Canned coffee sales in Japan brewing lots of interest

AgExporter, Oct, 1992

Gaining Market Access

In recent years, the Japanese government has liberalized a number of restrictive regulations and structural trade barriers, making it easier for U.S. companies to initiate commercial transactions in Japan. However, several legal, business and cultural obstacles remain. Among these are tariffs, food sanitation and labeling laws and Japan's complex distribution system.

Currently, there are no limitations on the importation of canned coffee products. However, all imported foods and beverages are subject to the restrictions contained in Japan's Food Sanitation Law. U.S. beverage manufacturers should be aware of the fact that in addition to standard shipping documentation, an import notification form must accompany all product shipments and be filed with a Food Sanitation inspector's office.

Strict limitations have been placed on the use of certain food colorings, preservatives and additives. These should not be applicable to most canned coffee products. Additional guidance regarding the use of chemical additives can be obtained from the English edition of "Japanese Standards for Food Additives," a publication produced by Japan's Ministry of Health and Welfare.

All products sold in Japan must carry proper labeling. Labels for imported beverages must include the following information:

- Product name - Raw materials used, including additives - Date of manufacture or processing - Name and location of manufacturer or

processor.

The applicable tariffs are 16 percent for canned coffee and 22.4 percent for canned coffee with sugar. The high tariff rate is a major factor in preventing imports from gaining a larger market share.

Product Distribution is Complex

Japan's product distribution system is highly complex and based on a social hierarchy and culture that is hundreds of years old. Longstanding personal relationships form the primary foundation for most business transactions. The maintenance and support of these special bonds are often more important than short-term considerations of price and quality.

Products can travel through a number of different layers of wholesale distribution before reaching retail shelves or vending equipment. Each layer adds complexity and, most importantly, cost for the consumer.

The price competitiveness of imported food and beverage products is often reduced by inefficient distribution. To avoid this problem, U.S. manufacturers and processors that market products in Japan should focus their efforts on developing simple and direct channels of distribution to retailers and vending equipment operators. Negotiation of strong product distribution through vending equipment is particularly important in the Japanese beverage market. Approximately three-fourths of all canned coffee is sold in vending machines.

Many major canned coffee manufacturers own and operate their own vending machine networks. In this way, they can maintain complete control over vending distribution for their products.

U.S. manufacturers do not typically operate their own vending equipment in Japan. Consequently, they must rely on a Japanese vending machine operator to provide distribution services. The success or failure of a foreign canned coffee product in Japan may well depend on the selection of an appropriate operator.