) (Yen) 2008 524,125 275 Hokkaido 2009 554,309 283 5,507,000 796,008 7.45 2010 563,196 313 M 2008 251,856 131 iyagi 2009 244,972 135 867,095 -4.03 (Tohoku) 2,336,000 2010 241,704 139 2008 1,299,061 336 Tokyo 2009 1,260,387 346 12,868,000 945,697 -2.99 (Kanto) 2010 1,260,243 360 2008 708,981 290 Aichi 2009 718,871 302 0 926,122 2.51 (Chubu) 7,418,00 2010 726,741 313 Osaka 2008 863,565 295 8,801,000 922,817 -5.33 (Kinki) 2009 836,003 294 2010 817,535 297 2008 203,272 84 Hiroshima 2009 202,869 91 563 2.78 (Chugoku) 2,863,000 853, 2010 208,919 100 2008 110,498 63 Ehime 2009 110,981 70 1,436,000 862,375 2.02 (Shikoku) 2010 112,734 72 2008 262,211 143 Fukuoaka 2009 264,166 144 5,053,000 793,021 2.72 (Kyushu) 2010 269,333 161 II. Trends and Changes in the Retail Market 1. Hints to Consider When Thinking About Exporting to Japan If you are considering developing products or searching for products to export to Japan, consider these characteristics of the Japanese market. (1) Senior Represents the core customer base (2) Produce Senior and female customers want fresh produce (3) Deli Including housewives, convenience is in higher demand (4) In-store Preparation Similar to Deli, more demand for prepared foods (5) Desserts More women purchase desserts at convenient stores 2.Elderly Population Is Growing Rapidly As noted above, Japan has the fastest growing elderly population (over 65) or Generation M, in the world. In 2010, Generation M represents 23% of the entire population in Japan. By the year 2020, it is estimated to increase 29% and then 36% by the year 2040. Of course the total population is estimated to decline from 127 million in 2010 to approximately 105 million in 2040. As of August 22, 2010, 40,280,000 Japanese are over 60 years old, which is 31.5% of the total population (Weekly Toyo Keizai, September 3, 2011, pp 40-43). According to the article, Generation MF is the market that retailers must have a strategic plan. Generation M has the most money in Japan as well. There are several short term affects of this trend: 1. Generation M won’t be mobile and won’t be able to shop. According to an article in the Weekly Toyo Keizai magazine, Seven-Eleven store owners rented vehicles to start servicing hard-to-reach customers. After the Northeast Earthquake and Tsunami, AEON started a similar service in Miyagi prefecture (Northeast Japan). 2. Greater need of delivery service. 3. Expanded availability of internet shopping. 4. Additional mobile vehicle shops. 5. Development of products that fit Generation MF. Figure 4: Forecast for Elderly Population Year Population (1,000 People) Total Age 0-14 Years Age 15-64 Years 65 and Older 2005 127,768 17,585 84,422 25,761 2010 127,176 16,479 81,285 29,412 2015 125,430 14,841 76,807 33,781 2020 122,735 13,201 73,635 35,899 2025 119,270 11,956 70,960 36,354 2030 115,224 11,150 67,404 36,670 2035 110,679 10,512 67,919 37,249 2040 105,695 9,833 57,335 38,527 2045 100,443 9,036 53,000 38,407 2050 95,152 8,214 49,297 37,641 Source: National Institute of Population and Social Security Research 3. Customers are looking for convenience and added value. Here are three examples: A. Naturally defrosting frozen food (1) Top three frozen food manufacturers all have their focus on frozen foods that defrost in room temperature and taste good. These products are convenient (natural defrost), eco-friendly (no- cooking) and tasty. (2) These products must also be bite sizes and packaged in small containers to fit Japanese lunch boxes. B. Seasonings (1) There are many premixed seasonings and sauces in Japan. Noodle soup bases (soba, udon for example), various teriyaki-type sauces and powdered soup bases are popular. (2) Developing and offering recipes to show how to use these convenient seasonings is a must. C. Cosmetics (1) Cosmetic products have always been sold in supermarkets but they never had the glitter and the professional cosmeticians to apply make-up and lure customers to purchasing the newest and best products. AEON changed that by upgrading their cosmetic sales floor from economy type décor to top department store sales décor and has become the most popular place to try and purchase cosmetic products. 