2.
Soft drink market analysis (Japan)
The soft drinks market in Japan is booming and the region’s drink manufacturers aim to
grow that side of their business significantly.
a. Market size
The market size of the soft drinks market in Japan is about 5.1 trillion yen (about 51
billion dollars) according to the report of Japan Soft Drink Association in 2018. This
market in 2017 increased 0.4% from the previous year because of many sunny days. It
is increasing slightly year by year. Soft drink industry boasts its market size which is one
of the biggest in the processed food sector and became a member of Japan Business
Federation on 15th October 2019 since then Japan has been raising public awareness
of the soft drink sector utilizing the position. As collected data from Statista, in 2021,
revenue in the soft drinks segment amounts to US$54,085 million. In global comparison,
the country generating the most revenue is the United States with US$230,468 million in
2021.
In relation to total population figures, per person revenues of US$429.07 are generated
in 2021 in Japan. In addition, the average per capita consumption stands at 149.3 L in
the same year. The total consumption of soft drinks in Japan is equivalent to the amount
consumed when every single Japanese nation including all children and adults drink
500 ml PET bottles a day.
b. Market growth rate
Carbonates market in Japan registered a negative compound annual growth rate
(CAGR) of -0.87% during the period 2013 to 2018 with a sales value of JPY 797,914.04
Million in 2018, a decrease of -1.36% over 2017. The market achieved its strongest
performance in 2016, when it grew by 1.80% over its previous year and its weakest
performance in 2014, when it fell by -3.14% over 2013. In 2020, due to the COVID-19
pandemic, carbonates sales have declined in both the off-trade and on-trade channels,
with demand stalling as consumers have remained at home. To help control the spread
of COVID-19 there were widespread closures seen in the foodservice channel,
especially during the state of emergency, with this putting a significant dent in sales of
carbonates. The compound growth rate of the market (CAGR) during the period 2021 to
2025 is expected to grow annually by 3.73%.
c. Customer profiles
d. Customer Trends
Consumers of soft drinks are changing fast, and in ways that impact all brands. These
are some key behavioural trends
One of the current trends in Japanese beverages are drinks that contain added health
benefits. Japanese consumers are typically very health conscious and COVID-19 has
boosted the demand for drinks that offer preventative health. Residents want to
strengthen their immune system to prevent COVID-19 infection, and there is an
increasing demand for health and wellness beverages.The growing middle-class with
increased per capita spending power combined with the large ageing population have
transformed Japanese society into very health conscious consumers. As a result, the
Japanese consumers are very inclined to splurge on products that claim to have added
health. Many Japanese are preoccupied with a health trend; Therefore, the sales of
soda like Coke is decreasing. On the other hand, the sales of energy drinks is
increasing rapidly. "Red Bull" and "Monster Energy" are very popular among young
Japanese in recent years. This is in response to a long-term trend towards healthier
living among younger consumers.
- Demand for traditional beer by restaurants and bars is expected to return to just
80% of its pre-pandemic level even in fiscal year 2022, according to Satoshi
Fujiwara, an analyst at Nomura Securities.
- Euromonitor International reports that almost two-thirds (63%) of millennials are
trying to reduce or quit their alcohol consumption. The research firm also
forecasts that demand for non-alcoholic drinks will increase by 18.9% in Japan to
395.5m litres in 2024 compared with 2014.
- Japanese drinks giant Asahi Group Holdings plans for non-alcoholic and low
alcoholic drink sales to account for 20% of its portfolio by 2025, or more than
three times that of 2019.
- Rival Kirin Brewery saw sales of non-alcoholic drinks grow by 10.4% in 2020 and
aims to increase that further to about 23% this year. The company also plans to
double its sales of low-alcohol wine, while developing a non-alcoholic wine
brand.
The second trend is that online sales thrive while consumers turn to family-sized packs.
E-commerce companies in Japan are expected to see their share of soft drinks increase
in 2020, with more consumers embracing online grocery shopping in the face of the
challenges posed by COVID-19. Sales were particularly strong through this channel
during the state of emergency when prefectures advised citizens to remain at home
where possible and to limit their number of shopping trips.
Young Japanese consumers are beginning to favor Western cuisine and habits, leading
to a change in the types and amounts of drinks consumed. Japanese consumers’
interest in foreign goods has been strengthened by increased exposure to global culture
and media. They have a penchant for using Western drinks while retaining the unique
taste of the West. They love experience, new things, and creativity. With the younger
generation's interest, beverages such as soft drinks, tonic, and gin are growing in
popularity, and consumption of traditional drinks is falling. This is a huge opportunity for
Western soft drink companies to penetrate in Japanese market and become successful
The main elements of Japanese consumer mindset are: novelty seeking, high
expectations, relative price sensitivity and an interest in foreign goods. Japanese
consumers seek novelty and highly value new experiences and products; they have a
preference for originality, new products, new functions and a large variety of products.
Japanese consumers tend to have very high expectations for product quality and are
willing to pay a premium price, provided that the products exceed their expectations.
Product freshness and the origin of the product are very important. Japanese
consumers are relatively price-conscious, an attribute that has become especially
apparent in recent decades. There is larger demand for ready to drink beverages, soft
drinks, and non-alcoholic drinks.
