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ASIAN PRODUCTIVITY ORGANIZATION

Conference on State-of-the-Art Technology to Drive


Agriculture Productivity in the Next
Quarter of the Century, 28 June 2016, Tokyo, Japan

Session 1: Mega trends in agriculture and food industry

"Food Industry in Japan: New trends,


issues and challenges, and way forward"
Fuminobu Saito and Shoichi Ito,
Akita Agricultural Experiment Station, Japan
Kyushu University, Japan

Todays Contents

1. Overview of the Food Service Industry and Other Food-Related Industries in Japan
2. Strategies Adopted by the Food Industry to Address the Issue of Japan's Shrinking Population: Expansion into
Overseas Markets
3. Major and Local Japanese Food Companies' Expansion into Overseas Markets
4. Adoption of New Technologies: Sushi Robots, Freeze-Drying Processing, etc.
5. Spread of Farmers' Markets (Farm Stands) in Japan

1. Overview of the Food Industry in Japan


including the Food Services:
2. Reactions and Strategies of the Food Industry to
the Shrinking Population in Japan: Business
Extension in Foreign Countries;
3. Re-locations of Japanese big food companies in
Foreign Countries;
4. Employment of new technologies: Sushi-Robots,
Freeze-Dry Processing, etc.
5. Expansion of Farmers' Markets(Farm Stand) in
Japan
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0. Why an Agricultural Experiment Station Studies


Issues Facing the Food Industry
1. It is necessary to clarify the situation facing various parties from farmers to
consumers.
2. Japan's food consumption trend has changed as discussed below.
3. It is essential to develop products from a market-oriented view, not a
product-oriented perspective.

Note: It is extremely rare for prefectural agricultural experiment stations to


have dedicated researchers specializing in the study of the food
industry.

1. Overview of the Food Industry in Japan including


the Food Services:
(1) Domestic production for agriculture and food industries in 2013
USD 1 billion

Agriculture, forestry
and fisheries, 114.8

0%

10%

Material supply
industry, 27.8
Food industry, 323.1

20%

30%

40%

Food distribution
business, 228.7
Related investment,
20.4

50%

60%

70%

Restaurant, 198.1

80%

90%

100%

Source: Ministry of Agriculture, Forestry and Fisheries' economic


statistics on agriculture and food industries
1 USD = JPY 108

The Japan's agriculture and food industries were worth 913 billion dollars. The
food industry, the food distribution industry and the restaurant industry
accounted for 80% of the total production.
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(2) The number and ratio of employees in the food industry


2007
Total number
of employees
(million)
Ratio of food
industry
employees to
total number of
employees (%)

2008

2009

2010

2012

2013

2014

2015

8.2

8.00

8.07

8.17

8.04

7.90

7.89

7.93

12.8

12.5

12.8

13.1

12.8

13.0

12.4

12.4

Note: Figures estimated by Ministry of Agriculture, Forestry and Fisheries based on labor force
survey by Ministry of Internal Affairs and Communications
Note: The figures for 2011 not included because Great East Japan Earthquake and tsunami hit
Japan that year
The number of employees in the food industry is generally on the decline, but the figure rose in
2015 from the previous year. In addition, the food industry workers account for a large portion
of all the employees in Japan.
Employees in the food industry include not only full-time workers but part-time employees.
Many of those employees also work only for a short time, depending on their life situations.
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(3) Food sales by store type


10.0

trillion yen

9.0
8.0
7.0

6.0
5.0
4.0

3.0
2.0
1.0

0.0

6.7

4.8

7.2

4.9

7.4

5.1

7.7

5.1

8.0

5.1

8.5

5.4

8.7

6.1

9.4

7.0

46.0
45.0
44.0

43.0

2.3

2.2

2.2

2.0

1.9

Total sales for retailers handling


food and drink products (right
axis)
Supermarket

42.0
41.0

2.4

trillion yen

1.9

1.9

41.4 41.1 40.6 41.0 42.2 43.6 44.6 45.3

40.0
39.0

38.0

CVS

Department store

FY2001 FY2003 FY2005 FY2007 FY2009 FY2011 FY2014 FY2015

Source: Ministry of Economy, Trade and Industry's statistics about business trends

Food sales for department stores are low but stable, while the figures for
supermarkets and convenience stores are on the rise. Of them, sales for
convenience stores have been rising especially rapidly.
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(4) The food manufacturing industry, a foundation for Japanese cuisine


(simplification)
Using only ingredients sold at convenience stores, consumers can make
genuine Japanese food easily.
You do not need to use a kitchen knife or a pot.
Microwave ingredients
Take them out of bags
Add hot water
You just need to prepare tableware and utensils.

