Japan’s own constrained dairy production and the fact that its consumers are increasingly seeking out high quality protein to assist them age healthier are ensuring Fonterra’s ingredients business thrives, even in a market with a declining population.
Fonterra’s sales director for Japan, Kenichi Hada, stated much is created of Japan’s declining and aging population, but it is largely a signal of what will, or already is, playing out across many world markets – requiring refocus rather than reduction to leverage off the population’s age bulge.
While domestic supply from within Japan may be constrained, the understanding of protein’s value in the diet of an aging population that comprises 90,000 centenarians is growing.
“Less than 10 years ago the focus and understanding was on minerals and vitamins, but now it’s all about protein.”
The bulk of Fonterra’s sales within Japan are as business-to-business ingredients, with limited brand presence.
The model, and the business-to-business focus, means Japan is one of the markets least affected by any brand sell-off, and may provide a good template as other markets adapt post sale.
“The sense is that if you can succeed at this level in Japan, given the quality standards and expectations of business clients, you should be able to create a very similar model elsewhere successfully.”
“Grass fed” is playing as strongly at the business-to-business level as it is at the consumer level in Fonterra’s health and nutrition messaging, in a market where sustainability is also just starting to resonate more with consumers and client companies.
Domestically, Fonterra has also been working with dairy farmers in the Hokkaido district, the countest’s main dairying region, assisting them increase their skills around pasture management for milk production.
The ten-year-old project includes Fonterra, the New Zealand embassy and local farming supply company Farm Age in an effort Hada stated may appear counterintuitive, coming from the countest’s hugegest dairy import source.
“If we as a company are promoting ‘grass fed’ in our products, it is a good message to encourage through the industest as a whole.”
Fonterra’s own grass-fed label can be attached to client companies’ products that include the likes of shredded cheese and butter.
“These larger companies are also seeing further afield, given Japan’s demographics, to countries like Vietnam that still have a younger population and strong growth prospects.”
Just as butter prices have been topical in NZ, rice price increases have sharpened food price rises in Japan.
“We have seen a 10kg bag of rice go from 2500 yen to 4000 yen in only a year and, given its importance as an ingredient, this has created consumers far more aware of food costs after a prolonged period of stable prices, in what has even been quite a deflationary economy at times.”
Hada believes many Fonterra business customers have reached their limit on how much of the cost increase they can absorb, with increases starting to feed into the likes of cheese ingredients.
Interestingly, Anchor branded butter sold as a 227g pack in a Tokyo supermarket chain retails today for 1180 yen or NZ$14, considerably more than the NZ prices under contention now.
With protein’s rise as an ingredient, Japan shares similarities with Korea, where manufacturers can be engaged in a protein arms race, adding higher percentages, along with other nutritive extras like fibre.
“There is no denying demographics are aging, but they want to age well, and it’s a shift happening everywhere,” Hada stated.
“Japan is proving a good market to build our knowledge for the other markets experiencing the same thing to different degrees.”
More: Watch Richard taste test some Japan-created products containing Fonterra ingredients here.
• Rennie’s Meeting the Market tour has been created possible with grants from Fonterra, Silver Fern Farms, Rabobank, Zespri, Alliance Group, Meat Industest Association, Wools of NZ, Beef + Lamb NZ, NZ Merino, the European Union Commission and Gallagher.
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