HSC JAPAN

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Entering the Japanese Market with Nutrition
Prepared for the Agora Nutrition of SIAL October
18, 2004
H?S?C JAPAN
Health Strategy Consulting Japan
Plaza Mikado Bldg. 7F, 2-14-5 Akasaka, Minato-ku
Tokyo 107-0052 Japan Tel
81-3-3560-3638 / Fax [phone]
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About Health Strategy Consulting Japan
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HSC Offers An Unmatched Set of Capabilities and
Ability to Drive Results
DATA CONTENT
INDUSTRY CONTENT
NETWORKING

• Daily Industry News
• Searchable database
• Library Services
• Specialized Reports

• Strategy Development Implementation
• Market Overview Analysis
• Partnering Strategy Implementation

• Health Strategy Network Conference Series
• Executive Workshops
• NutraceuticalNetwork.com

• Wide range of team member experience ranging from
  RD to product development, and marketing to
  operations
• Significant experience in research, development
  and implementation of health-based strategies
• Incredible list of clients including the leading
  global players in the food, pharmaceutical,
  chemical and nutrition industries
• Thorough knowledge of the entire health industry
  value chain from technology development and
  ingredient manufacturing to retailing
• Global expertise with considerable project
  experience in North America, Europe and
  Australasia, Japan

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Overview of the Japanese Nutrition Industry
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Although There Is Great Overlap Entering The
Japanese Market Requires A Sound Strategy
Market
Consumers

• What is the market size?
• Who are the competitors?
• What products are on the market?
• Where is the market growing?

Legal/Regulatory

• What concerns and existing conditions do
  consumers have?
• Who are target consumers? age, sex, lifestyle?
• Where do consumers get information of nutrition
  and products?
• Where do consumers buy products

• Is an ingredient allowed to be used?
• Does your manufacturing process meet the
  regulations?
• What kind of health claims can you make?

JAPANESE NUTRITION MARKET
Entry Option
Value Propositions

• Do you need a distribution partner, a licensing
  partner, or your own presence?
• How can you build the most effective supply
  chains?

• How can your product be positioned among
  competitive products or alternative products?

Technology/Intellectual Property
Channel

• How can your technology be differentiated from
  other existing technologies?
• Is it protected?
• Did you apply for your trademark in Japan?

• What is the most appropriate distribution channel
  to reach your target customers?

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There Are Four Categories for Drugs/Foods in Japan
Most of functional foods/beverages and dietary
foods are classified in General Foods.
Source Tokyo Metropolitan Government and HSC
Japan Analysis
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There Several Major Regulations In-place Related
To Health Foods
Source Tokyo Metropolitan Government and HSC
Japan Analysis
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The Japanese Nutrition Market Is Over 12 Billion
Euros
THE JAPANESE NUTRITION MARKET
(Billion Yen)
Source Fuji Keizai and HSC Japan Analysis
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The Japanese Nutrition Market Is Divided to Three
Major Product Forms Functional Foods, Beverage,
and Supplements
THE JAPANESE NUTRITION MARKET SHARE BY PRODUCT
FORM
Total 12,132 Million Euro
Source Fuji Keizai and HSC Japan Analysis
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Major Distribution Channels Are Different By
Product Form
MARKET SHARE BY DISTRIBUTION CHANNEL
DIETARY SUPPLEMENTS
FUNCTIONAL FOOD/BEVERAGE
2003 Total 3,713 mill.Euros
2003 Total 8,419 mill.Euros
Majority of dietary supplements are sold by
direct marketing, while functional
foods/beverages are sold at retail
Source Fuji Keizai and HSC Japan Analysis
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Regardless Product Forms, Weight Management, Gut
Health And General Health Are Big Categories
MARKET SHARE BY TARGET CONDITION
DIETARY SUPPLEMENTS
FUNCTIONAL FOOD/BEVERAGE
2003 Total 3,713 mill.Euros
2003 Total 8,419 mill.Euros
Source Fuji Keizai and HSC Japan Analysis
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High Health Concerns Of Japanese Adults
HIGH HEALTH CONCERNS (n1000 men and women
living in cities from 15-60 years old)
Weight management and energy are the two largest
health concerns among both men and women.
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Major Ingredients Targeting High Health Concerns
Source HSC Japan Analysis
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Educating Acquiring The Japanese Consumer Has
Subtle Differences Than Other Parts Of The World
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The power of testimonials cannot be overstated in
marketing to Japanese consumers.
Source Ministry of Health, Labour and Welfare
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Overview of the Japanese FOSHU Market
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What Is FOSHU?