(Photo of precooked food available at convenience stores to be inserted)

(5) Food companies' entry into agriculture


It became possible for even private companies to rent farmland as
related laws were revised in 2009.
A total of 2,039 corporations have entered the farming business as of
December 2015, and 463 of them, or 23 percent, are food-related firms.
The Aeon Group, Japan's largest retailer, has started directly running
farming facilities at 15 locations across Japan.
Lawson Inc., Japan's second largest convenience store chain operator,
has begun its agricultural business at 23 sites throughout Japan by
investing in the business jointly with farm producers.

The agricultural materials business, which helps companies be engaged


in farming, also captures considerable attention.
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2. Reactions and Strategies of the Food Industry to


the Shrinking Population in Japan: Business
Extension in Foreign Countries;
(1) Japan's population
thousand people

thousand households

140,000

80,000
70,000

120,000

60,000

100,000

50,000

80,000

40,000

60,000

30,000

40,000

20,000

20,000

10,000

Population
65 or older
Number of
households (right
axis)

0
1995

2000

2005

2010

2011

2012

2013

Although the population has been shrinking,


the number of households is on the rise.
The number of people in a household decreases.

2014

2015

Source: Ministry of Internal


Affairs and
Communications
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(2) Frequency of eating out and use of precooked food or restaurant meals
50

45
41.2 41.5 41.3 41.2

40

39.3

39.8

42.1

43.0 42.8

42.6

43.5

44.1

45.0 45.2 44.9

44.3 44.1 44.6 44.1 44.0

44.7

35.9 35.5 35.6

35.6

42.8 42.8 43.0 42.8

40.8 40.7

38.1
37.0
35.4

35

33.4

34.9

35.8

36.6 36.9

37.7 37.8 37.5

37.3

37.7
36.8 36.6

38.3
37.1
36.2

36.7
35.8 35.5 35.4

35.2

36.0

36.6 36.8 36.6

35.1 35.3

33.5

30

31.8

Frequency of eating out

28.4

Frequency of using precooked food or restaurant meals


27.8

25

Source: Foodservice Industry Research Institute


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(3) Impacts of the aging, shrinking population on the food industry


The aging and shrinking of the population have three types of impacts on the food
industry.
1. Decline in the number of consumers
2. Decline in the work force
3. Changes in buying behavior and dietary habits
1. How to address a decline in the number of consumers
(1) Expand into markets whose populations are expected to grow (overseas expansion)
(2) Release of high-priced products
2. How to address a decline in the work force
(1) Introduce automated machines to save labor
(2) Hire employees from overseas

3. How to respond to changes in buying behavior and dietary habits


(1) Develop products to be manufactured in small lots (small quantity, small package)
(2) Develop products that will help consumers cook meals more easily at home (meal
solution)
(3) Shift from provision of ingredients to provision of meals (increase the degree of
processing)

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(4) The number of overseas subsidiaries of Japanese food manufacturing


firms and their sales
USD 1 million

Sales for other subsidiaries


Sales for Asian subsidiaries
Number of overseas subsidiaries

40,000
35,000
30,000
25,000

392

405

406

427

447

15,000

8,907

11,139

600

508

10,296 10,880

7,648

500

440

10,630

12,787

13,509

400
300

15,065

200

10,000

5,000

533

20,148

20,000
10,361

companies

9,657 10,157 10,954 11,435

15,574

100
0

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

Source: Ministry of Economy, Trade and Industry's basic survey on overseas businesses

The number of overseas subsidiaries of Japanese food manufacturing firms is


generally on the rise, though the figure dropped in 2011, when the Great East Japan
Earthquake and tsunami struck Japan.
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3. Re-locations of Japanese big food companies in


Foreign Countries;
(1) Expansion into overseas markets as part of growth strategies (Japan's
largest restaurant operators' expansion into overseas countries)
Company name

