Targeting the over 60s key to the Japanese market

7 August 2006

Targeting the over 60s key to the Japanese market

“High quality, food safety, relationships and use of new technology are some of the key factors that will ensure the success of New Zealand products in the Japanese market,” John Chanoki, Senior Analyst, Rabobank Tokyo, told over 500 growers at the inaugural Horticulture New Zealand conference in Auckland yesterday.

Mr Chanoki has undertaken a study on behalf of New Zealand Trade and Enterprise which aims to provide producers and exporters with strategic information on the changing dynamics of the Japanese market.

“Japan is a mature market. The Japanese population peaked in 2005 and is predicted to decline around two percent over the next ten years. In 2015, thirty-three percent of Japanese will be over 60 years old. The birth rate has fallen to around 1.25 children per female. These are very important trends for New Zealand’s food exporters as it means fewer and smaller stomachs,” says Mr Chanoki.

However this needs to be kept in perspective. Even with the declining and aging population the Gross Domestic Product (GDP) of the Tokyo metropolitan area alone is still higher than that of the United Kingdom. Japan will remain the second largest economy in the world. Japan is New Zealand’s second largest market for horticulture products after the European Union, with an FOB value of in excess of $350m per annum.

The aging population is driving a range of trends in the food service sector:

1. The growth in single person households. Twenty-eight percent of households are now made up of one person. These people do not buy in bulk. New products such as a 3-slice loaf of bread are catering to these households. Mini-sizing as opposed to super-sizing.

2. Functional foods delivering proven health benefits such as reducing cholesterol are booming. These are called FOSHU (food for specific health uses). This extends to the whole range of foods, including a chocolate high in a stress reduction agent.

3. Organic foods.

4. Ready-to-eat meals

5. Functional and/or organic petfoods – the number of dog and cats in Japan now outnumbers children.

“The good news for New Zealand’s fruit and vegetable growers is that as people age they tend to eat more fruit and vegetables. In particular, sweet fruit consumption increases. Older consumers also want re-assurances on food safety. Traceability is a must. New Zealand producers may also want to use tools such as ‘protected designation of origin (PDO)’ or ‘protected geographical indicator (PGI)’ which associates a region with high quality product. These could be good marketing tools to build a strong association between New Zealand foods and good quality. Consumers will hunt out premium products and pay more.”

Mr Chanoki has identified the following factors as integral to the success of New Zealand’s food exports to Japan:

- Strong customer focus – “the customer is king”

- Food safety and traceability

- Freshness

- Good visual appeal

- Attractive packaging

- Stable supply with large volumes

- Competitive prices

- Long term relationships along the distribution channel

The retail sector is changing to better meet consumer demand. The multi-national retailers have less of an impact in the Japanese market and companies such as Walmart, Carrefour, and Metro do not dominate. The five largest retailers in Japan account for only 7 percent of the market. Trends in retailing include:

- Specialist convenience stores – following the Seven Eleven model but with specialist product ranges such as organic.

- Upmarket supermarkets

- TV and internet shopping/infomercials/mail order are accounting for a growing share of wallet.

- Home delivery of products such as milk are returning as aging consumers cannot carry bulk items home.

- Train stations are becoming shopping malls – with declining passenger numbers train companies are encouraging them to spend more time and money in stations.

Mr Chanoki says, “Small to medium sized retailers hold a large market share in Japan. They tend not to want to buy direct from suppliers as the large supermarket chains do. Food safety is of such importance they want wholesalers to carry the risk.”

New technology also holds some fascinating opportunities. In Japan the mobile phone has become so much more than a tool to talk into. It is a web browser, MP3 player, Global Positioning System (GPS), E-money, digital TV receiver, electronic train pass, credit card and is used to receive information via QR codes.

QR Codes are 2-dimensional matrix barcodes. They are incorporated into websites and print advertising. If someone wants more information on a product they photograph the QR code with the camera on their digital phone. The image is then downloaded into the web browser and automatically connects to the appropriate website.

“QR codes are a part of everyday life and a very important marketing tool for many companies operating in Japan. Consumers can do anything from getting the trailer for the latest movie to downloading discount coupons for an energy drink,” says Mr Chanoki.

“Marketers are seeing wider opportunities. High profile bloggers are endorsing products on their websites and directing their readers to further information using QR codes. More direct applications for QR codes in the food sector are in providing food safety information to consumers. The meat industry has incorporated QR codes in packaging. Consumers can photograph the QR code and are connected to a website profiling the farmer and property the animal came from. Obviously the same could be done with fruit and vegetables.”

“If New Zealand growers can continue to succeed in Japan, they can succeed anywhere. Japan has always had the highest standards for food products. Food safety is paramount and New Zealand should aim to achieve preferred supplier status,” finishes Mr Chanoki.

Rabobank New Zealand is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 100 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank has a AAA credit rating and, in recent years, has twice been awarded the title of the world’s safest private bank by Global Finance magazine.

Rabobank operates in 35 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1500 offices and branches. Rabobank New Zealand is one of the leading rural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 29 branches throughout New Zealand.

ENDS