• FOSHU or Food for Specified Health Uses is a
  product category which requires a registration to
  Ministry of Health, Labour and Welfare.
• Registered FOSHU products are allowed to make
  approved health claims.
• Registration is required product by product.
• Significant amount of scientific data are
  required for registration.
• Identification of an active ingredient
• Identification of action of mechanism
• Efficacy has to be measured in an objective
  method (e.g. Reduction of blood pressure level)
• Safety data
• Human clinical data on target people

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There Are Currently Seven Health Condition Areas
FOSHU Covers
TARGET CONDITIONS
Gut Health
Cholesterol
Triglyceride/Body Fat
Blood Pressure
Blood Sugar
Bone Health
Dental Health
New ingredients approved in the last two years
are only phytostanol ester, mid-chain fatty acid,
catechin, amino acids, milk base peptide.
Source Japan Health Food Nutrition Food Ass.
And HSC Japan Analysis
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Health Claims Approved for FOSHU
TARGET CONDITIONS
Gut Health
Cholesterol
Blood Pressure
Blood Sugar
Bone Health
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The Japanese FOSHU Market Grew by 37.6 to About
4.2 Billion Euros in 2003
THE JAPANESE FOSHU MARKET SIZE (in billion yen)
Source Japan Health Food Nutrition Food Ass.
And HSC Japan Analysis
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The Majority Of FOSHU Products Are Sold At Retail
Outlets
THE JAPANESE FOSHU MARKET BY CHANNEL
Total 4.2 Billion Euros
The majority of FOSHU products are sold at
retails. Dairy companies have a system to
deliver products to families.
Source Japan Health Food Nutrition Food Ass.
And HSC Japan Analysis
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Gut Health Account For 64 of FOSHU Sales
THE JAPANESE FOSHU MARKET BY HEALTH CONDITIONS
Total 4.2 Billion Euros
Most of gut health products are yogurts, which
are typically not newly developed products
targeting FOSHU registration but rather existing
products being registered as FOSHU by submitting
scientific data.
Source Japan Health Food Nutrition Food Ass.
And HSC Japan Analysis
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About 50 Of FOSHU Products Are Drinks
THE JAPANESE FOSHU PRODUCTS BY FORMS
Total 369 Products
Source Japan Health Food Nutrition Food Ass.
And HSC Japan Analysis
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Entry to the Japanese Nutrition Market
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There Are Different Ways To Enter the Japanese
Nutrition Market
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Establish their own presence in Japan

• GLOBAL FOOD COMPANIES
• (Nestle, Coca-cola, Cadbury, Kellogg)
• THE U.S. MULTI-LEVEL MARKETING COMPANIES
• (Amway, Nu Skin, Shaklee, Herbalife)
• GLOBAL FOOD INGREDIENT COMPANIES
• (Indena, Degussa, Lonza, BASF, DMV, DSM)

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Find a local partner (Distribution / License)

• DAIRY COMPANIES
• (Danone/Ajinomoto/Calpis, Valio/Takanashi,
  BioGaia/Chichiyasu)
• BEVERAGE COMPANIES
• (PepsiCo/Suntory, Danaone (Volvic)/Kirin
  Beverage, Danone (Evian)/Calpis/Itochu)
• FOOD COMPANIES
• (General Foods/Ajinomoto)