Major brand(s)

Major product(s)
(Business type)

Number of
outlets
overseas

Number of
outlets to
open
during
2016

Increase for
2015

Yoshinoya Holdings

Yoshinoya, Hanamaru "Gyudon" beef bowl,


Udon
udon noodle

675

68

105

Mos Food Services

Mos Burger

Hamburger

326

Saizeriya

Saizeriya

Family restaurant

290

60

85

Toridoll

Marukame Seimen

Udon noodle

243

141

80

Plenus

Yayoi

"Teishoku" set meals

155

21

40

Genki Sushi

Conveyor belt sushi

147

13

10

CoCo Ichibanya

Japanese-style curry

143

20

30

Sukiya

"Gyudon" beef bowl

141

62

126

Hachi-Ban Ramen

Ramen noodle

118

Watami

Watami

"Izakaya" pub

97

Unknown

Unknown

Ootoya Holdings

Ootoya

"Teishoku" set meals

88

13

16

Kappa Sushi

Conveyor belt sushi

46

Unknown

Unknown

Genki Sushi
Ichibanya
Zensho Holdings
Hachi-Ban

Kappa Create Holdings

Source: IR materials of each company


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(2) What does expansion into overseas mean?


Buoyed partly by the Japanese food boom across the world
A company plans to make the number of its outlets overseas higher than that in
Japan in the coming 10 years.
There is a company that has no shop in Tokyo but runs outlets in overseas
countries.
Many Japanese companies choose Taiwan and Bangkok, the capital of Thailand,
as the site for their first outlets in overseas countries.
A company hires non-Japanese who have studied in Japan. Those employees
are first deployed at outlets in Japan and then sent to overseas shops as
managerial officials when new outlets are opened in foreign countries.
Source: Hearing survey
More than 400 firms said they want to export their products to foreign states,
though it is difficult for them to expand into overseas markets by themselves.
Source: Japan Finance Corporation, 2015
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(3) Challenges for expanding into overseas markets (survey covering


companies that want to strengthen their overseas businesses)
70.0 (%)

MA: n = 254

62.2
58.3

60.0
50.0
40.0

33.9
29.9

30.0

29.9

27.6
22.4

22.0

20.0
10.0
0.0
Lack of
information on
local laws and
commercial
practice

Acquisition
Acquisition
Changes to
Cannot find
Local food
There are no Fund raising
and
and
local
local business distribution
advisory
development development regulations on
partners
infrastructure organizations,
of employees
of local
foreign firms
not sufficiently or cannot find
who can help
workers
and laws
developed
them
promote
expansion into
overseas

Source: Japan Finance Corporation, 2015


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(4) Important points for overseas expansion in the food service industry
Three key points
Whether to serve meals that taste the same as those served in Japan
Or change the menu to match the taste of local consumers
(If meals are changed, what changes should be made)
Whether ingredients suitable for the company's menu can be procured

For example, rice is very important in Japanese cuisine, but whether local eaters
like rice depends on the country.
(A group headed by Prof. Ito is studying the liking for Japonica rice in various
states as well as what rice is used at Japanese restaurants in overseas countries.)

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4. Employment of new technologies: Sushi-Robots,


Freeze-Dry Processing, etc.
(1) Japan's excellent food processing technologies were presented at Expo
Milan 2015
1. Sushi robots
Can shape rice for sushi - an important process for sushi making - in an
efficient and stable manner
2. Freeze-drying technology to process miso soup and other types of soup
Meals that used to be nonperishables help simplify daily cooking now.
3. The soybean milk manufacturing technology based on the Ultra Soy
Separation (USS) method
The world's first soybean milk manufacturing technology to produce
low-fat soy milk and soy milk cream (high-fat soy milk)

17

(2) Sushi robots: Technology to help companies reduce labor costs


and open many outlets

An automated robot to shape rice for sushi was developed 35 years ago.
The latest models are about three times smaller than the first sushi robot,
making it possible for restaurant operators to install such a machine even
in a small kitchen.
One of those latest sushi robots can shape a rice ball for sushi per second,
or 3,600 balls per hour.
Anyone can put sliced fish on rice, if the rice base is properly prepared.
It takes time and costs to nurture sushi chefs.
It becomes easier to open many shops if robots automatically shape rice
base for sushi. Even facilities other than sushi restaurants can serve sushi
(sushi are served at student cafeterias of universities in the United States).
Some people criticize sushi made by robots, saying they are not genuine
sushi. But seen from the opposite perspective, sushi robots can be used to
underline the difference between sushi made by chefs and machines.

