Insights On Plant-Based Ice Cream in Japan With EECO CEO Tsuyoshi Kanazawa
Time is right for premium products — but the trend hasn't reached mainstream consumers yet.
Hello, Market Shakers!
Last week, we focused on plant-based ice cream trends worldwide and in Japan. We noted that the category is rapidly rising in North America, Europe, and Asia. The Japanese market is slowly opening up to premium products, but mainstream consumers are not on board with the trend.
Today, EECO CEO Tsuyoshi Kanazawa is with us to talk about the success of EECO’s brand Soy Gela and the plant-based market in Japan.
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The time is right for limited, premium plant-based ice cream in Japan.
Founded in 2016, EECO is an ethical organic food manufacturer located in Shizuoka. With organic, ethics, and eco-friendly at the heart of their business and company name — EECO standing for Ethical Eco Organic, EECO is a human-size food company. In May 2020, they successfully rebranded their organic plant-based ice cream, Soy Gela.
The plant-based market is growing slowly but surely.
Last year was good for the plant-based industry in Japan, with large companies and start-ups coming to the market. Product launches accelerated, and soy was at the heart of this green revolution. A perfect example of the trend is Fuji Oil, a Japanese pioneer in plant-based meat made from soy, reaping over fifty years of hard work.
Fuji Oil worked hard on making good soy-based food products, and now their effort is paying off, with a huge boom in the past year. They were visionary when they started, believing soy would be the key to a future food crisis.
However, even with 2020’s incredible momentum, the market is still very niche, with growth slower than in North America or Europe. For Tsuyoshi Kanazawa, one factor standing in the way could be the very influential Japanese agriculture industry. Through the Japan Agricultural Group, commonly known as JA, over 600 Japanese regional cooperatives hold tight control over food production in Japan. Very conservative and fighting for their business, the cooperatives have the upper hand over farmers, slowing down progress toward organic farming and sustainable agriculture.
If you are a Japanese farmer interested in organic farming, you cannot keep doing business with the JA, but doing so means losing your distribution route. Your production will be lower, and your unit cost will rise, becoming a key barrier. That’s a scary perspective.
Protecting its interest, the JA Group is notably influential for the dairy industry, a big chunk of Hokkaido’s economic activities. Acting as a middleman between farmers and Japanese schools, the JA stimulates demand for milk since the 60s.
When schools closed during the pandemic last year, the demand for milk dried up, and milk farms were about to be out of business. I’m not alone in the food industry thinking that milk is for baby cows, and there’s an artificial demand in Japan that the dairy industry is trying to protect.
The JA Group isn’t the sole factor. The lack of awareness and need among consumers leading to a lack of demand made it hard for retailers to venture into this sector. Contrary to other countries, Japan still has very few organic and specialized retail store chains.
In the United States, Amazon acquired the organic supermarket chain Whole Foods Market in 2017. Their move is motivated by strong consumer demand. Here in Japan, even if major retailer Aeon wanted to establish a subsidiary company dedicated to producing organic food, the battle to make pricing affordable for Japanese consumers would be a hard one.
French organic chain Bio c’Bon did land in Japan in 2017 through a partnership with the Aeon group and rapidly rose to over 20 store locations in the greater Tokyo area. However, the company does well thanks to the group’s investments.
Consumers living in urban areas have a bigger budget for high-quality premium products. In our region (Shizuoka), Engel’s coefficient [proportion of money spent on food in household expenses] hasn’t moved a notch in twenty years. But in Tokyo, living standards are polarized. You find consumers who can buy expensive products.
Health and the internet behind the push for more soy and more organic
In our past Market Shake cycles, we explored consumer behavior and noted that, for the most part, growing health awareness is a key driver for this market. The pandemic further pushed already highly self-conscious Japanese consumers toward alternative products. Tsuyoshi Kanazawa believes the internet revolution tremendously helps consumer awareness growth in favor of organic and plant-based products.
We’re no longer in the Heisei era (the 90s) dominated by commercial messages on television. Today, you have access to all sorts of information through many channels, such as YouTube and social media platforms. People are becoming vocal. Food companies can base their R&D on buzzing topics on Twitter or Instagram, analyzing what consumers are into lately.
In other words, the dynamic between food manufacturers and consumers changed. Rather than selling products they wanted to manufacture, companies seek products fitting with consumers’ needs, as reflected in trends. An approach closer to the consumer than ever before.
Take a simple example, food without additives. More people today care about eating food without additives than not. I feel unlikely for our consumer society to go back from this shift. So, the food and beverage industry can’t ignore the no-additive food trend.
The plant-based ice cream market is still too niche for prominent players to succeed, but the right fit for EECO.
Currently, the demand for alternative ice cream isn’t strong enough for larger companies to jump in. They would need to grab mainstream consumers’ attention for the plant-based production to be financially viable. Mass production requires a considerable amount of investment, and reducing costs is difficult. Even major soy milk makers such as Kikkoman and Marusan do not have a line-up of products. Instead, they promote frozen soy milk recipes that consumers can do at home.