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Examples Of Non-Japanese Food Companies in Japan
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There Are Several Types of Businesses Within the
Japanese Nutrition Industry That Offer Viable
Distribution Partnerships to Foreign Companies
DESCRIPTION OF BUSINESS TYPES AND THEIR FUNCTION
Source HSC Japan Analysis
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Selected Successful Cases
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Recaldent by Cadbury Japan
DESCRIPTION Recaldent, launched in 2000, is a
chewing gum containing xylitol and CCP-ACP, which
helps prevent tooth cavity and strengthen teeth.
Its business right was transferred to Cadbury
Japan in early 2003 due to acquisition of Pfizer
Consumer, Inc. (former Waner-Lambert) by Cadbury.
KEY SUCCESS FACTORS
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Trident, a predecessor of Recaldent, was
innovative to create a healthy gum category in
Japan. - Trident was launched in 1976 as the
first sugarless gum in Japan, when consumers
awareness of dental care was still low.
2
Trident grew further to the next stage by adding
an innovative ingredient, Recaldent, which was
developed by University of Melbourne, Bonlac
Foods, and Victorian Dairy Industry Authority.
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• Recaldent was registered as a FOSHU product in
  June, 2003.
• It is allowed to make a health claim, for your
  strong and healthy teeth
• It can communicate a clear message to consumers

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Flavangenol by Toyo Shinyaku
DESCRIPTION Flavangenol is an extract of pine
bark (Pinus maritima) in southern France. It
contains a high amount of polyphenols called OPC
or Oligomeric proanthocyanidin. The ingredient
is imported from France by Toyo Shinyaku. RTD
tea drink containing Flavangenol by Suntory was
introduced early this year and became a big hit.
KEY SUCCESS FACTORS
1

• Toyo Shinyaku approached Suntory
• Suntory has a strong RD team which can research
  and publish the antioxidant ability of
  Flavangenol.

2
National TV commercial by Suntory was successful
to increase the brand recognition and let
consumers have an image that Flavangenol is
effective to keep the clear blood flow
As Flavangenol is now well known, Toyo Shinyaku
expands its application to cosmetics.
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FloraGLO by Kemin Foods Asia
DESCRIPTION FloraGLO is a nutritional ingredient
which is extracted from marigold and contains a
high amount of lutein which supports eye health
and helps prevent AMD. Lutein is one of the
major ingredients for eye support dietary
supplements and Kemin is the market leader.
KEY SUCCESS FACTORS
1

• Distribution and education are done in separate
  organizations
• Koyo Mercantile is responsible for distribution
  and Kemin is responsible for education of
  FloraGLO to professionals and consumers

2
Consumer recognition of lutein is increasing due
to media coverage, especially by popular health
programs on TV
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There Are Some Companies Struggling To Meet
Expectations
INGREDIENT
FINISHED PRODUCTS
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Critical Steps To Enter Japan
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Steps To Enter The Japanese Market
1

• Understand The Market Dynamics
• Know the customer
• Know the key conditions
• Know the product forms
• Know the trends

2

• Understand Entry Options and Develop Entry
  Strategy
• What is the intended channel
• How to accomplish manufacturing
• How is the product to be distributed
• How is the product to be marketed
• Conduct scientific studies on Japanese people
  (and get testimonials)
• How is the product regulated

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Find A Partner Or Establish Ones Own Presence
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There Are Several Criteria to Screen Potential
Local Partners
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Ability to propose products to brand manufacturers

• Ability to understand products
• Capability to offer different applications
• Level of sales forces

2
Ability to work with academia

• Ability to understand science
• Capability to plan research
• Level/availability of scientists

3
Ability to educate consumers

• Level of marketing skills
• Relationship with media
• Level/availability of marketers

Source HSC Japan Analysis
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Thank You For Your Attention!
CONTACT INFORMATION
Takeshi Takeda Managing Director Health Strategy
Consulting Japan E-mail ttakeda_at_health-strategy.c
om Tel [phone] Fax [phone]
Please feel free to contact us if you have any
questions about the nutrition business in Japan