Hot Drinks in Japan

Hot drinks facing significant challenges

The Japanese hot drinks market faces significant challenges. The changing demographic profile of the population and ever busier consumer lifestyles are leading to the erosion of long-established traditions of consumption and increasing competition from rival drinks categories.

Demographic developments and changing lifestyles undermine demand

One of the most notable features of hot drinks in Japan in 2018 was the ongoing erosion of demand as a result of demographic developments and changing consumer lifestyles. A shrinking and ageing population, a rise in the number of small households and the increasingly hectic character of consumer lifestyles all served to undermine demand.

Domestic manufacturers remain strong despite Nestlé’s lead

While Nestlé Japan retained a strong lead in hot drinks in 2018, domestic players continued to dominate the overall market, including occupying the rest of the top 10 positions by retail value. This dominance results partly from the strong tradition of green tea consumption in the Japanese market, which is served primarily by domestic producers.

UCC Café Rhythm highlights key trends in innovation

A number of factors influenced product innovation in hot drinks in 2018, with the rising demand for convenience amongst time-starved consumers, the health and wellness trend, and an increasing appreciation of high-quality coffee foremost amongst them. Targeting all three trends, UCC Ueshima Coffee’s Café Rhythm, launched in September 2018, is a fresh ground coffee that comes in three varieties, each claiming to provide a different health and beauty benefit, and is available in convenient bags, as well as in standard fresh ground format.

Limited potential for expansion

Hot drinks is expected to continue to struggle to achieve growth over the forecast period, as key categories see their potential for expansion constrained by demographic developments and changing consumer lifestyles, which are bolstering the competitive threat from categories such as RTD tea and RTD coffee. Areas of growth potential remain, however, with fresh coffee expected to continue to benefit from the increasing sophistication of consumer demand and rising consumer health-awareness providing a boost to categories such as other tea and other plant-based hot drinks.

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