Functional Foods And Nutraceuticals In Japan
A year of changes
By Ron Bailey
A year ago when the first “Japan Insider” column was written, it included several cautionary statements regarding the future of the Foods for Specified Health Use (FOSHU) market in Japan. Japanese companies were certainly involved in the process, but did not seem to be fully committed to making FOSHU a success. New FOSHU products were being introduced and new health claims were being accepted, but the future of the FOSHU market was by no means secure. What a difference a year has made!
Last year at this time there was a total of 108 approved FOSHU products, with estimated retail sales of approximately $800 million U.S. total. By October of this year the list of approved FOSHU products had grown to 154, which is more than a 40% increase versus one year ago. The annual retail sales of these 154 products has been conservatively estimated at over $1.5 billion U.S. dollars, approximately a doubling in market size in the past year.
Why Has FOSHU Growth Been So Rapid?
There are several reasons for the strength of the market growth. The primary market growth has come from the essentially complete conversion of the entire Yakult Honsha line of more than 20 lactic acid bacteria drinks, fermented milk drinks and yogurts to FOSHU status. This conversion has nearly singlehandedly caused a doubling of the FOSHU market size in Japan. More importantly, the conversion of so many successful market-leading products from the respected Yakult company will essentially “guarantee” the continued success of the FOSHU market in the future. It is likely that the Yakult line conversion will “force” competition in the large and growing fermented milk beverage and yogurt markets to plan for early conversion to FOSHU status or simply fail in the marketplace, as consumers opt for government-approved FOSHU products.
The Ministry of Health and Welfare in Japan has also helped support the rapid market growth. They have been willing to consider (and often approve) health claims beyond the initial conservative approach that was generally used in allowing on-label claims. A specific example from the Yakult line is an approved claim that their Lactobacillus casei Shirota active is useful to “..help increase good bacillus and (emphasis added) decrease the bad ones...” This expanded claim beyond the original claim of “...increases good bacillus in intestines...” is very important to Japanese consumers and is fully supported by the scientific evidence.
The Ministry of Health and Welfare has also continued the simplification of the formal regulatory approval process. Over a year ago it was decided that the original separate approval systems for FOSHU “active” (actually called “functional components”) ingredients and FOSHU finished products should be abandoned in favor of a single FOSHU product approval. This change in procedures not only reduced the level of bureaucracy involved, but also provided an additional marketing incentive for the FOSHU marketers. It is now possible to surprise your competition with the approval of a totally new claim based on a totally new FOSHU active ingredient, which was not the case when the active ingredients needed to be “approved” prior to filing for a FOSHU product approval. As an added incentive, the original procedure requiring re-registration of each approved product after four years was also deleted, further simplifying the overall process.
The Non-FOSHU Functional Foods/Nutraceuticals Markets
It is interesting that at the same time as the rapid growth of the formal FOSHU market, the growth of several categories of non-FOSHU functional food products has been equally strong. For example, the relatively new category of what are called “Near Water” drinks, usually fortified with vitamins and minerals, fiber sources, antioxidants, etc. and slightly sweetened, has grown to over $200 million U.S. in retail sales. The “jelly drinks” usually sold in special portable “Cheer Pack” (with retractable spout) packages have also grown to nearly $200 million U.S., as part of the “Nutritionally Balanced Foods” category, which includes jelly drinks, fortified food bars, etc., with a total retail market value of over $850 million U.S.
No doubt some of these products, possibly even whole categories, are “fads” and will not survive over time. On the other hand, it is also possible that some of the leading products in these emerging categories will decide to develop a point of market uniqueness by converting to FOSHU status. Clearly the Japanese consumers now have the impression that the FOSHU logo is in effect a “stamp of approval” from the important Ministry of Health and Welfare and there will be a growing market value in having the FOSHU logo and approved health claims on food packages in Japan.
All of the basic reasons for the establishment of the original FOSHU regulatory category are still in place in Japan: an aging population concerned about maintaining a healthy lifestyle, an increasingly complex and expensive medical support system, a declining birth rate and eventually declining population, and a troubled economic support base, for example. These factors will contribute to creating new consumer (and government) interest in functional foods and nutraceutical ingredients. It is clear from the increasing number of well-attended trade shows in Japan focusing on functional foods and nutraceuticals that the interest in such products and ingredients is growing and is likely to continue to do so for the foreseeable future.
And What About The Future?
It can be expected that the number of formal FOSHU products in Japan will continue to increase, perhaps not at the 40% growth rate seen in the past year, but with growth through both new FOSHU products and also conversions of currently successful non-FOSHU products. It is not unreasonable to expect the retail market for FOSHU products to double in size in the next year, to perhaps over $3 billion U.S., primarily based on conversions of successful non-FOSHU products to FOSHU status.
As the FOSHU market grows in Japan, it is also likely that certain “active” ingredients for FOSHU products, which have been shown over time to be both safe and efficacious, will no longer require time-consuming and expensive case-by-case FOSHU product approvals. It is only a matter of time, given the continued success of many of the products in the marketplace and the high level of consumer acceptance. The prebiotic and probiotic categories are likely first candidates for such treatment in the future.
At the same time, strong consumer interest in “self-health management” will support the development of a wider range of non-FOSHU functional food products. These products will not have access to the FOSHU logo and cannot have on-label health claims, but manufacturers are allowed to use print advertising and supporting literature to communicate the demonstrated product benefits to the consumers. As an example, the recent rapid growth of the red wine market in Japan has been related directly to the health benefits claimed for the polyphenol antioxidant ingredients, although no actual claims (other than the amount of polyphenols) are allowed on the labels.
Even though the growth of the U.S. market for herbal dietary supplements has slowed somewhat, the continued success in the U.S. of herbs with “health” (structure/function) claims has not gone unnoticed in Japan. Again, the Ministry of Health and Welfare has been instrumental in allowing at least some of the popular Western herbs to be sold in Japan as foods or dietary supplements rather than drugs and this is creating a new area of opportunity. So far only one herbal ingredient, a glycoside extract of Chinese Eucommia leaf, has been approved as a FOSHU “active,” but it is only a matter of time before additional clinical and safety support information on other herbs is used for FOSHU approval in Japan in common food (not tablet or capsule) form.
It is clearly an exciting time for the functional food and nutraceutical ingredient markets in Japan, both FOSHU and non-FOSHU. It will be interesting to watch the directions of growth in the future and to decide how the Japanese experience might fit in with Western needs and interests. It is possible that the government-approved and consumer-friendly FOSHU regulatory approach might even prove to be the appropriate answer for the controlled development of a functional food market in other countries, including the U.S.