Redefining Meat #4: Market Insight

We sat down with Japanese Start-Up Next Meats to discuss what’s happening in Japan and formulated our conclusions.

Hello Market Shakers,

Welcome to Market Shake’s final issue on the plant-based meat market in Japan! There is still much more to say about what has been happening in Japan. But it’s time to close this chapter, for now, with some market intelligence and actionable insights.

We enjoyed learning a lot from Yuya Makino, Director of Public Relations and Marketing at Next Meats, Japan’s latest new player who dreams big. 

Building from our great conversation on Next Meats’ launch and success in 2020, we will conclude with our professional perspective on market entry to Japan in this segment.

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Summary of this edition

  • Next Meats was established after three years of incubation. 

  • What can we learn from all this?

  • What’s the potential for foreign products?

  • What would be the keys to enter the Japanese market successfully?

Let’s dig in!

Next Meats was established after three years of incubation. 

The team behind the tiny start-up has been working on Next Meats since early 2017. They started as a media dedicated to sustainable eating while looking into developing alternatives to meat products to save the environment.  

“Originally, we were looking into developing cultured meat in Japan. We eventually shifted towards soy-based products because of the technical and financial difficulties related to developing in-vitro meat.” 

When Next Meats finally got established in June 2020, the timing was perfect. Plant-based meats gained exposure in Japanese media, propelled by product launch announcements and restaurants jumping on the bandwagon. 

“The market is still small, but it’s growing. At the same time, there is little competition with domestic makers, while it’s getting more attention from the public.”

Next Meats bet on local dishes to convince Japanese customers.

From the start, Next Meats aimed at bringing environmentally friendly alternatives to Japanese consumers’ favorite dishes, for it is the key to become mainstream. 

“Our Next Yakiniku series (boneless short rib, fried skirt steak), a common dish in Japan, is very popular. In September 2020, TBS (Tokyo’s broadcasting network) presented our products in a news segment dedicated to meat substitutes, and our sales increased drastically afterward.”

Today, Next Meats is also venturing into patties for burgers. But when it comes to labeling their products, the fast-rising start-up distances itself from the expression ‘soy meat’ that so many domestic makers are using. They use soybeans but also green peas. 

“We have not yet reached a consensus on how to call our products in Japanese. We sometimes use ‘fake meat’ or ‘alternative meat’. But we do not intend on using the expression ‘soy meat’. Our products aren’t only made from soybeans, and we don’t want to limit ourselves. Plus, ‘daizu meat’ (soy meat in Japanese) sounds kind of uncool. “

Health at the hearts of customers’ concerns

Next Meats’ primary customers are vegetarians and vegans. Their products strictly do not contain any animal-derived ingredients—the same isn’t true for many of the products launched by domestic food makers. But they try to appeal to a broader range of consumers. 

“Of course, we target health-conscious consumers, athletes in particular. We also appeal to consumers that, for health or age reasons, cannot consume meat products. Animal meat is often too heavy for the elderly.” 

“Speaking about the age range, our consumers are in their 40s and 50s, and while we do not specifically target one gender, a large part of our consumer base are women.”

Convincing customers to purchase plant-based meats is still challenging, though, with texture and taste as the main obstacles. The production process requires a lot of trial and error. The team is working hard to get it right. In October 2020, they had already released a new formula for their gyudon series, the ‘Gyudon 1.2’.  

“We consider our main competitor to be the meat itself, and we need to test a lot before we come up with a satisfying product that can compete with meat while meeting our requirements on quality and nutritional values. Our plant-based meat provides twice as much protein while less than half of fat as yakiniku meat. ”

Going into the retail market for frozen food: challenge accepted!

Next Meats’ products are sold on their online stores as well as on Amazon and Rakuten. They’re also working to enter the Japanese retail market, but it’s particularly challenging for frozen foods. 

“We are actively working on bringing our products to supermarkets, but it’s hard to penetrate such a small market. We’re finally getting there, though, and next month (March 2021), we should have our products available in some stores for the first time.”

The main issue comes down to space. Supermarkets in Japan have a limited to a very limited number of frozen food sections. Space concerns lead retailers to prioritize successful products and limit the number of items they sell. Another matter is that health-conscious consumers may not look into frozen food sections. Frozen ready-to-eat products are typically perceived as unhealthy. 

Finally, the final retail price may also put off potential consumers.

When it comes to price, meat is Next Meats’ benchmark. 

The price is critical to convince more mainstream consumers to ditch meats for plant-based alternatives.

“We need to reach parity with typical meat products so that consumers can seriously consider our products as an alternative. If our products are more expensive than meat, then price-sensitive consumers will not choose us. We’re working on reducing our pricing, aiming at the price range consumers can afford to buy daily.”

Today the startup’s products are about 30% more expensive than meat products. But they’re working on lowering the production costs so that they can reduce their prices in the long run. In parallel, Next Meats is already expanding abroad and eyeing more countries. 

Next Meats has the ambition to lead the market alongside US-based Beyond Foods and Impossible Foods. 