Ethical living is also becoming a trend in Japanese lifestyle. Zero-waste initiatives
gained in popularity. Many businesses have banned disposable straws, plastic water
bottles, and single-use coffee cups. Although ethical living is a new concept for the
Japanese, increasing public awareness and ongoing education about the idea will
encourage more people to understand the importance of being ethical consumers.
e. Competitors:
The soft drink market in Japan is one of the most competitive one in the world.
Currently, there are more than 700 companies supplying nearly 5,000 different types of
soft drinks to this market according to The Japan Soft Drink Association. In addition,
every year, nearly 1,000 new soft drinks are introduced to the people here. Here are
some main direct and indirect competitors in this tough beverage market.
Direct competitors in this market include companies that sell soft drinks including
Ramune Soda, Sparkling Drinks, Fruit & Vegetable Drinks, Soy, Coffee & Milk Based
Drinks, Sports & Health Drinks, Jelly & Aloe Drinks. In particular, in 2017 Coca Cola is
the company that has captured the largest market share in Japan with 27%. Suntory
Holdings has the second share (21%), Asahi Group Holdings has the third share (13%),
Kirin Holdings has the fourth share (12%) and ITOEN has the fifth share of this market
(11%).
Since Japanese Coca Cola release in 1961, it has always ranked high in popularity and
numerous varieties such as “zero,” “caffeine zero,” or “clear” keep consumers excited.
The packaging, bottle size, and marketing may change, but it is Coca-Cola’s original
and unchanging taste that makes it such a long-seller. In 2018, both Coca-Cola and
Coca-Cola Zero’s 500ml plastic bottles are adorned with special labels that come in 12
different colors. During the period 2016 to 2018, the revenue of Coca Cola in Japan
increased significantly from JPY460,455M to JPY927,307M. However, in 2020 and
2021, the sales of this firm decrease slightly due to the impact of the COVID-19
(JPY914,783M and JPY791,956M respectively)
Indirect competitors of soft drinks companies may be the firms which sell alcoholic
beverages or teas. The alcoholic beverage industry is a major segment of the beverage
manufacturing industry in Japan. Renowned for its manufacturing of high-quality rice
wine (sake), the industry covers a broad spectrum of fermented and distilled drinks.
While sake and Japanese clear liquor (shochu) have a long history in the country, the
procedures of beer and whisky manufacturing began in the last centuries. However,
despite its short commercial history in Japan, beer is the top seller in the domestic
market. Along with liqueur, the brewed beverage makes up around half of alcoholic
beverage sales, relegating sake and shochu to a secondary position. In the tea market,
Matcha Green Tea, Tea Bags, Loose Tea, and Bottled Tea are four types gaining
popularity in the community. This is also a huge Japanese market with the revenue
amounting to US$13,017.9m in 2021 due to the healthy image. People nowadays pay
more attention to their health, which is why this market is intended to grow strongly in
the future.
3.1.1 Inbound Logistics
Fentimans control and operate a huge supply chain across many different countries.
They treat their suppliers as business partners. Of course there are many agreements
between Fentimans and their raw material supplier on product quality, as well as
environmental issues. A good relationship and nice treatment between Fentimans and
its supplier maintain a continuous and uninterrupted flow of raw material for the
company.
The indulgent and distinctive flavour experience starts with scouring the globe for the
finest natural ingredients. Fentimans has supplier in Americas due to its diverse climate
and vast amount of fertile land, the Americas can grow a huge variety of fine fruits and
flora. In Florida, the company has a large supply of pink grapefruit. It is one of the
largest members of the citrus fruit family, pink grapefruit is tangy whilst carrying a
luminous sweetness. The sharp yet sweet notes create a delicious melody of flavours in
our Pink Grapefruit Tonic Water; the perfect recipe for an invigorating G&T like no other.
Fentimans also has a huge source of ingredients in Europe because the firm always
tries to source as many ingredients as close to home as possible and Europe holds
some of the finest ingredients in the World. Especially, Fentimans inbound many
elderflowers from Europe. Elderflower has been a staple of the English country kitchen
for centuries. The delicate white flowers grow wild in European hedgerows and come
into bloom in June, signalling the arrival of summer. To capture the essence of an
English summer, we use the finest elderflowers, which are transformed into a pale, floral
liquid that is Fentimans Sparkling Elderflower.
Some of the finest exotic ingredients are grown in the Asian continent. Two thousand
years after the Romans first started to import ginger to Europe, Fentimans continue the
tradition of importing the finest Chinese ginger root. To make Fentimans Ginger Beer,
the ginger root is crushed before the intense and spicy flavour is extracted and
botanically brewed. The result is a complex taste which is fiery and full of flavour.
3.1.5 Services
In pre-sale service, every week the company sends newsletters and trade news to its
customers to help them keep up to date as well as an opportunity for the company to
reach closer to its customers. The company regularly introduces customers to the latest
products associated with special occasions. The official website of Fentimans has a
FAQ section to summarize the most common questions and answer them.
In post-sale service, Fentimans serve customers mainly through email and the
company's official website. After making a purchase, the company is always ready to
receive feedback and customer reviews through email. Customers can return the drinks
if something is wrong or even they don't want it anymore