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(3) There are five major companies that manufacture sushi robots
Suzumo Machinery Co., Ltd. accounts for the largest share of more
than 50 percent in the sushi robot market. Suzumo can dominate
the market partly because it owns many patents.
Fujiseiki Co., Ltd. the second largest firm in the sushi robot industry,
controls 80 percent of the rice ball robot market.
Number of patents each company received from 2011 to 2013.
2011-2013
Suzumo

31

Fujiseiki

11

Audio Technica

Tomoe

Top

Source: Patent information platform J-PlatPat


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5. Expansion of Farmers' Markets(Farm Stand) in


Japan
(1) Numbers of farmers' markets and Seven-Eleven Japan convenience stores
facilities (stores)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

16,816
13,538
11,310

13,232

Farm
stand
SEJ

FY2005

FY2010
Source: Report on Results of 2010 World Census of
Agriculture and Forestry In Japan, SEJs IR date

There currently are more farmers' markets than stores of Seven-Eleven Japan
Co., Ltd. though it is the largest convenience store chain operator in Japan.
20

(2) Example of farmers' market

(Photo of farmers' market to be inserted)


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(3) Ratio of farmers markets by sales


40

(%)

39.5

22,980

23,560

23,710

35

31.8

30

facilities

32.8

32.4

15,000
12,160

10,000

15
10
5
0

20,000

Facilities
Less than 1 million yen

25
20

25,000

1.4

1.2

FY2010

6.2

6.7

6.4

5.6

1.9
FY2011

2.6
FY2012

5,000

6.3

FY2013

5 million yen to less


than 10 million yen
10 million yen to less
than 50 million yen
50 million yen to less
than 100 million yen
100 million yen to less
than 300 million yen

6.6

2.5

1 million yen to less


than 5 million yen

300 million yen or


higher

Source: Ministry of Agriculture, Forestry and Fisheries' research to promote agricultural


business diversification and integration
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(4) Topics concerning farmers' markets

The number of large-scale farmers' markets is on the rise (more farmers'


markets now report large sales).
Some of those farmers' markets stock products from outside suppliers so
that they can sell as many products as supermarkets.
Some farmers' markets not only sell vegetables but make and serve
boxed meals and precooked food as part of their efforts to expand their
lineup of products and services.
The central and local governments are currently proceeding with the
agricultural business diversification and integration. As part of the
project, they are working to improve facilities and functions of farmers'
markets.

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6. Conclusions
The Japanese food industry - one of the largest industries in the country
- accounts for more than 10 percent of Japan's GDP.
Some food companies, including food service ones, have entered the
agricultural business. Meanwhile, agricultural corporations (farmers) that
also serve as retailers or food service firms have emerged.
Japan's population is shrinking, while the number of one-person
households and households consisting of fewer members is on the rise.
Food processing technologies play a significant role by helping simplify
cooking processes.
The Japanese food market is shrinking in tandem with the population
decline.
An increasing number of food companies have expanded into overseas
markets to address Japan's trend of population decline.
Japanese companies doing business overseas are seeking local firms and
local workers to tie up with.
When food companies expand into overseas, new business opportunities
are created, such as establishing the local channel to procure ingredients
and materials and developing a cold chain.
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Suggestions
Can a business model in which companies expand into overseas markets
because of the aging and shrinking of the Japanese population be justified?
The strategy of companies expanding into overseas markets just because they
failed in the Japanese market lacks the sustainability.
Foreign countries will also surely experience the dwindling birthrate and the
aging and shrinking of the population in the future.
A business model based on the assumption that the population will continue
growing is impossible.
It is now time for the Japanese food industry to establish a new sustainable
business model that will work even in societies whose populations are shrinking.

Studying the Japanese food industry's business strategies will lead to a better
understanding of issues that will face countries when their populations start
declining in the future.
(Japan already faces many issues that other states will likely experience in the
future.)
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