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Japan Food & Beverage Sector

The Japanese food and beverage industry is complex and evolving. The combined food retail and food service market is quite sizeable, with its value approaching $600 billion. While the country's older generation tends to maintain a traditional diet, younger consumers are beginning to favor Western cuisine and habits, leading to a change in the types and amounts of food consumed. However Japan's population is beginning to shrink and age, with a lower birth rate and higher life expectancy.

This means that demand for food and beverages could decrease in the future. Japanese consumer spending on food ( fell by 32.6% from 2012 to 2015, which is in line with the decrease in total consumer spending.

This does not undermine the potential for US companies in the Japanese market. Japan is highly dependent on imports for its food supply and the different drivers for the food and beverage market - such as a more Westernized diet, increasing popularity of health foods and rising incomes - can provide the opportunities for US companies. The country's food imports far exceed its exports, being more than 10 times greater in 2014. Over the past few years, imports have risen and exports have fallen, with the top three imports being fish, meat and cereals. The country's self-sufficiency in food was 39% in 2015 and the government has made a goal of rising this number to 45% by 2025.

In general, the Japanese consumer base is highly-educated with a significant disposable income. The main elements of the consumer mindset are: novelty-seeking, high-quality expectations, relative price sensitivity and an interest in foreign goods.

Firstly, Japanese consumers seek novelty and highly value new experiences and products. They have a preference for originality, new products, new functions and a large variety of assortments and food.

Secondly, Japanese consumers tend to have very high quality expectations and are willing to pay a premium price for this, providing that the products exceed their expectations. Product freshness and the origin of the product is very important.

Thirdly, Japanese consumers are relatively price-conscious. This element has become especially visible over the past decades. There are bigger demand for ready-made meals, processed and frozen foods and reasonably priced private-label products.

Lastly, the Japanese have an interested in foreign goods, which has been strengthened to increase exposure to global culture and media.

Over the past several years, the Japanese government has increased its focus on health. In order to reduce the burden on the country's health system and decrease stress-related health issues, the Ministry of Health, Labor and Welfare introduced mandatory health checks in 2008. The government hopes to reduce lifestyle disease such as obesity and heart diseases and these health checks are meant to encourage healthier lifestyles. This focus on health has led to greater demand for food that is perceived to be healthy, such as products with low fat and sugar content, organic produce and nutritional supplements. These consumers also tend to consume more fruits and vegetables so demand for them will likely rise in the future.

Consumers tend to buy groceries on a daily basis in local stores, This behavior is reflected in the number of grocery stores in Japan. There are about 18,400 grocery stores and 54,400 convenience stores throughout Japan. Japan is shifting towards dual income, typically very busy lifestyle, families that has formed the widespread convenient grocery store network. Eating out is popular in Japan. There are about 620,000 restaurants and bars in the country. The Michelin Guide has given stars to 227 restaurants in Tokyo area alone making it the city with the most Michelin stars in the world.

With the younger generation taking an interest in Western food, products such as meat, dairy, salt, oil and fats are growing in popularity and consumption of fish, seafood, and rice is falling. The continued urbanization of the country is also leading to demand for more variety in food and for new experiences and rising disposable incomes mean that consumers are willing and able to pay for it. Japan's marriage rate and age are decreasing, leading to a greater number of single-person households. Along with this, more women are entering the labor market, meaning there is less time for cooking and for eating together. These factors are creating more demand for ready-to-eat meals and home delivery. The aging population is also contributing to this as many elderly consumers prefer the ease of prepare meals.

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