When it comes to the plant-based ice cream market, the growth is minimal. Major players such as Calbee [November 2020] have entered the market recently. However, products were launched by big companies in the past, too. Many failed and eventually retreated from the market.
However, the market growth speed is just the right fit for EECO and offers opportunities for smaller players providing premium products.
Our products are quite expensive [380 yen per unit 100ml], but our ice cream is JAS certified as organic food. We do not use additives or preservatives. Our business strategy is to bring a perfect premium product, and we’re the only one on the market.
Since their rebranding last year, EECO has received inquiries from major retailers interested in a more significant production. A move the small Hamamatsu-based company isn’t ready to make yet. They can only accept deals for limited production and mainly partner with local supermarkets and restaurants.
We want to stay in control of our production, from the field to the point of sales, and timing — we’re not aiming to reach a company size that requires us to think about fiscal year targets and caring for hundreds of employees. What matters to us is to keep a high satisfaction rate with our consumers. I’m fine with our products reaching a soaring success in a few decades.
EECO’s business equally relies on wholesales and e-commerce.
The company takes its orders online since the launch of its membership-based website EECO Wholesales five years ago. Among their buyers, EECO counts Natural Lawson, a premium convenience store in the greater Tokyo area.
Earlier this year, I presented our system at Japan’s Food And Beverage Exposition (FABEX). Large companies couldn’t sign-up because of their internal regulations. But several dozen clients answered our call to join. Today, our orders are equally distributed between retailers and individual restaurants and cafe owners.
With increasing orders for retail, the company needed to work on its design packaging to grab consumers’ attention. For many years, farmers they work with simply bagged their production in plastic bags labeled with the JAS mark.
We wanted our products to stand out next to major brands on store shelves. Accomplishing this effect required a massive effort on branding so consumers would see our products as a good alternative.
In November 2019, the company also opened its EECO Organic Cafe, a physical point of sales for the local community. However, the timing was unfortunate. With almost no sales and struggling to open regularly during Japan’s various states of emergency, the cafe is now temporarily closed.
In parallel, EECO has done well with e-commerce, a direct-to-consumer avenue for its products. Where the traditional distribution channel requires mass production, e-commerce offers the opportunity to stand out and cater to consumers that are specifically looking for plant-based and vegan products. The plant-based trend and the pandemic significantly boosted sales from their online store.
Selling on the internet opens more doors. Our products aren’t lined up next to Häagen-Dazs or Ben’s & Jerry and other more prominent brands. At the same time, consumers finding our products are already ready to pay a higher price.
While their products are suitable for consumers with dietary restrictions, the soy gelato manufacturer believes in catering to everyone’s needs and doesn’t wish to target a vegan population specifically. Avoiding labels is a mindset reminiscent of our interview with Sho Yoshida from Gateaux de Voyage.
Our end goal is to help build a world where mainstream consumers can go to their regular supermarkets where they’ll buy products that do not contain additives, preservatives, and that will be organic. We want to offer sustainable products that people can enjoy over decades.
As a small business, EECO can move fast and experiment.
There’s two of us, so the decision-making process is swift! We constantly try new ideas, and well, many products didn’t go well at all, but that’s the fun of it. Trial and errors help us bring good products to our customers.
EECO used to sell Japan’s first organic rice milk through an OEM, as they didn’t have a license to produce soft drinks at the time. Japanese consumers shunned the product, and with no sales, the company retreated. Now, they make organic rice for their consumption.
We recently obtained the license, and we started producing latte powder, made from soy milk. We also gave a try to almond milk, but our most popular product is certainly our roasted tea (hojicha) latte powder.
Today, the company is planning to build one more production line at their factory to cater to more customers. The demand exceeded their expectations, and not everyone could get their hand on their delicious ice cream.
We’re also looking into reducing the price. However, we face several challenges starting from ingredients. Unfortunately, we don’t have a national organic soy and cocoa power production, so we import them, which adds up the cost. At the same time, we care about ethically sourcing our products and limiting our impact on the environment.
EECO dreams of sourcing all of its ingredients locally. Their sweet potato flavored soy gelato is made from potatoes grown on organic farms in Kagoshima. The company also invests and purchases abandoned lands from aging farmers and started producing its organic green tea. EECO also cares about tackling social issues. The company is doing a lot for the community in Hamamatsu. Their hiring program is looking into improving the insertion of people with disabilities.
Helping people has been at the heart of our mission from day one before even the sustainable development goals got created. We want to build a local, ethical company, giving a chance to people in trouble around us. EECO also sells fair-trade chocolate products, but in all honesty, I always wary of labels. I feel they’re too often used as a communication tool. I can’t be sure I improve the labor environment overseas. But I can help my neighbors—that’s fair-trade to me.
See you next week!
Stay tuned. Next week we stay in the cold section with our Happy Yogurt cycle. We will explore worldwide trends, the Japanese market and get some key market insights.
Market Shake is brought to you by GourmetPro - Food & Beverage experts in Japan. Reach out for questions and comments!