A New Gateway Market To Japan - Focus on Fukuoka #1 [Market Brew]
Exploring one of Japan's unknown but most promising test markets.
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Happy Thursday Market Brewsters! We’re back with a new series of Market Brew. This time we’re taking a moment to explore opportunities in F&B outside of Tokyo.
It’s no secret that, like many industrialized nations, Japan has an excessive concentration of population in the capital. Ultimately, this is damaging to many regional economies around Japan. People flock to Tokyo and the businesses in the towns and cities they leave behind struggle for customers. Yet Japan is home to many growing localities, bursting with exciting opportunities.
Over the next few weeks, we’ll be introducing you to the wonders of one city in particular which is renowned in Japan’s F&B industry as a fantastic test market. Let’s dive in!
In search of a test market in Japan
Japan is a unique, complex market. If you’re planning to launch a product and stake a claim to much sought-after retail shelf space, it’s wise to trial it in a local test market at first.
Tokyo, or somewhere in the Greater Tokyo area is an obvious answer. Tokyo’s economy dwarfs that of all other cities in Japan, and even a lot of countries. You may even be tempted to treat it as a separate entity to the rest of Japan. But this reflects a sad reality of the Japanese market: for many companies, the metropolis is the beginning and end of their ambitions.
While Tokyo is certainly the main stop on the roadmap of a company seeking success in the Japanese market, it shouldn’t be your first. Here’s why.
Tokyo is too big
Tokyo is Japan’s Yokozuna. It’s a monster. Its size means that it’s a difficult market to wrap your head around, even for local companies. The 23 central metropolitan wards are vastly different in their demographic make-up and character. Take Shibuya and Meguro for example, two wards right next to each other, yet with consumer bases that are polar opposites in many ways.
The astronomical size comes with an astronomical price tag. Launching an F&B product here takes a big budget. If you want to capture a broad consumer response, you’re going to have to launch initiatives across several areas in Greater Tokyo. And that’s expensive. From the cost of producing enough products to fill enough stores’ shelves to a TV spot, you’ll need some serious yen.
What this means is that trialling a product in Tokyo is tantamount to launching it. Because, what if you botch your test? Tokyo is by far the biggest market in Japan. If your product ends up with a bad rep in the Metropole, Japan is all but lost to you.
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So, let’s return to our opening question. Where would you choose as a test market for your F&B product in Japan?
We asked around GourmetPro’s network of F&B industry pros. Where would they choose? A name that kept coming up again and again was…
Fukuoka is renowned in the Japanese food and beverage world as an excellent test market. It’s smaller, more manageable than cities such as Osaka or Tokyo. It’s Japan on intermediate, rather than hard mode. Not only, say our experts, is Fukuoka a good place to test market products, but it’s also a good place to build resources - money, knowledge and network, before taking on Japan’s final boss, Tokyo.
Today’s Market Brew explores the question, why Fukuoka? Not only as a test market but as a market in general. To answer this question we spoke to several experts who have launched products and do business in Fukuoka. We’ll introduce a different perspective week by week over the next month.
Today we start by exploring Fukuoka.
An Overview of Fukuoka
Fukuoka is the capital city of Japan’s southern island, Kyushu. An economic centre for western Japan, the prefectures’ annual GDP amounts to 154 billion USD, roughly one-tenth of Tokyo’s.
The city’s population size is about 1.6 million. It continues to grow as people move there to take advantage of its many business and lifestyle benefits.
The first of these is connectedness. The prefecture boasts two international airports, Fukuoka Airport and Kitakyushu Airport. Together they support 300 international flights, to destinations in Asia mostly, and 410 domestic flights per week. Fukuoka’s city centre is both the end of an extensive shinkansen rail network that stretches to Tokyo and the beginning of a broad rail network that spreads across the island of Kyushu. There are also two major ports, each with 35 global container routes.
Then there’s the “vibe”. Fukuoka’s climate is warm and its streets are wide and green. It’s relaxed for a growing metropolis.
