Cheese Revolution #4: Market Insights

Read for some insights on cheese and yogurt categories in Japan

Hello, Market Shakers! 

This week, we keep things light, with some final insights on the yogurt and cheese category. We spoke with Yusuke Hasegawa, data researcher for GourmetPro. 

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Cheese under influence

The birth and growth of the plant-based cheese category in Japan can partly be attributed to outside influences. North America and Europe trends have set the tone, and Japanese specialty stores perceive the category as trending and niche. Therefore, importing a rare product that offers a new experience for the consumers is greatly valued. 

You could say there’s an islander mindset —Japanese consumers follow influencers and trends, especially women. Men are probably more conservative and skeptical about new products [something we noticed throughout our consumers’ sounds bites!]. 

This conservatism can be explained by the organization of Japanese society, where married women and mothers often become housewives and, even when they’re not, will take charge of most of the house chores, including grocery shopping. However, looking at younger generations, the curiosity and interest for new and premium products will equalize. 

Japanese consumers turn to plant-based products for many reasons, but the leading drivers are health and environmental concerns. The SDGs are pushing plant-based trends in Japan.

While the public isn’t too caught up with ethical issues, the development of the SDGs does play a part in the overall growth of the plant-based market, cheese included. The government is actively promoting the SDGs, and at the same time, mass media report on the food industry’s impacts on the environment. This promotion created a burgeoning demand for alternative products. 

Understanding the consumer base in Japan is key to success. Millennial consumers are closer to their peers in Europe and North America and more likely to be interested in environmental issues and animal welfare. But when it comes to spending on premium products, the primary consumers in Japan are the silver generation —the elderly. 

The need for plant-based cheese is likely to grow in Japan. 

With significant retailers embracing the category, notably Aeon, this category will stay. Large food manufacturers will determine the future of the market. If they show an interest in plant-based cheese and jump on the bandwagon, the market will have the right conditions to expand. But without significant players, the category will stay niche.

The key driver for consumers will be the product’s taste. Texture comes next, and so far, products made in Japan are somewhat lacking, so manufacturers need to improve this point. But as long as they can secure a taste consumers like, they’ll succeed.

From a retail point of view, the storage period for plant-based products is more prolonged than conventional cheese. Therefore, these products represent a real advantage —they can be stored longer in storage. 

Do ingredients matter?

So far, the main ingredients for products available in Japan are palm oil (Marin Food), coconut oil (Vegetive, Sheeze), and soy (Marusan, Beyond Tofu). But more than the ingredients, the ingredient origin and type matter a lot for Japanese consumers. 

If you have a soy-based product, it should preferably be domestically produced or organic. Domestic production is always more convincing and reassures consumers that they’re in control of what they eat. In addition, Japanese people believe that they have better quality control compared to other countries. “Domestic” also gives them the impression that the product is authentic as opposed to “fake” or highly processed.

Does this mean Japanese brands will always win over imported products? Not necessarily. Thanks to a well-controlled production process, well-branded instead of European products can be perceived as authentic and of high quality. For example, an organic product from Germany or Denmark will be attractive. The label provides an excellent selling point in Japan. 

Are Japanese consumers digging plant-based yogurts? 

The high prices may explain the generally low level of enthusiasm for this trend of products. Another, more fundamental, has to do with why Japanese consumers purchase yogurt in the first place. 

In this category, Japanese consumers are driven by health reasons. They eat yogurts for their gut health, to get calcium and protein. Unless they have a known food allergy or intolerance, switching to alternative products is not apparent. There’s a solid market of dairy-based probiotic drinks, so it will be hard to shake the positive perception of conventional yogurts. 

When consumers experience health issues related to their guts and want to improve their conditions until their trouble is gone, they tend to turn to yogurt. Unfortunately, plant-based yogurts wouldn’t be their first choice because they do not expect to find the same health benefits as dairy products.

Consumers genuinely looking to maintain their health over a long period understand that eating fewer animal products is good for them. However, this way of thinking is still niche. The belief that animal calcium is necessary is still firm in Japan. In the end, only consumers that have a high awareness of ethical issues will turn to soy yogurt. 

The Millenials and the generation Z are more likely to care about the environment and animal welfare. However, that’s also the generations that cannot afford premium products. The ball is in the court of large retailers and manufacturers. This market may or may not grow, depending on how things go. 

Market entry for foreign brands is tricky. 

The plant-based yogurt products’ short shelf life makes it difficult for importation. On top of that, the Japanese retail industry obeys local custom, the “one-third rule.”

In Japan, all the food and beverage products have their shelf life split into three phases. As a business custom, wholesalers and retailers will not accept products if one third of the shelf life is already exceeded. A product that reaches the last third of its shelf life will be pull off the shelf.

The organic supermarket chain Bio c’Bon used to import by air the Dutch brand Happy Cow. However, the retail price ended up being very high for Japanese consumers. 

Japanese manufacturers of plant-based yogurts are not specialized in this category, and their product series isn’t their main business focus. For example, major beverage company Pokka Sapporo bought a plant-based yogurt manufacturer and didn’t put more effort into product development. Other manufacturers like Kokubu or Fujicco aren’t specialized. All these companies are launching products as a trial, and the competition is minimal.

Do ingredients matter?

The market has soy, coconut, and almond-based yogurt products for the time being. A potentially exciting base could be rice for Japanese consumers, but manufacturers would be threading into a close category, the amazake. Amazake is a fermented rice drink rich in amino acids. 

A rice-based yogurt could join the yogurt category, which is typical, or the amazake category, which is more niche. The yogurt section is more significant than the amazake section. Rice is ubiquitous for the Japanese, so there’s room for development. For Japanese consumers, there’s no significant difference between drinkable yogurt and yogurt.

A final word: What foreign operators should know about the Japanese retail world

Japanese retailers care to foster long-term relationships with distributors and manufacturers. This need for loyalty and trust influences how they stack their shelves, sometimes regardless of what consumers want or need. Their business relationships affect their rebate rates, too. 

The rebate rate with a major Japanese retailer was 1% of the product for a well-known international dairy manufacturer. The rebate doesn’t matter for plant-based foreign brands looking to enter the Japanese market, at least not the first year. After that, buyers and retailers would take an interest in the product because of its rarity. 

However, if the product does well, the foreign operator may need to consider a rebate to keep up a good relationship with its local partners.

See you next Tuesday!

We will share an exciting interview with Ike Nakayama, founder of Terra Foods, a company developing, manufacturing, and wholesaling 100% plant-based and vegan food products.

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