Although the Japanese consumer is intelligent and very receptive to new product ideas and the new value offered by functional products, much of the force behind rapid and intense innovation is economic. The high labour costs in Japanese food companies and a reliance on imported ingredients result in thin profit margins. The result is that ‘added value’ becomes absolutely necessary for profit in many product categories.
The other factor encouraging innovation in Japan is the extremely short product cycles imposed by Japanese retailers. This forces companies to innovate just to keep their products on store shelves.
How will this competitive situation intensify? First, the Japanese government has successfully depreciated the Japanese yen, making exports cheaper. While this helps many Japanese companies, the price of imported food ingredients has risen sharply. This has put a squeeze on Japanese food companies forcing many to reformulate, raise prices or change product sizes. These are short-term measures, whereas innovation would be the long-term response.
Second, most of those involved in the Japanese agriculture and food industry are urgently trying to access the effect of Japan’s decision to join the Trans Pacific Partnership (TPP) treaty negotiations which may significantly open the Japanese market to imports in protected sectors.
Japanese manufacturers have typically responded to increased competition with more product innovation and this can be expected to happen again. Dairy farmers will also have to innovate. Farmers are likely to offer more products that emphasise the tradition and social benefits of dairy, naturalness, the safety of Japanese produced food, and possibly even organic (which has yet to take off in Japan).
Third, another squeeze being felt by Japanese food companies is the increase in private branding by Japanese retailers. This encourages companies to create innovative products that cannot be copied by competitors. Add to this extremely short product turnover rates and you have another strong impetus to innovate.
Many of the current innovations in the Japanese dairy industry were on display last October at the IDF Summit in Yokohama. Probiotics continue to be a focus in Japan, with Meiji, MegMilk Snow Brand, Morinaga and Yakult all describing new research there and explaining the novel benefits of proprietary probiotic strains.
In addition, Meiji discussed innovations in taste with its Oishii Gyunyu (Delicious Tasting Milk) and MegMilk Snow Brand explained its milk derived protein, MBP or ‘milk basic protein’, which can benefit bone health.
Expect even more innovation as Japanese companies respond to changing economic forces and increased competition.
© FoodBev Media Ltd 2024