Consumer Concerns in Japan and the Response of Agribusiness, Food Industry and Government An Exploratory Inquiry Theo Jonker Project code 61591 October 2000 Report 7.00.01 I Agricultural Economics Research Institute (LEI), The Hague The Agricultural Economics Research Institute (LEI) is active in a wide array of research which can be classified into various domains. This report reflects research within the following domain: ¨ Business development and competitive position ¨ Natural resources and the environment ¨ Competitive position and Dutch agribusiness; Trade and industry ¨ Land and economics II ¨ Chains ¨ Policy þ Institutions, people and perceptions ¨ Models and data Consumer Concerns in Japan and the Response of Agribusiness, Food Industry and Government; An Exploratory Inquiry Jonker, T.H. The Hague, Agricultural Economics Research Institute (LEI), 2000 Report 7.00.01; ISBN 90-5242-609-0; Price NLG 31.-, (including 6% VAT) 65 p., fig., tab., app. This report presents the findings of an exploratory inquiry on consumer concerns in Japan. The objective is providing an initial insight into how Japanese consumers perceive health, environmental and ethical issues in relation to food products. Furthermore, it aims to give examples of the way trade and industry in Japan deal with it: on the one hand how Japanese companies manage it, and on the other hand how foreign companies contend with it. Orders: Phone: 31.70.3358330 Fax: 31.70.3615624 E-mail: [email protected] Information: Phone: 31.70.3358330 Fax: 31.70.3615624 E-mail: [email protected] © LEI, 2000 III Reproduction of contents, either whole or in part: þ permitted with due reference to the source ¨ not permitted The General Conditions of the Agricultural Research Department apply to all our research commissions. These were registered in the Central Gelderland Chamber of Commerce in Arnhem. IV Contents Page Preface 9 Summary 11 1. Introduction 13 1.1 Background 13 1.2 Project objective and research questions 13 1.3 Starting point for further research 14 1.4 Contents of the different chapters 14 1.5 Sources 15 2. Overview of literature and opinions on consumer concerns in Japan 16 2.1 Introduction 16 2.2 Trends and conformism 16 2.3 Japan's population by area and age groups 17 2.4 Trends in Japanese eating habits and food expenditures 19 2.5 General consumer perceptions in relation to food products 21 2.5.1 Principal concepts in Japanese consumer perceptions 21 2.5.2 Consumer perceptions in relation to foreign versus domestic food products 21 2.6 Consumer perceptions regarding health issues 23 2.6.1 Health issues are a major concern 23 2.6.2 Pin-pointing specific health concerns by consumer surveys 24 2.6.3 Key words 'nutritional balance' and 'natural products' 25 2.6.4 Influence of the media 26 2.6.5 Japanese-style food in connection with health 26 2.6.6 Motives for Japanese consumers' health concern 26 2.6.7 Concerns about genetically modified organisms (GMO) 28 2.6.8 Consumer concerns in the field of confectionery (on the basis of a consumer survey) 29 2.7 Consumer perceptions regarding environmental issues 30 2.7.1 Environmental concerns in general 31 2.7.2 Packaging 32 2.8 Consumer perceptions regarding ethical issues 32 2.8.1 Ethical issues equals animal welfare 32 5 2.8.2 Vegetarianism 33 2.8.3 Outlook 33 Page 3. Consumer concerns and the response of Japanese agribusiness and food industry 34 3.1 Introduction 34 3.2 Corporate strategy 34 3.2.1 Japanese consumer behaviour rooted in Japanese tradition 34 3.2.2 Marketing mix specific to the Japanese market 35 3.3 'Something extra' or 'something new' as an added value 35 3.4 Product 36 3.4.1 Functional foods 36 3.4.2 GMO 37 3.4.3 Response to the environmental issue 38 3.4.4 Fresh vegetables 38 3.4.5 Confectionery 38 3.5 Promotion 40 3.5.1 Factors of promotion 40 3.5.2 Fresh vegetables 41 3.5.3 Confectionery 43 3.6 Distribution 44 3.6.1 Ready-to-cook and ready-to-eat food in convenience stores 44 3.6.2 Functional foods and dietary supplements in convenience stores 44 3.6.3 Fresh vegetables 44 3.6.4 Confectionery 45 3.7 Price 46 3.7.1 Reasonable price 47 3.7.2 Fresh vegetables 47 3.7.3 Home cooking 47 4. Consumer concerns and the response of Japanese government 48 4.1 Introduction 48 4.2 Labelling: new JAS Law 48 4.2.1 Enhancement of food labelling system 48 4.2.2 Labelling of organic products 49 4.3 GMO 49 4.3.1 Legislation: labelling of GMO 49 4.3.2 Response of the Japanese government 50 4.4 Food self-sufficiency 51 4.5 Guiding principles for dietary life 52 6 4.6 Environment 54 4.6.1 Recycling 54 4.6.2 Dioxin 54 4.7 Views of consumers' organisations 55 7 Page 5. Consumer concerns and the response of foreign agribusiness and food industry in the Japanese