Hip Drinks Bring Cool Profits in Japan

By Sarah Hanson

If your company produces natural, organic, herbal or fruit ingredients, the Japanese new age drink market may be right for you.

Japanese consumers are more health-conscious than ever, which may explain why the market for what the industry calls new-age beverages continued to grow–even during Japan’s recent recession.

Production of these trendy beverages–canned coffees, sport drinks mineral waters and teas–tends to be dominated by large companies that control distribution channels. Still, there is opportunity for smaller firms that supply ingredients.

When Japanese consumers buy a canned drink, there is a 70-percent chance they will buy through a vending machine.

Currently, 20 companies own 80 percent of Japan’s beverage market–with one U.S. firm alone holding 35 percent.

But market giants still need reliable suppliers of trendy health and natural products. This is where small and medium-size firms can make their moves.

What’s Your Special Ingredient?

First, the large market for canned and bottled coffees and teas offers a potential boon to importers of roasted coffees and various types of tea. Green and roasted coffee beans have potential here.

Furthermore, new Japanese markets for flavored tea and other drinks offer opportunity for importers of natural nutritional supplements, herbs and fruit flavorings. There is also potential to sell royal jelly (the food that bees feed to their queens), aloe, the herbal stimulant guarana and vitamins.

Mineral Water Makes Waves

Most new-age drinks designed for U.S. consumers don’t translate well to the Japanese palate–they are just too sweet. But mineral water, which tends to be sugar-free throughout the world, tends to be the exception to that rule.

The bottled water market has recovered from a food safety import scare in 1995 and domestic production is growing. Still, the market is smaller than France, the United States and even other Asian nations. This suggests that the water market has room to grow.

There are many reason to be confident that it will. First, many consumers in Japan worry about the quality of their tap water. This is a special concern in metropolitan areas such as Tokyo and Osaka. And, in spite of past problems, consumers seem confident that bottled water ensures good flavor and high safety standards. 

Also, Japanese teenagers who see bottled water on television, and vacationers who enjoy it on overseas trips, contribute to the growing demand for trendy bottled waters.

One product that continues to sell is "near water." This is mineral water with a slightly fruity taste. It often contains vitamins, royal jelly, fruit flavors or caffeine.

Canned Coffee Sales Spike

Canned coffee is consistently one of Japan’s most popular drinks. Vending machines sell this beverage hot or cold. Sales have doubled over the last decade.

In the past, canned coffee was made from either instant coffee or coffee extract. In 1994, however, companies switched to using regular coffee beans. In fact, the bean variety is promoted as a selling point. Recently, canned café au lait and cappuccino have become especially popular with women.

Tea Drinks Pour on Profits

Sales of canned and bottled tea have risen dramatically over the last decade. By 1995, sales of tea drinks surpassed sales of all carbonated beverages combined. This rapid growth has been fueled by demand for healthy, sugarless drinks.

In addition to canned teas, take-home packs of 2-liter bottles are popular with families and restaurants.

Among tea drinks, oolong is the most popular, followed by straight tea, green tea and barley tea–which is called mugicha.

Beverage makers have also had success marketing English-style straight tea by emphasizing that it is sugar-free.

Teas flavored with fruit or herbs such as jasmine, apple or lemon have also had an increase in popularity among women.

Still, this is not a market for U.S.-style sweetened iced teas. In Japan, the cool fresh flavor of a straight-tea taste is what consumers crave.

Sports Drinks Perform

Domestic production of sports drinks grew by 36 percent during the 1990s. Two brands, "Pocari Sweat" by the Japanese company Otsuka and "Aquarius" by a major U.S. soft drink manufacturer, dominate the market with a combined 90-percent share.

These drinks are light and tend to be semi-sweet, containing considerably less sugar than is typical for U.S. products. Potential ingredients? Everything from amino acids to kelp.

In the United States, drinks specifically designed for intensive sports activity are a real hit, but that’s not the case in Japan, where consumers respond to drinks marketed as part of an active lifestyle rather than for serious athletes.

One of the biggest changes in the soft drink market in Japan is the popularity of new jelly-style health drinks. Originally targeted to athletes, these products are sold in soft plastic packs with a straw. You drink them by squeezing the contents in your mouth. When they first came out in 1995, they were sold only in health clubs. But they turned out to appeal to more than sports enthusiasts. Today, jelly-style drinks are for everybody, and are sold mainly through convenience stores and supermarkets.

As more Japanese consumers skip meals, jelly drinks are becoming popular with people trying to eat on the run and still maintain a healthy diet.

The U.S. sports company Weider was the first to enter this market, but now there are several Japanese competitors. The U.S. product gained popularity in part because its packaging was easy to carry and could be re-sealed for later use. As with the other new-age drinks, adding fruit juices for flavor is a popular trend.#

_____________________________

The author is Agricultural Attaché at the American Embassy in Tokyo. Tel.: (011-81-3) 3224-5102; Fax: (011-81-3) 3589-0793; E-mail: AgTokyo@fas.usda.gov

Last modified: Thursday, October 14, 2004 PM