• Japan is already Australia’s largest export destination for food and beverages, and new opportunities are emerging for Australian exporters.
    Japan is already Australia’s largest export destination for food and beverages, and new opportunities are emerging for Australian exporters.
  • Victorian business Camilo Olives exports its olive oil products to Japan.
    Victorian business Camilo Olives exports its olive oil products to Japan.
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Japan is the world’s second largest retail market and, with a population of 128 million and a food self-sufficiency rate of just 39 per cent, its demand for imported food remains unrivalled globally.

Since the 1980s, household income disparity has increased, and 16 per cent of the total population now live below the poverty threshold, which means consumer segmentation is increasingly evident.

The retail market has adapted to this socio-economic shift by broadening the range and availability of both very cheap and high-end expensive food products.

Middle-income earners have also changed their purchasing habits, joining the quest for low-priced daily consumables, while still enjoying the occasional indulgence.

This changed demographic and purchasing behaviour has polarised the Japanese food retail sector, resulting in the expansion of both the low-cost product segment, and the tailored and premium product market segment. The result? New market opportunities for Australian exporters.

Cut price and convenient

In adjusting to socio-economic changes, major supermarket retailers such as AEON have developed their own private label product lines, which deliver greater profits than their national branded counterparts. AEON has eight different private label names ranging from discounted to premium, and in some categories, the private label occupies the entire line.

Companies such as Costco Japan and Metro Cash & Carry have also been successfully targeting the growing value-conscious end of the market. Costco operates 18 Japanese outlets and offers quality, discounted products packaged in bundles.

Also, the traditional supermarket is facing stiff competition from the ‘category killer’ such as convenience and drug stores, home centres, and the ever-popular discounters such as Don Quixote and 100Yen Shop, which are now all licensed to sell processed foods and beverages, fruit and vegetables.

The 2011 earthquake, when fresh produce and ingredients were in short supply due to nuclear contamination, saw consumer demand shift to ready-made meals. Major convenience store chains filled a gap, accelerating product development and expanding their ranges to include deli products, breads and milk to attract working women and senior citizens as well as the growing ‘singles’ market.

At the premium end

While major supermarkets have pursued economies of scale and focused on private label and discounted prices, international supermarkets and gourmet specialty stores have turned their attention to premium ‘tailored’ products.

Many of these stores do not offer a full range of everyday food items, but rather focus on providing regional specialty, imported premium, and ‘safe’ food products driven by the Fukushima disaster in 2011.

After two decades of declining land prices, Japan is also experiencing a ‘re-urbanisation’ boom. Lower rental prices are seeing workers who once faced long commutes moving into the city, along with a new breed of boutique retailers such as Motomachi Union, Precce, Lincos, Blooming Bloomy, Seijo Ishii, Kaldi Coffee Farm and AEON’s Caferrante.

Brimming with opportunities: Japan is already Australia’s largest export destination for food and beverages, and greater consumer segmentation and price competition, increasing industry consolidation and savvy consumers are giving rise to new opportunities for Australian exporters, according to Sally Phillips.

Japan’s discerning appetite for year-round supply of seasonal gourmet products is steadily on the rise, so Australia is increasingly seen as a trusted supplier of premium items such as olive oil, cheese, truffles and tuna – products once considered the sole domain of Europe.

Australia’s geographical diversity and clean, green image also continues to capture the attention of major retailers, particularly in the fresh produce area.

Japan holds Australia in high esteem and, with a new free trade agreement on the horizon and an additional advantage of counter seasonality, Australian companies are well positioned to both move their branded product up the value chain and expand market share for bulk product.

The growth across the board in private branding offer Australia’s contract manufacturers opportunities for partnership. Suppliers to major grocery chains like Coles and Woolworths are ideally positioned to offer major Japanese grocery retailers such as AEON and Costco something from ‘down under’.