4.Home dining and Home Meal Replacements The HMR (Home Meal Replacement) market, which represents, ready-to-cook, ready-to-heat and ready-to-eat meals, continues to grow. Driven by such macro trends as an increasing number of single households, the aging population and an increasing number of working women, etc, consumer demand for HMR products is still strong. Retail food outlets are adding to or expanding their HMR product line. The expanding retail presence of “delicatessen” in supermarkets of all sizes – as well as in department stores and convenience stores – attests to the popularity of the HMR market. HMR sales are also increasing at a brisk rate in the fast food industry. Summitt Store Experiments Fresh Ingredient In-Store Preparation Corner Summitt Stores is experimenting with a tasting corner and in-store preparation kitchen constructed right in the fresh food aisle. Fresh produce, meats, and seafood are normally displayed and stocked on store shelves for customers to simply examine and select. Summitt preparation kitchen will cook take-out meals using these fresh products right in the store and as the customers shop. Summitt will also offer tastings of various dishes from their menu. This is an important step forward. As companies introduce more and more foods, customers often ask how to prepare and serve. 5. Healthy Foods Offer Expanded Opportunities Driven by the aging population of Japan and rising consumer interest in health maintenance and improvement, the demand for healthy and nutritionally balanced foods has increased. Interest is strongest among those aged 50 and above, and adult women. The healthy food category (or functional foods) has been growing steadily since the mid 1990’s. In Japan, functional food can be divided into “Foods for Specific Health Use,” or FOSHU, and health- enhanced food. Among the numerous attributes that serve to distinguish one from the other, the most important is that FOSHU products require government approval, while health-enhanced food products do not. What motivates companies to pursue the FOSHU designation, rather than avoid the often-lengthy approval process, is that they can affix the FOSHU seal on the product in question should it meet the Minster of Health Labor and Welfare (MHLW) criteria. 6. Usage of Private Brands (PB) Expands The majority of major food retailers now feature their own private brands. Studies conclude that PB products will continue to gain more shelf space. According to a study by Manao Kidachi, Chuo University(Private Brand Development and Food Manufacturers Production Role in Japan*), AEON recorded PB sales of $4.8 billion in 2008 and practically doubled PB sales to $9.7 billion in 2010. Generally, PB products amount to approximately 10% of total sales. AEON hopes to increase to 20%. Second, PB products were generally produced by secondary food manufacturers. Today, leading manufacturers are beginning to expand production of PB products. A 2009 survey by the Japan Finance Corporation found that 67.8% of all food manufacturers produce PB products and that 23.2% of those companies would like to increase the number PB products; and 9.8% of all manufacturers wished to introduce PB products to their line-up. In another survey performed in 2010 this time to survey consumer response toward PB products, the survey found that even if the economy improves consumers will continue to purchase PB products. *Japan Finance Corporation, Farm, Forest and Sea Department, “Survey of PB Products”, August 18, 2009. *Japan Finance Corporation, Farm, Forest and Sea Department, “2009 2nd Survey of Consumer Trends”, February 9, 2010. 