The prefecture is also a thriving hub of industry. For food and beverage specifically, Fukuoka boasts clusters of food product businesses that specialize in fermentation and brewing processes. What’s more, Fukuoka’s food scene is internationally renowned. The city boasts all kinds of restaurants, Japanese and international, traditional and modern.
There’s also a vibrant drinking scene in Fukuoka thanks to the fusion of traditional izakayas and yatai (Japanese food carts), and modern bars and pubs. Before COVID-19, people from across Kyushu and Japan, as well as neighbouring Asia flocked to Fukuoka to enjoy a good time at the weekends. It’s only a matter of time before they return.
In short, Fukuoka is a goldilocks market. Not too big, not too small, bursting with energy and opportunity, but slower-paced than Japan’s hyper-speed capital. And this is just some of the reasons why companies favour Fukuoka as a test market.
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To really understand the ins and outs of this, we spoke to a GourmetPro expert with over 10 years of experience in the Coca-Cola (Japan) Company where she was in charge of insights*. She shared with us why Fukuoka is a good test market and discussed how Coca-Cola tested one of their most innovative products in the city.
*our consultant asked to remain anonymous
Fukuoka as a test market
In 2018, The Coca-Cola Company made history in Japan. For the first time since their founding, they released an alcoholic beverage.
Lemondo is a lemon sour, a carbonated mixture of lemon juice and shochu (a Japanese hard spirit distilled from grains or vegetables). The product is now sold across Japan and consumed in abundance. Back in 2018 however, it launched exclusively in Fukuoka.
Fukuoka is located close to abundant manufacturing facilities. Coca-Cola partnered with a local company in neighbouring Yamaguchi prefecture to produce a limited run of their Lemondo product - enough to test the market.
At that time, Coca-Cola Bottlers Japan Inc. didn’t have a licence to produce alcohol, so Coca-Cola partnered with a local company in Kyushu. After the nationwide launch, CCBJI started producing Lemondo at their own facilities with a licence.
Fukuoka’s demographics are very good, there are a lot of people in their 20s and 30s, and a good spread across older generations. Like Tokyo, it’s full of working-age people with disposable income. The older generation are also relatively affluent.
A good test market should ensure enough demand to make a production run worth the cost, without being too large to stretch production costs astronomically. Fukuoka’s access to manufacturers surely made logistics more straightforward in this case too.
Fukuoka is known for its drinking culture. Shochu-based drinks are especially popular in the city. There are a lot of cocktail bars, Japanese izakaya, the yatai, and modern pubs and restaurants too. People are used to hopping between different drinking scenes, and open to trying different alcohols.
For Coca-Cola, this was key. Lemondo, though not the first lemon sour on the Japanese market, was a very innovative product. It was Coca-Cola’s first alcoholic beverage, not only in Japan but globally. This meant the launch was a risk, a brave new world for the company. They needed to test the product in a market where the cost of failure wouldn’t be too high. But, they also needed a market where people would try the product so they could get reliable data. As our source explained, Fukuokans are open to new things.
The launch went very well, and the product is now sold nationwide. Interestingly, our test-market campaign generated demand across Japan before we were even sure we’d launch. Business trippers visiting Fukuoka got wind of Lemondo and started talking about it online. This drove demand in cities like Osaka and Tokyo.
The story of Lemondo is just one of many products that first touched consumers' lips in Fukuoka. In addition to Coca-Cola, other big names, such as Costco, have chosen Fukuoka as their test market.
Compact, convenient, and full of curious consumers who are open to trying new things, Fukuoka has a lot going for it as a market to launch products. As the example of Lemondo shows, this may be especially true for beverages.
Want to know more about finding a test market in Japan?
Check out GourmetPro’s guide to the best test markets to use for F&B in Japan:
That’s all folks
To find out more about the bar scene, we spoke to a local business owner who has developed a thriving hospitality business in Fukuoka. Stay tuned for his story next week.
In the meantime, we want to hear your recommendations for the best test markets in Japan. Do you have experience launching F&B products in Fukuoka? Or maybe you’ve launched a product in Tokyo without a struggle. We’d love to hear your experiences and insights, so drop us a comment!
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