In January, Next Meats entered the US stock market, which will help with a worldwide expansion. In parallel, they struck a deal with Taiwan’s largest alternative meat company Hoya and are set to launch in Taiwan, Hong Kong, and Vietnam.

“We’re already expanding internationally and opened a factory in Vietnam last year. We are currently making our products in Japan and exporting them, but we’ll produce our products locally in the future. We hope to help develop this market for the future of the planet. We’re also the first company to sell yakiniku and gyudon meat substitutes in the world.”

Next Meats is looking to expand into the foodservice in Japan—their products are already sold at the BBQ restaurant Yakiniku-like and to sell at supermarkets. 

In March 2021, they released their Next Yakiniku series at some Ito Yokado stores (GMS) in Tokyo, Yokohama, Kanagawa, Saitama, and Chiba. 

What can we learn from all this?

We brought our research to Duco Delgorge, CEO of Joft, an import agency facilitating international food producers to build long-term success in Japan. With 30 years of experience and a successful track record leading food importing companies, Duco has in-depth market knowledge and was the right choice for an insight into what’s happening in Japan. 

Is the market moving from niche to mainstream? Yes! 

Japan is at an incubation stage, playing catch-up with the world. Many products are still first or second-generation, with issues related to taste, texture, and price.

“But Japanese companies are moving ahead and racing for innovation. The potential is there, and the market could evolve very quickly. Start-ups like Next Meats are showing the way”.

One significant advantage is the natural consumption of soy in Japan, which gives them an edge for soy-based alternative meat. “There’s no reason that Japanese companies shouldn’t succeed. Japan is originally the home of plant-based food. It feels like Japan is going full circle”. 

Are Japanese consumers ready to take the leap? Some are ready; more will follow.

There’s a lot of confusion around veganism and vegetarianism. People worldwide embrace a plant-based revolution or are aware of plant-based options for apparent three main reasons: health, environment, and animal welfare, with an understanding of the link between climate change and livestock. 

“But these issues are not on the radar of Japanese people, as they are in other advanced economies. Getting consumers on board to buy products labeled as vegan or vegetarian has a long way to go. In short, it’s perhaps too early for a vegan corner in stores, which could bring negative perceptions.”

So, how to convince consumers to give plant-based meat a try? Health. 

Japanese consumers’ sensitivity to the environment may be less prominent, but they have a high health-awareness.

“As health issues related to food will become more evident, they’ll look into eating healthy and cutting junk-food more. Health is the first step to get them to give these products a try. But any compromise in taste will limit success.” 

Some domestic manufacturers like Marukome and Next Meats adopt a vegan approach but heavily insist on health claims to catch consumers’ attention. Marukome’s initial packaging of their soy-based series had a vegan label on the front. The new design traded it for a simple mention that the product does not contain animal ingredients. The health claims are more visible: cholesterol-free, high in fiber and protein, low fat. 

Consumers in Japan are more likely to take the leap for a flexitarian diet where plant-based meat gets a more significant share as it becomes tastier, healthier, and cheaper. 

The distribution of plant-based meat is limited for now; e-commerce could play a significant role.

More products landed on the market, especially in GMS. But frozen types are limited to e-commerce and food services. Ready-to-eat products are mainly available in convenience stores, in some supermarkets, and organic or specialized shops. Plant-based meat manufacturers face the challenge of expanding more products to the retail sector. 

“Today, if they go to their local stores, Japanese consumers explicitly looking for plant-based meat, whether for dietary restrictions or health concerns, are unlikely to find a broad range of choices. E-commerce comes in to fill this gap, further driving the shift to online shopping.”

What’s the potential for foreign products?

Japanese start-ups and Japanese manufacturers lead the domestic market. Market entry for foreign suppliers will be challenging through traditional distribution channels because of import hurdles. For instance, combining transportation costs (especially for frozen products) and re-labelling (often done locally) leads to a substantial price increase—double or more. Imported alternative meats would land in premium SM and natural food stores.

“Bottom line, it would mean relatively limited distribution, somewhat limited shelf space, and a high price and with a brand that is probably unknown to most local customers.”

Japanese consumers, especially younger generations, will not be ready to pay double the price for imported alternative meat if there’s robust Japanese competition.

What would be the keys to enter the Japanese market successfully?

“Imported products could do well if they are uniquely different from domestic products. Good taste and a good image would be the keys to competitive advantage.”

Wholesalers and retailers are open to plant-based products, and at the moment, at least, there are few regulatory barriers. 

The strategy would be not to go too deep into a niche; it’s best to select products that will be immediately attractive to 90% of the market. In other words, to focus on products that will intuitively work, whether the people want it in the first place, or the image will be attractive. Price would also be an essential factor.

That’s all, folks! 

We hope you’ve enjoyed this very first chapter of our plant-based revolution cycle. Next week, we’ll take a closer look at what’s happening in the plant-based milk market. Are Japanese consumers ditching cow-milk? And in a country where soy-milk is king, can other alternatives make their way into the market?

This publication was brought to you by GourmetPro - Food & Beverage experts in Japan.

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