The Homa Files

Takeaway: When you’re bored with the game at home, take your show on the road.

This strategy has worked well for Japanese companies for decades. However, foreign markets typically expect high tech products from Japan.

Recently, Japanese food companies have focused their efforts outward as their domestic consumer market stagnates.

As is expected in Japan, these companies face relatively high labor costs, and limited agricultural resources, so will this strategy bring home the bacon, or be put out to pasture?
 

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Excerpt from New York Times, “Japanese Food Companies Seek Growth Abroad” by Miki Tanikawa, April 2, 2010.

As birth rates and the consumer market shrink at home, food companies in Japan are increasing the pace of their overseas expansions and trying to improve promotion of their brands.

Analysts say that increasing sales abroad is crucial for manufacturers. To do so, the companies are combining, undertaking joint ventures, cutting production costs and creating strategies for new markets.

“The domestic market is shrinking, deflation is cutting into sales and the sense of crisis is looming stronger and stronger,” said a senior economist at Norinchukin Research Institute in Tokyo.

The sector’s strategy has been twofold. First, Japanese companies have been infiltrating the health food and condiment categories overseas with soy-based products like tofu in countries where few domestic companies can compete.

Second, Japanese producers capitalize on cute Asian-themed characters like koalas and pandas and apply technology to make amusingly shaped treats to attract snack-happy consumers.

The Japanese confectioner Ezaki Glico says its Sofyl yogurts and Yakult fermented-milk drinks contain bacteria that aid digestion, now draws 25.7 percent of its 293 billion yen in annual revenue from overseas units, thanks to 38,000 “Yakult women” who sell the products door to door in Asia and Latin America.

The company says it sells 6.5 billion units of Yakult and Sofyl a year outside Japan. “We want our product to be available virtually everywhere, like Coca-Cola, and make a contribution to the health of people around the world,” said the director for the international department.

Ajinomoto, a leading Japanese food company, with about 1.2 trillion yen in annual revenue, has increased its overseas sales ratio to 31.8 percent, from 22.8 percent, in eight years.

In terms of expansion, Japan’s Asian neighbors offer the biggest opportunities. Countries like Thailand already embrace a Japanese food subculture, and in China, growing numbers of upwardly mobile workers are increasingly inclined to purchase prepared foods and snacks.

The international survey firm Euromonitor says that the Lotte Group, a company in Tokyo that sells products in more than 70 countries, is the leading Asian-owned confectioner, with a 10.3 percent market share. The company, maker of Koala’s March — chocolate-filled koala-shaped cookies — ranks fourth in terms of sales among global companies in the Asian sector excluding Japan — ahead of Nestlé but behind Mars, Perfetti Van Melle and Cadbury.

Despite quality concerns raised by the recent recalls by Toyota Motor, a scandal caused by the sale of expired dairy products and eggs at Fujiya confectionery in 2007 and the Snow Brand food-poisoning fiasco in 2000, Japanese food manufacturers express pride in the country’s technological expertise.

In fact, the sales and marketing strengths of Western food companies far outweigh those of the Japanese. Kraft, for example, has gross sales of $50 billion a year, nearly 10 times as much as Lotte, which grossed about $5 billion in sales in its 2008 financial year.

Analysts and management consultants said that the struggle of the Japanese food companies to keep up with their Western rivals in overseas territories sounded familiar: Japanese companies that have higher-quality products are still sometimes hampered by weak marketing and brand strategies.
 

Managing director in Tokyo for the Boston Consulting Group, said: “Japanese firms may say, ‘We have superior products.’ That alone won’t do. You need sales and personnel who understand the trends of the local market, developers who will take the local taste into account and marketers who can explain the product to the locals on their terms.”

“You need the whole package in order to win,” he said.

Edit by BHC

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Full Article:

http://www.nytimes.com/2010/04/03/business/global/03food.html?pagewanted=2&ref=business

This entry was posted on April 14, 2010 at 7:15 am and is filed under Mktg - Global - BoP. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.