Many soft drinks companies in Japan face gloomy prospects as most categories are expected to continue to decline over the next few years. Despite various economy stimuli, one thing no politician or economist can change is the nation’s ageing population. As staples, soft drinks products require a sizeable consumer base and periodic sales peaks, for example during spells of warm weather, to maintain volume sales. In this highly saturated market the shrinking population is causing volume sales to decline and is a challenge to manufacturers seeking to sustain their businesses. However, the concept of FOSHU beverages has given manufacturers a glimpse of hope in recent years.
Adapting to the ageing consumer base
Demand for types of products differs and the perception of quality can vary according to the development stage of a country’s consumer market. In fast-growing but less affluent markets such as Nigeria, which has a sizeable population of young consumers, basic soft drinks such as purified bottled water and standard carbonates may be market drivers. For Nigerian consumers starting to trade up to commercially packaged beverages from tap water, the switch may be a symbol of rising living standards and the purpose of soft drinks products simply to quench thirst. With insufficient middle- and higher-income consumers to support added-value soft drinks, affordability and availability are key product attributes at this stage of the market’s development in Nigeria.
In contrast, Japan’s older consumers tend to drink less in volume terms but are more discerning about the quality and specific benefits of beverages. Japanese consumers increasingly prefer added-value and functional beverages, or drinks containing scientifically proven ingredients or formulations. They are also more exposed to these “high-tech” drinks. Perceived healthy ingredients or formulations are important sales and marketing messages.
In Japan, while consumers tended to drink soft drinks regularly, their preferences shifted to milder flavours. This benefited functional bottled water and flavoured bottled water, which drove growth in soft drinks overall in recent years.
Older consumers are likely to avoid products that could worsen any age related health issues. In Japan, the metabolic syndrome checking system is mandatory for people aged 40 and over. Metabolic syndrome is a condition that is associated with age and obesity and which vastly increases the chances of developing lifestyle diseases such as diabetes and cardiovascular disease. By starting mandatory check-ups, the government sought to raise public awareness about lifestyle diseases and promote early prevention. Increasing numbers of Japanese consumers are exercising more regularly due to improved health awareness. They also pay greater attention to their dietary habits and are more concerned about the amount of fat and sugar they consume.
The popularity and availability of reduced-sugar and reduced-fat products increased in response to growing health concerns among consumers. “Zero” and calorie-free carbonates increased their presence and triggered launches of FOSHU (Food for Specified Health Uses) beverages. FOSHU is an accreditation from the Japanese government for products that contain health properties or functions. In 2012, FOSHU cola Kirin Mets Cola, which limits the absorption of fat from food, was launched successfully. Suntory Beverage & Food (PepsiCo’s local bottler) introduced Pepsi Special, which claims to reduce fat absorption. Asahi launched Fiber 7500, a FOSHU non-cola carbonate that claims to be good for digestive health.
Typically, if one manufacturer’s product is successful in Japan, rival companies will follow suit to avoid missing an opportunity. Accordingly, many manufacturers developed their own versions of FOSHU products. In RTD coffee and RTD tea, Kao’s FOSHU Healthya Coffee and Suntory’s Iyemon Tokucha were reportedly popular. All of these brands garnered publicity and retained consumers’ interest in the category. Some brands such as Healthya previously existed but the FOSHU versions of Healthya are priced lower than the existing brand, which allows consumers to purchase them more often, thus increasing volume sales of FOSHU brands. Taste-wise, consumers favour FOSHU beverages.
Not all health and wellness drinks are guaranteed to succeed or receive a warm welcome from consumers. The Coca-Cola Company’s Glaceau Vitaminwater sweetened with stevia was withdrawn after just a couple of months as consumers preferred the flavour of the original version.
Potential loosening of FOSHU regulations
In addition to FOSHU beverages, manufacturers also introduce new limited edition flavours of their core brands. For example, PepsiCo introduced a limited edition watermelon flavour a few years ago. As consumers switch between brands and products, manufacturers have to be prepared for a quick turnaround of their products, which presents production and logistics challenges. This is a unique feature of the Japanese market compared to the developed markets of Western Europe and North America, meaning generally that levels of product loyalty are lower in Japan than in Western Europe and North America.
Price, taste and health claims are important factors in a product’s popularity. Competition in FOSHU beverages is growing and consumption is increasing. Specific health claims and applications need to be fully conveyed to consumers in marketing messages. The government is planning to loosen the restrictions on health claims for food and beverages, which is seen by manufacturers as an incentive to develop FOSHU portfolios. FOSHU products with specific health benefits which differentiate them from others could see good prospects.
Euromonitor International’s data shows that over half of the aged over 65 population resides in Asia. Taiwan, South Korea and Singapore also show signs of ageing population, which could offer growth potential for drinks targeting this consumer group.
Want more market research insights? Subscribe to our email bulletins.