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    Features

    Japan

    An Established Market for Nutraceuticals

    Related CONTENT
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    Ron Bailey11.01.08
    For the first time in several years, the macroeconomic climate in Japan is deteriorating, moving beyond "sluggish" to a serious concern in light of a potential recession and inflationary pressures at the consumer level (gasoline costs more than$7 per gallon). During the writing of this article, it was announced that Japanese-based Nomura Holdings would be taking over the Asian businesses of bankrupt Lehman Brothers.

    The economic concerns in Japan have been complicated by the resignation of the Prime Minister-the second one in a row to resign after only one year in office. This relative instability has been further compounded by the global economic slowdown of Japan's major trading partners, the U.S. and China. Typically when Japanese consumers begin to worry about the economy in general and inflation specifically, they increase their savings and reduce spending, much to the dismay of the Japanese government. It remains to be seen if this likely outcome will include less spending on relatively inexpensive goods such as nutraceutical foods and beverages to help maintain health.

    Demographics Update



    The most significant demographic information comes from the aging Japanese population. The most recent projections indicate that 40% of Japanese consumers will be 65 years of age and older by the year 2050, assuming current trends continue.

    At the same time, the life expectancy in Japan is increasing. Japanese females lead the world with a life expectancy of 86 years, while males can expect to live for 79 years. If the men were to follow the lead of women with respect to much lower tobacco usage, the longevity gap between the sexes would likely be narrowed considerably.

    Regulatory Overview



    In previous summaries of the important regulations impacting the nutraceutical food and beverage markets in Japan, each of the primary regulatory categories has been addressed. A short list of these special regulations include: FOSHU (Foods for Specified Health Uses)-"Tokuho" in Japanese; Foods with Nutrient Function Claims (FNFC); and Foods for Special Dietary Uses (FSDU).

    Although there is market activity in the FNFC and FSDU categories, only the FOSHU regulatory category generates new ingredient and product ideas worthy of consideration by overseas marketers. The FNFC and FSDU categories have proven to be neither exciting nor innovative. By comparison, FOSHU-related opportunities have been and continue to be of particular interest to Japanese companies willing and able to develop scientific support (including clinical studies) for products with unique functional ingredients. If they get it right, the market potential could be significant.


    FOSHU Category Update



    The Japan Health Food and Nutrition Food Association (JHNFA) publishes a short but detailed report every two years on the state of the FOSHU marketplace (based on information supplied by industry on a voluntary basis). Its most recent report earlier this year included data through calendar year 2007. Significant highlights from the report include:

    • FOSHU retail product sales for 2007 were less than $6.5 billion at current exchange rates, an 8% increase from the last report of 2005 retail sales.
    • FOSHU products approved at the end of 2007 numbered 755. The net gain in product approvals since 2005 was 128.
    • The Gastrointestinal Health claims category represented a majority of FOSHU sales at 51% of the total in 2007, but for the first time ever showed a decline in actual sales revenues versus the previous reporting period.
    • The biggest gainers in sales revenue terms were in the "Neutral Fat/Body Fat" category (24% of total FOSHU sales, including products with the diacylglycerol functional ingredient, for example) and the Tooth Health category (14% of total FOSHU sales).
    • The categories allowing claims related to Metabolic Syndrome risk factors (cholesterol lowering, blood pressure control, blood sugar control) are together responsible for 10% of total FOSHU sales.

    Overall, the slowdown in FOSHU percent growth primarily reflects a lack of new functional ingredients and exciting new health claims allowed by the Japanese Ministry of Health, Labor and Welfare (MHLW).

    Non-FOSHU Functional Foods and Beverages



    Previous Japanese market summaries have indicated that the MHLW is being petitioned by Japanese industry to open up the FOSHU market to new health claims categories and new functional ingredients. There is specific ongoing interest in anti-fatigue/stress, immune function enhancement and weight loss. Industry believes that the scientific support and consumer safety data are now at a point where MHLW should feel comfortable allowing the new categories. So far MHLW disagrees.

    The strong MHLW support for products addressing Metabolic Syndrome is an important new development, however. MHLW has encouraged the introduction of FOSHU products with functional ingredients addressing the risk factors defining this condition. The recent JHNFA summary report, however, indicates that so far there have not been any significant increases in consumer acceptance of FOSHU products with a Metabolic Syndrome positioning.

    At the moment, MHLW seems to be taking a very conservative stance regarding major changes to FOSHU regulations. The reasons for this are not clear, however. Given the excellent consumer safety record of the approved FOSHU products over the past several years, the risk of proceeding on at least a limited basis would seem to be minimal.

    Clues for the Future



    Fortunately, the Japanese food and beverage industry is not sitting idle, waiting for MHLW to act. A review of the marketing focus of relevant tradeshows in Japan (ifia Japan and HiJapan specifically) provides some perspective. For example, the educational conference associated with the HiJapan (Health Ingredients Japan) show featured several presentations on immune function and joint support from university re­searchers. The HiJapan show also featured new pavilions for organic ingredients, Metabolic Syndrome related ingredients, beauty and anti-aging ingredients, and fermentation ingredients. The prebiotics/probiotics category remains very active at the functional ingredient level, even though the domestic Japanese marketplace is approaching saturation.

    What is clear is the likelihood of continued support by MHLW of the nutraceutical food and beverage industry. Patience is required, as is typical in Japanese business, but it will be rewarded. In the meantime, many of the new functional ingredients that have been developed in Japan, but have not yet been approved for use in Japan in products with health claims, can be sold in receptive overseas markets such as the U.S. More of the Japanese companies involved in nutraceutical ingredients are establishing offices and even laboratories in the U.S. to serve this market. In addition, although the Japanese companies cannot compete with Chinese companies on price, they can be relied on to consistently produce safe and efficacious ingredients and products with a foundation of good science.


    Note: An important source of information for this article is the biennial Japanese-language FOSHU market status report from the Japan Health Food and Nutrition Food Association (JHNFA).

    About the author: Ron Bailey is president of California Functional Foods and has been an independent consultant for more than 20 years, focusing primarily on the transfer of food technology between the U.S. and Japan. He can be reached at bailey@mind.net.
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