Agri-Food Trade Service
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SIAL Canada - Exporting to Japan
Greg Folinazzo, Markets and Trade Officer, Agriculture and Agri-Food Canada (AAFC), Ontario Regional Office.
During this afternoon's seminar, Greg Folinazzo captured the current agri-food landscape in Japan, touching on trends and economic conditions, as well as the effects of the recent earthquake; for this important consumer market for Canadian exporters.
Japan is the world's largest net agri-food/seafood importer, and Canada is Japan's 4th largest agri-food/seafood supplier, after the United States (U.S.), China and Australia. In 2009, Canada exported $3 billion in agri-food products to Japan, Canada's largest overseas agri-food market. Japan imports approximately 60% of their food requirements, making the Japanese market valued at $69.5 billion, and highly competitive.
Greg displayed how Japan's current economic climate and consumer base is shaping this attractive export market. In 2010, Japan's GDP grew by 4% from 2009. The Japanese government has set a 3% nominal GDP growth rate target for the next decade. The Yen is currently very strong, making imports cheaper and possibly more attractive. With a population of 127.7 million, that is highly urbanized and geographically concentrated, Japan has multiple markets with varying tastes, import demands, distribution channels, retailers, etc. (e.g. Kanto, Kansai, Kyushu). Japan has the world's fastest aging population, which is driving demand for healthy, elder-friendly and home meal replacement products. At the same time, a growing number of single person families are driving demand for convenient, ready made, individual portion-sized product options. This portion of the population is also moving towards weekly, bulk, shopping trips in supermarkets or hypermarkets and away from traditional daily shopping trips.
Historically, the Japanese diet was characterized by a high intake of carbohydrates (rice, noodles), a moderate intake of protein (tofu, seafood) and a very low intake of animal fat. Meat and dairy products were consumed in very low quantities, while potatoes, fruits, pulses and seafood were consumed in moderate quantities. Over the years, the Japanese have shifted towards a more westernized diet pattern, with increased consumption of meat, dairy products, eggs and fats. Greg pointed to the fact that McDonald's hit an all time sales high in Japan in 2010 – not just because of convenience, but also because of more western style eating habits and price sensitivity. There are now more than 45,000 convenience stores across Japan, aiding the trend in the ready-made meal category. Online shopping sales are also increasing, proving convenience is a growing priority for Japanese consumers. Online shopping is expected to grow to $50 billion by 2015, as more consumers are staying home and spending time on the internet. Natural food online orders have seen an increase, as well as organic and pesticide-free foodstuff orders, which rose 12.6% and are expected to continue growing significantly. The organic market in Japan has experienced significant growth as well. In 2009 market size was approximately 454 billion yen, up 8.0% from 2008. However, awareness of organic foods is low and few consumers clearly differentiate between "organic," "natural" and "chemical-free." General retailers tend to carry few organic products as well. However, the functional food market is the most developed in the world and valued at US $19.6 billion. Greg said this market has experienced such success due to Japan's very health conscious consumers, and an increased demand for such products because of the ageing population.
It is estimated that 89% of Japanese consumers would choose domestic products over imports, predominantly due to quality and safety factors. However, perceptions of Canada in Japan are positive, but awareness of Canadian products is low compared to competitors. Canada faces competition (sometimes subsidized) from US, Australia, China, SEA, and the EU. With that said, Greg mentioned that while Japanese consumers are affluent, sophisticated, and highly demanding with preference for perceived quality/safety from domestic products, recent Chinese food safety scandals have created uncertainty. Consumers are increasingly concerned with food safety issues and are looking for alternatives. Many products in the marketplace now have a "QR" code, which can be scanned by a cell phone and takes the consumer to a website with information about where the product was grown, farmer, etc.; which is helping to establish traceability within Japan.
Greg made an interesting point that the private label market is also showing some significant opportunities, which is mainly due to consumer's increased price sensitivity and concerns over economy and job security, leaving private labels as an increasingly popular choice. In Japan, the private label market increased by 21.6% in 2009 to 2.3 trillion yen. Growth in private label food introductions in convenience stores have also increased.
The impact of the recent earthquake/tsunami caused severe damage to provinces of Tohoku and Kanto on the Pacific coast, as well as radiation contamination from nuclear plant. It is estimated that the economic losses will total US$235 billion (4% of GDP). The impacted area is a major producer of seafood, meat, vegetables and rice. While the medium to long-term impacts on agri-food demand is not certain, Japan will most likely see a short term drop in demand for specialty food and an increased need for staple foods.
The AAFC Regional Offices can help companies prepare for the market, assess market potential, provide qualified contacts, and aid in resolving problems. Visit the ATS website for more information on the regional offices, or our Japan market information section for more detailed trade and economic statistics.
If you have any further questions regarding the information shared during this presentation, please contact:
Markets and Trade Officer, AAFC
Agriculture and Agri-Food Canada
Telephone: 519 780 8005
Facsimile: 519 837 9782
174 Stone Road West
Guelph, Ontario N1G 4S9
Until next time,
Project Officer, ATS
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