|
|
By some estimates, the market share of private brand (PB) label products in Japanese supermarkets is approximately 5%. However, in some major Japanese food retail operations this figure falls to lows of 1-2%. By comparison, "in Canada private label brands account for 25 percent of sales" [Hoch, Stephen J. and Shumeet Banerji (1993), "When Do Private Labels Succeed?" Sloan Management Review (summer), 57-67.].
When we contrast the characteristics of these two markets, we can see a potential strategic opportunity emerging for Canadian producers. As the market share of private brands in Canada is much larger than in Japan, and larger than in the U.S. or Europe (15-20%), Canadian producers may have a competitive advantage through experience in producing private brand label products for specific retailers.
Admittedly, Japanese retailers have made efforts in the past to promote private brand label products and current PB shares are lower than 5-10 years ago. However, in light of this trend it is important to recognize two significant factors. First, towards the end of the 1990s the willingness of the Japanese consumer to pay higher prices for international brand names has weakened - due to exposure to lower prices abroad and also to changing economic conditions. Second, many of the PB efforts were made in categories where a strong national brand (NB) image already existed. PB trials in categories such as colas and soy sauces were not successful, despite price advantages, due to strong NB images from competitive products such as 'Coca-Cola' and 'Kikkoman'. Initial efforts were also plagued by quality problems, both in terms of packaging and product claims (i.e. mold inside PB water products).
A strong benefit that can be achieved through PBs is the tailoring of products to meet specific retailer needs. Big Japanese NB producers usually have several products and will not tailor to meet individual retailer requests. In fact, with many NB products the power position between producer and retailer is often reversed vis-à-vis North American business practices, with the NB producer holding the reins. One reason for this is that, while in North America supermarkets may hold as much as 75% of the market for food products (in-home consumption), Japanese supermarkets only hold around 25% of the overall market. This is due to higher levels of competition from convenience store outlets, "mom & pop" outlets, and small community stores (i.e. produce stores, fish stores, etc.). As a result, NB products can be distributed through a greater variety of channels and the significance of the supermarket outlet in the chain is reduced.
The opportunity for PB products, therefore, lies in categories where no strong NB producer is dominant in the market, such as frozen vegetables and processed potatoes. "Best Production Area" traits are important, as is overall country-of-origin image. Alberta producers can seek direct export partnerships with Japanese retailers or indirectly through partnerships with Japanese traders and producers. Partnerships with traders or producers have advantages in increased volumes and risk diversification. The use of trading companies is attractive to retailers because of the specific sourcing knowledge and experience traders are expected to have regarding foreign companies.
Low-level processed goods are also easier to export to Japan - goods that do not require significant adjustments for the Japan market. The Japanese taste is highly sensitive for high-level processed goods, while it is less sensitive for products such as frozen french fried potatoes. The difficulty with high-level processed goods is that Japanese people have different methods of eating the same product (i.e. bacon) than in Canada. As a result, Japanese producers generally import bulk, make the 'right cuts', and add tastes specific to the Japanese palate.
Another challenge for Japanese supermarkets concerns the product assortment decision. While U.S.-style category management is moving towards streamlined assortments, Japanese supermarkets continue to hold broad product assortments. In a typical Japanese supermarket, about 10% of the items in a product assortment could be classified as "slow-movers", but are deemed necessary to retain customer loyalty and confidence (if rises to 15%, changes are made). When we take into account the limited space in Japanese supermarkets, the sensitivity between product assortment and space allocations becomes paramount - a further challenge for introducing new products to the market.
The user of this information agrees to the terms and conditions in the terms of use and
disclaimer.
Copyright © 1999-2000 Her Majesty the Queen in the Right of Alberta. All rights reserved.