7. Continued Consolidation of the Food Retail Industry A. Mitsubishi Shokuhin (Food) Becomes the Largest Food and Beverage Distributor On February 18, 2011 Mitsubishi wholesale company was established with the merger of Mitsubishi Shokuhin (food), RyoShoku Ltd., Meidi-ya Corporation, San-Esu Inc., and Food Service Network Co., Ltd. Ryoshoku Ltd. was one of the strongest beverage distributors and was the second largest wholesale company after Kokubu Co. Meidi-ya Corporation ranked eighth and Food Service Network ranked ninth. The reason for the merger, according to the press release dispatched by the four companies, was to protect the safety of food quality and food supply by creating a new wholesale distribution model capable of adapting to changing consumer demands and diversification and to withstand long term deflation. The strengths of the individual companies will mesh well. As was discussed in section II of this report, supermarkets and convenient store businesses are strengthening their positions and market share. These retailers have become an essential and necessary shopping entity for many Japanese to function on a daily basis. Their buying power is stronger and they are expanding their manufacturing capability. Not only that they have also been strengthening their distribution network and logistics that compete with other entities of the food distribution industry. Mitsubishi Shokuhin and future growth and consolidation will perhaps balance the relationship between the strong retailers and wholesalers. B. ARCS Group (Always Rising Community Service) Spreads its Network to Mainland Japan with Universe ARCS is a holding company established in 2002 with the merger of Hokkaido supermarkets, Ralse and Fukuhara. In order to compete with rising national supermarket chains, maintain localized food businesses and to share logistical distribution ARCS merged with other Hokkaido supermarkets such as Dounan Ralse (Obihiro) and Fuji (Asahikawa) in 2004, and Tokoh Store (Sapporo) in 2009. ARCS reached record sales in 2010 of $3.9 billion. One of the biggest stories of 2011 was the news that ARCS will expand outside of Hokkaido, which ARCS president Yokoyama once said that they would avoid. On October21, 2011, Universe supermarkets, headquartered in the most northern prefecture on mainland Japan joined ARCS, creating a group that includes 47 stores located in three northern prefectures, (Aomori prefecture 30 stores, Iwate prefecture 16 stores, and Akita prefecture 1 store) adding $1.3 billion in value to the ARCS group. ARCS’ website address is http://www.arcs-g.co.jp/ (Japanese Only) C. Competition in Western Japan’s Food Distribution Industry is Heating Up Three regions, Chugoku, Shikoku and Kyushu have experienced changes in their distribution network similar to northern Japan. Asahi Shokuhin who is one of the largest food distributors finished construction of a distribution center located in Tosu city, Saga prefecture in the Kyushu region inside the Tosu Distribution Center. The facility will warehouse and distribute dried, frozen, and chilled products to Chugoku, Shikoku and Kyushu regions. The Chugoku and Shikoku supermarket sector saw some changes too. AEON has acquired the largest supermarket chain in Shikoku, Marunaka http://www.marunaka.net/ (Japanese only), for $648 million. Marunaka provides AEON 340 stores and $4.6 billion in sales. Marunaka’s strategy was to acquire AEON’s private brand, digital money, and AEON’s distribution network. AEON strengthens its network in western Japan where it traditionally lagged. III. Retail Market Industry 1. Retail Establishment Trends In 2010, supermarkets and convenience stores continued to be the primary distribution channel for food in Japan. Large-scale supermarkets appear to have lost some ground to regional supermarkets. However, to compete against AEON and Ito Yokado regional supermarkets are merging such as ARCS in Hokkaido and Universe in Northern Japan. 