Several Australian companies have already partnered with AEON, the major supermarket retailer, to develop specialised AEON ‘Top Value’ product ranges. Costco is also keen to talk with Australian producers capable of supplying large volumes of quality, discounted products that are ‘pallet-to-shelf ready’ and new to the Japanese market.

Convenience store chains attract customers with low-cost, loss-leader products that make them competitive, which may suit some Australian suppliers such as Australian Vintage, which has its Coleridge Chardonnay and Shiraz stocked nationally in 7-Eleven.

The rise of international and gourmet specialty stores also offer opportunities for suppliers of niche, premium-branded product.

Seijo Ishii, for example, recently celebrated its 100th store opening and is now developing its own line of unique ‘Seijo’ products. It imports bulk produce and repackages it in Japan under the Seijo brand. Australia’s capability to supply products such as macadamia nuts, crackers, leatherwood honey, freeze-dried cheese and fruit, olive and truffle oil, and jams and condiments is attracting considerable interest.

Kaldi Coffee Farm aims to differentiate itself with ‘story-driven’ and ethical products, and has also increased its footprint to over 300 stores throughout Japan with more on the way. Australian producers can benefit from this by creating a carefully crafted image or story for their products, and vibrant packaging tailored to Japanese consumer taste and shelf size, with a minimum shelf life of 12 months.

A number of Australian producers of dressings using Australian native herbs, dried fruits free from artificial preservatives and beef jerky, have already made strong inroads into this area.

Also, on the back of the boutique retailer boom, in 2012 supermarket retailer AEON introduced Caferrante, a new high-end retail venture. The expansion has been rapid, with 28 stores already in operation and another 200 earmarked for the next three years. Caferrante’s primary lines are imported products, and Australian wine, cheese, olive oil, salt and snacks are in strong demand.

About the author
 
Sally Phillips is Trade Commissioner at the Australian Embassy in Tokyo, where she is responsible for managing Japan’s Food Beverage and Agribusiness Team, a cross regional team of Japanese business development professionals, focused on increasing the market share of Australian food, beverage and agribusiness into Japan.

For further information or to arrange to speak with Austrade’s team in Japan, please contact Sally.Phillips@austrade.gov.au.

Victorian business Camilo Olives exports its olive oil products to Japan.

Branching out

Victorian business Camilo Olives has been exporting small quantities of its olive oil products to Japan since 2010. However, a piece of luck saw its exports to the country take a sharp upturn in 2012.

The president of the Japanese bakery chain Andersen Bakery Group was on a cafe-bakery tour in Australia early that year when he was introduced to the company’s founders, Joan and Peter McGovern, through a common acquaintance.

Andersen Bakery Group operates 70 premium stores in Japan, as well as 20 in San Francisco and a further three stores in Denmark. During the tour, several company representatives took a detour to visit Camilo Olives and sample their products.

In May 2012, during the olive processing season, the company’s international manager and its olive oil buyer visited, and left with samples of Camilo’s products. Soon after they sent Andersen’s first order: 11,000 100ml bottles in a mix of extra virgin olive oil, lemon-infused extra virgin olive oil and Camilo’s honey balsamic glaze.

All products are sold co-branded under the bakery’s Hygge brand as “Hygge Camilo”. The products are on sale in every one of Andersen’s bakery stores across Japan.

“This is a high value and high volume contract for us and we value their repeat business,” says Joan McGovern.
“To be in Japan’s most famous bakery gives us a great profile and their store displays are exquisite.

“I would want to add a tip to anyone wanting to export to Japan: You need to understand that they are fabulous and loyal customers but you have to be incredibly particular about your quality control, because if you aren’t, they will be.

“And all our Japanese customers have the same traits – they are lovely people, we trust them and as long as we look after them, they look after us,” says McGovern.

“I also had some great advice from another exporter some years ago which was to get the product right on the domestic market before exporting, and it is very true. You really do need to sort out any product and labelling problems at home before you venture overseas.”

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