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Growth stunted in Japanese confectionery market by health conscious ageing population

By Oliver Nieburg , 19-Oct-2011
Last updated on 24-Oct-2011 at 12:53 GMT

The Japanese confectionery market offers limited opportunities for foreign players due to the nation’s ageing population and preference for functional foods, according to analysts from Leatherhead Food Research and Euromonitor International.

Market analysis from Leatherhead suggests that although the market is the biggest in the Asia-Pacific region, it is growing at a slower rate than surrounding countries.

Reasons for poor growth

Leatherhead’s research said that Japan is still suffering from the global economic recession and had been forced to up prices for confectionery products due to the escalating costs of raw material such as sugar.

It said the Japanese confectionery market was worth around JPY926bn (€ 8.7bn) in 2010 and has increased just 9% since 2006. Volume sales and consumption levels had remained static since 2006.

It added that the domestic production of chocolate had declined in the last few years by around 20,000 tonnes and per capita consumption was low by international standards.

Lee Linthicum, head of food research at Euromonitor, told ConfectioneryNews.com that Japan was a mature market compared to its neighbours.

“It’s hard to sustain growth for an ageing population where confectionery is not attractive,” he said.

He added that a preference for healthy products has damaged the confectionery market.

“Such a fixation on health and functional food does not help confectionery,” he said.

Limited opportunities for foreign confectioners

Linthicum said it would be very difficult for foreign confectioners to make a mark on the Japanese market as the country is “very protectionist”.

Leatherhead also found that domestic suppliers dominate the market, such as Asian confectionery giant Lotte, has a 60% share of the gum market and hold a quarter of the sugar confectionery market.

Linthicum recalled a failed move into the market by Ferrero, which established an unsuccessful partnership with Lotte.

He said that the sophisticated market may support value sales but not volume sales due to product preferences. He added that confectioners should not expect growth there in the near future.

Leathehead analyst Jonathan Thomas, who authored the research told ConfectioneryNews.com: "Market growth is likely to continue to lag compared with other countries in the Asia-Pacific region – mainly because markets such as China are less well-developed than Japan."

"It is possible that market growth may be held back over the next year or so if the global economic situation remains bleak, but I would expect growth to pick up soon afterwards. Penetration of western brands in this part of the world is increasing as disposable income levels rise, and the emergence of a more affluent urban consumer base is also likely to aid sales growth in China in particular," he said.

Product preferences

Leatherhead’s research found that chocolate had been the best performer and made up 54% of the total market.

It said that consumers have a preference for dark collocate and smaller-sized bars.

It added that demand was rising for functional forms of soft sweets, such as breath freshening mints with herbal extracts and sweets containing collagen for the beauty market.

Linthicum said chocolate fortified with gamma-aminobutyric acid (GABA), an amino acid with neurological properties, would perform well in the Japanese market as it could be marketed to promote relaxation.

He added that gums containing the sugar substitute xylitol would also sell. He said that Lotte had developed successful sugar-free gums using xylitol which were authorised to make dental health claims.

Leatherhead said the bubblegum is expected to decline due to the falling number of Japanese children.

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