2. Large-scale Supermarkets and Conventional Supermarkets A. Outlets The number of outlets changed very little. AEON shrank from 569 outlets in 2007 to 415 outlets in 2009. Barrow grew from 120 (2007) to 173 (2009) and AEON Kyushu (western Japan) doubled from 48 to 99. Most others remained relatively the same. B. City-style Stores March 11 affected the retail industry in many ways. One key finding from March 11 was that convenience stores were better suited to quickly re-establish their store and support the local consumers in an emergency situation. Convenience stores were the first ones to deliver products using small vans and to open their stores in affected areas. Taking the lessons learned to compete with convenience stores, large supermarkets, AEON and Seven & i (Ito Yokado) are developing small “City-style stores”. Store sizes measure about 1800 square yards of floor space. Tokyo and other cities are major targets for these City-style stores. C. Target Population As the Japanese market continues to mature, supermarket giants AEON and Seven & i have strengthened their network to reach single adults and the older generation, who will be referred to as the Generation Mature (herein referred to as Generation M). D. Price Competition Price competition has become more intense and is a major feature of the supermarket business in Japan. Supermarkets are seeking to reduce costs and improve their infrastructures through the introduction of management systems and the improvement of procurement processes as well as through the closure of unprofitable stores in their efforts to improve efficiency. The companies which have succeeded to reduce management cost and to prevent losses have regained their profit. E. Company profiles Figure 5 summarizes the top 16 supermarkets. AEON http://www.aeon.info/en/, Ito-Yokado http://www.7andi.com/en/, and Daiei http://www.daiei.co.jp/index.php (Japanese only) have nationwide supermarket networks. All three are gradually expanding into regional areas outside of Tokyo and Osaka. Uny http://www.uny.co.jp/ (J) is the strongest regional supermarket with a concentration in the Chubu and Kanto area. Figure 5: Top 16 Supermarkets by Total Sales in 2009 Total Food Ratio of Growth Company Sales (US$ Sales (US$ Food Number of Location of Rate '09- Rank Name Mil.) Mil.) Sales (%) Outlets HQ & Stores '10 (%) 1 Aeon 21,323 10,660 49.9 415 Chiba 4.43 2 Ito-Yokado 15,190 7,197 47.4 175 Tokyo -1.92 3 Uny 7,720 4,816 62.4 233 Aichi 6.82 4 Daiei 8,319 4,914 52.7 207 Hyogo -0.47 5 Izumi 4,606 1,511 32.8 83 Hiroshima 12.92 6 Life Corp. 4,771 3,862 80.9 203 Tokyo 5.03 7 Heiwado 3,463 2,004 57.8 105 Shiga -3.41 8 Izumiya 3,457 1,948 56.3 86 Osaka -0.8 York 9 Benimaru 3,575 2,633 73.6 156 Fukushima 5.38 10 Maruetsu 3,537 3,285 92.8 242 Tokyo 6.07 11 Barrow 2,214 1,610 72.7 173 Gifu 4.44 12 Fuji 3,124 1,256 40.2 93 Ehime 1.89 13 Okuwa 2,611 1,937 74.1 143 Wakayama 2.67 Aeon 14 Kyushu 2,670 1,115 41.7 99 Fukuoka 10.21 15 Summit 2,266 2,106 92.9 97 Tokyo 4.71 16 Inageya 1,797 1,685 93.7 127 Tokyo -0.59 Source: Food and Beverage Distribution; Nihon Shokuryo Shimbunsha F. Other supermarket locations: Chubu and Kanto Maruetsu http://www.maruetsu.co.jp/corporate/ (J) Valor Supermarket http://chirashi.valor.co.jp/store_search.php (J) Kanto Summitt http://www.summitstore.co.jp/ (J) Inageya http://www.inageya.co.jp/ (J) Kyushu/Chugoku Izumi http://www.izumi.co.jp/e_ir/corporate_data.html (J) AEON Kyushu Tokyo Kinki Life Corporation http://www.lifecorp.jp/company/index.html (J) Kinki Heiwado http://www.heiwado.jp/profile/gaiyo.html (J) Okuwa , http://www.okuwa.net/corpo/002.html (J) Kinki/Kanto Izumiya http://www.izumiya.co.jp/ (J) Fuji http://www.fujicitio.com/company/company01.html (J) Tohoku York Benimaru http://www.yorkbeni.co.jp/company/outline.html (J) G. Specialty Supermarkets Specialty supermarkets are important for export products because these stores carry products with higher prices. Here is a list and some background information for these specialty supermarkets. Kinokuniya - First self-service supermarket in Japan. http://www.e-kinokuniya.com/kinokuniya2.pdf Meidi-ya - First supermarket to specialize in imported products. http://www.meidi-ya.co.jp/en/ Seijo Ishii Combination of specialty products and convenient store. http://www.seijoishii.co.jp/ (Japanese only) Dean & Deluca - Premium product and prices. Emphasis on delicatessen. http://www.deandeluca.co.jp/ Queens Isetan - Special shelf space for imported products. http://www.queens.jp/pc.html (Japanese only) Kaldi Coffee - Specializes in premium imported products. http://www.kaldi.co.jp/english/ 3. Convenience Stores A. Outlets The total number of store outlets for the top 10 convenience store companies increased 9.7% in past three years. Total outlets were 45,236 in 20109a, which was a slight increase of 4,013 from 41,223 outlets in 20079b. Sales made a huge jump in three years. In 2007, sales for the top 10 were approximately $62 billion, whereas in 2010 that shot up to $90 billion. One reason for the increase of outlets and sales is the greater utilization of convenience stores by female office workers and Generation M. Convenience stores have developed products, such as desserts and drinks, and services such as a la carte deli bars that attract female office workers to stop by before going to the office or returning home. Generation M has less mobility and utilize convenience stores that are closer to their homes. Most recently, convenience store companies such as Lawson developed discount convenience stores. These stores have smaller store space, less SKU’s, and no fast foods (FF) that convenience stores consistently offer. Discount convenience store prices are cheaper than convenience stores as well. B. Company Profiles The following table (Figure 6) summarizes the top 10 convenience stores in Japan 2010. Seven Eleven has 1,198 more stores than in 2007. Lawson had 1,407 more and FamilyMart was up by 1,530 stores compared to 2007. One major change since 2008 was FamilyMart’s acquisition of am/pm Japan on March 1, 2010. am/pm Japan Co. became its wholly owned subsidiary. The effective cost for the acquisition was about $155 million. Figure 6: Top 10 Convenient Stores in 2010 Rank Company Name Total Sales (US$ Million) No. of Outlets Location 1 Seven-Eleven Japan 33,190 13,232 Nationwide 2 Lawson 18,948 9,994 Nationwide 3 FamilyMart 16,220 8,717 Nationwide 4 Circle K Sunkus 10,395 6,274 Nationwide 5 Mini Stop 3,626 2,042 Tokyo/Nagoya 6 DAILY YAMAZAKI 2,440 1,634 Nationwide 7 Seicomart 1,927 1,102 Hokkaido 8 Cocostore 1,299 837 Nationwide 9 Three F 1,164 704 Tokyo area 10 POPLAR 1,022 700 Nationwide Source: Lawson Annual Report 2011 4. Department Stores A. Outlets and Sales Department store sales accounted for only 5% of the total retail food market with sales of US$19 billion in 2007. Significant restructuring among major department stores has been increasing. For example, the major department store Sogo filed for chapter eleven bankruptcy and merged with Seibu Department Store, which is now Millennium Retailing Co. The second largest department store, Isetan, merged with the third largest department store Mitsukoshi. The Kansai region’s large department store Hankyu merged with its strongest competitor, Hanshin Department Store. They now operate under a name, H2O Retailing. Daimaru Department Store merged with Matsuzakaya and established J Front Retailing. Food sales at department stores have continuously declined for the past several years with a dramatic decrease in sales from 2000 to 2002 related to store closures. B. Depachika It is important to note the “depachika” phenomenon when discussing the retail food sector of a department store. Depachika means the basement floor of the department store where fresh food halls are traditionally located. Traditionally, depachika was a quiet retail food location. This changed when shops introduced high-quality HMR. In fact, this was responsible for spurring the high-quality HMR market in Japan. In addition, famous restaurants became tenants and lent their brand names to popularize depachika. The Depachika phenomenon turned the basement floor from nothing special into an attractive place and a means of bringing customers to department stores. C. Premium Price, High Quality, BUT Small Quantity Department stores usually carry imported branded products. The sale prices are higher than supermarkets but keep in mind that the capacity