market 56 5.1 Introduction 56 5.2 Product 56 5.2.1 Opportunities for foreign products 56 5.2.2 Adaptation to the Japanese quality level 56 5.2.3 Contact address or telephone number for consumers 57 5.2.4 Speed of product development 57 5.2.5 Importance of appearance in the case of impulse-buying products 57 5.3 Promotion 57 5.3.1 Communication to the customer 57 5.4 Distribution 58 5.4.1 In general 58 5.5 Price 58 5.5.1 Price competition 58 6. Conclusions 59 6.1 Consumer concerns in Japan 59 6.2 Response of Japanese agribusiness, food industry and government 59 6.3 Opportunities for foreign agribusiness and food industry 60 References 61 Appendix 1 Addresses 65 8 9 Preface The Ministry of Agriculture, Nature Management and Fisheries has commissioned the Agricultural Economics Research Institute (LEI) to conduct an exploratory inquiry into consumer concerns in Japan and the response of agribusiness, food industry and government. These issues were explored through in-depth interviews in Japan with experts and with stakeholders involved. The interviews formed the basis of this report. It should be noted that this report is exploratory in nature and is intended to be the basis for more detailed investigations on this topic. This project aims to provide Dutch agribusiness and food industry as well as Dutch policy makers with examples that they may use for their own strategy or policy development towards Japan. The research was executed by LEI researcher Mr. Theo H. Jonker. During two weeks of interviews in Japan in April 2000, he talked to many experts and stakeholders who generously shared their professional views. We cannot thank them personally here, since the author has guaranteed them not to mention their names nor organisations. However, please note that their time, support and frankness were indispensable and are greatly appreciated. We owe many thanks to them. We especially would like to extend our gratitude to the Agricultural Counsellor - Mr. H.R. Toxopeus - and his staff - Ms. A.V. Dolgoff, Mrs. N. Sawada, Mrs. C. Boonstra and Mr. Y. Akimoto - at the Royal Netherlands Embassy in Tokyo for their co-operation and commitment. The managing director, Prof. Dr. L.C. Zachariasse 10 11 Summary Introduction about the project This report on consumer concerns in Japan and the response of agribusiness, food industry and government is targeted at the Dutch agribusiness and food industry as well as Dutch policy makers. It is the intention that they use the observations of this report for their own strategy or policy development. Due to the nature of this project - it is an exploratory inquiry - further research would be required in order to draw more precise conclusions. The objective of this exploratory inquiry is providing an initial insight into how Japanese consumers perceive health, environmental and ethical issues in relation to food products. Furthermore, it aims to give examples of the way trade and industry in Japan deal with it: on the one hand how Japanese companies manage it, and on the other hand how foreign companies contend with it. The main conclusions are offered in the following. Consumer concerns in Japan Consumer perceptions are classified into three groups, namely health, environmental and ethical issues. We studied the perceptions of Japanese consumers regarding these three groups of issues in relation to food products. Principal concepts in Japanese consumer perceptions in relation to food products are the following. Good taste and high quality, which includes safety, are the consumer's first priorities - or even prerequisites - when he chooses a food product. Issues of great significance to Japanese consumers in their purchasing behaviour are the product's freshness, appearance and place of origin. Health issues play a more significant role in the consumers' purchasing decisions than environmental and ethical issues. Different motives are behind this consumer behaviour. They are, among other factors, concerns about the future and cultural aspects. We can conclude that the key words in the consumer perceptions regarding health issues are 'nutritional balance' and 'natural products'. Response of Japanese agribusiness, food industry and government Japanese trade and industry are well aware of the Japanese consumer concerns. They use the commercial opportunities these concerns offer and respond to them in various ways. Since the Japanese market is highly saturated and competitive, Japanese manufacturers and retailers are continuously looking for additional or new features to make their products stand out and catch the eyes of the consumers. 12 Product development leads to innovative products, which often fall within the category of functional foods.