of department stores to stock quantities is low. D. Company Profiles Figure 7 summarizes the top 10 department stores in Japan. Figure 7: Top 10 Department Stores in 2007 Growth Rank Company Total Sales Food Sales Number of Name Rate (Food) (US$ million) (US$ million) ‘06~’07 Outlets 1 Takashimaya 9,479 1,856 2.7% 20 2 Isetan 7,143 748 0.3% 10 3 Mitsukoshi 7,036 1,695 - 3.8% 18 4 Sogo 4,564 Undisclosed - 12 5 Marui 4,532 Undisclosed - 17 6 Daimaru 4,382 962 2.0% 24 7 Seibu 4,255 Undisclosed - 16 8 Tokyu 2,735 Undisclosed - 12 9 Kintetsu 2,731 783 0% 9 10 Hankyu 2,676 695 0.9% 11 Source: Nikkei MJ, Nihon Shokuryo Shinbun – (2010 data not available) IV. Road Map for Market Entry 1. Food Distribution System in Japan When considering market entry in Japan’s relatively developed food market, it is important to keep the following points in mind: Overall, traditional entry points via importers are beginning to make way for other more diverse avenues. For example, even within one food retail organization (i.e., large-scale supermarket, regional supermarket chain, convenience store chain, etc.), there may be several routes for procurement – including importers, wholesalers, etc. Large-scale supermarkets still rely primarily on importers and wholesalers. Most are engaged to some degree in developing and maintaining private labels, which they tend to outsource to food processors. Conventional supermarkets tend to depend more on wholesalers. They usually procure from a number of regional/local and national wholesalers who buy imported food products from trading houses and importers. Wholesalers and big trading houses are generally interested in handling high volume products, not niche-oriented products. A. Distribution Structure for National and Conventional Supermarkets - Giant nationwide supermarket chains including Aeon and Seven & i mainly purchase their foods through three channels: (1) direct from the importers; (2) direct from the manufacturers and processors; and (3) wholesalers and distributors. Conventional supermarkets purchase through similar distribution channels, although they mainly purchase from wholesalers, whereas the major national chains rely more on direct routes. Figure: 9 B. Distribution Structure for Department Stores - Food items at department stores are procured almost entirely through wholesalers and tenant merchants. Imported products reaching department store “tenant merchant” shelves is dependent upon the wholesaler purchasing these products from importers or trading companies. Tenant merchant companies mainly purchase the ingredients for their products from wholesalers and then manufacture the products to be sold. Figure 10: *ADO - All Nippon Department Stores Development Organization C. Distribution Structure for Convenience Stores - Convenience store chains utilize trading companies and wholesalers, depending on the type of product. Due to limited space, convenience stores can only handle a few brands per category. Product performance is reviewed continuously, and slow moving products are replaced quickly, ensuring the highest turnover possible. Their management systems present the most significant challenges for imported packaged processed foods, since they require that U.S. exporters: 1) modify product taste/specifications to fit the tastes of Japanese consumers; 2) shorten delivery time to ensure freshness; and 3) update and introduce new products frequently. D. Co-ops and voluntary chains use a variety of sources, including importers, wholesalers and direct importing. Serving voluntary chains, there are several major joint procurement organizations: CGC Japan, Nichiryu, All Japan Supermarket Association (AJS) and Consumer Cooperatives (Co-ops). Their major role is to develop private brand products with Japanese food processors and overseas sources to sell to member retailers. Some of these organizations directly import non-branded food products that are “volume” oriented in nature. E. Most traditional stores (i.e., Mom & Pop and one category stores) depend on wholesalers. Penetration of imported foods into these shops and stores is relatively low. F. Specialty stores (i.e., foreign foods, discount foods, etc.) also primarily depend on wholesalers. Selected coffee shop chains, discount stores and natural food specialty stores with chain operations may be worth development for U.S. food exporters. G. Online Sales - Finally, online sales including TV, mail order offers yet another possible channel that U.S. exporters can consider for retail food distribution. Majority of the sales are still non foods, but food and beverage sales are increasingly being purchased online. 2. International Competition of Food Exports to Japan The United States is the largest exporter of food products to the Japanese market, representing 27.4% of all imported value in 2010. China’s export has increased in the past two years. Their share increased from 9.6% in 2008 to 11.9% in 2010. Figure 11a: Major Food Exporters to Japan Value % Share Rank Country 2008 2009 2010 2008 2009 2010 1 United States 16,983 12,974 13,862 31.61 29.25 27.37 2 China 5,146 5,160 6,021 9.58 11.63 11.89 3 Australia 4,635 3,806 4,232 8.63 8.58 8.36 4 Thailand 3,628 2,959 3,785 6.75 6.67 7.47 5 Canada 4,280 3,165 3,503 7.97 7.14 6.92 6 Brazil 2,407 1,809 2,380 4.48 4.08 4.7 7 Indonesia 1,475 861 1,547 2.75 1.94 3.05 8 France 1,490 1,228 1,307 2.77 2.77 2.58 9 New Zealand 1,304 1,142 1,287 2.43 2.57 2.54 10 Philippines 1,068 1,193 1,069 1.99 2.69 2.11 World Total 53,729 44,353 50,652 100 100 100 Source: Global Trade Atlas Figure 11b - Source Global Trade Atlas 3. Summary of Key Advantages and Current Position of the U.S. Food Products in the Japanese Market (Figure 12): Figure 12 Key Words Advantages Current Position U.S. specialty food products attract Have a good story to educate Quality Japanese consumers. U.S. products customers about the quality of usually have a good story to tell. your product. Emphasize quality. Cu Be able to explain how your ltural Japanese consumers are strongly product relates to American Influences influenced by U.S. food culture. culture. Health related food market in the U.S. Address health related benefits Health is advanced. Even though your product but be careful you don’t make Consciousness may not be a health product, make claims unless you have Japanese sure to emphasize any health benefits. government approval. U.S. agriculture can successfully Educating your customer about differentiate itself from Japan and third safety issues helps to facilitate Food Safety countries on food safety issues by communication and provides your HACCP, GAP, ISO, etc. customer transferable knowledge. The U.S. is the largest exporter of food p Japan’s food self sufficiency rate is roducts to Japan. As a largest St only 39% and it has been able Supply supplier of food products in the world, declining due to aging population the U.S. has a great opportunity to and the declining farm population. expand exports to Japan. VII. Post Contact and Further Information If you have any questions or comments regarding this report or need assistance with exporting to Japan, please contact the U.S. Agricultural Trade Offices in Tokyo or Osaka at the following addresses: Tokyo Osaka U.S. Agricultural Trade Office U.S. Agricultural Trade Office U.S. Embassy, Tokyo U.S. Consulate General, Osaka-Kobe 1-10-5 Akasaka, Minato-ku 2-11-5, Nishi-tenma, Kita-ku, Tokyo 107-8420 Osaka 530-8543 Tel: 81-3-3224-5115 Tel: 81-6-6315-5904 Fax: 81-3-3582-6429 Fax: 81-6-6315-5906 E-mail: atotokyo@fas.usda.gov E-mail: atoosaka@fas.usda.gov ATO Japan has begun a series of regional reports to provide specific information on major regions in Japan. Please go to http://www.usdajapan.org/ and click on “Regional Briefs”. To date, the ATO has reports on the Kansai region (Osaka/Kobe), and the Chugoku region (Hiroshima). Reports on Hokkaido (Sapporo), and Kyushu (Fukuoka/Kagoshima) will be available soon. Other websites: http://www.myfood.jp http://www.us-ato.jp
Posted: 12 January 2012

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