Alberta's Opportunity to Supply Beef to Japan

Submitted by: Wes Sawatzky
Marketing Services Division
Alberta Agriculture, Food and Rural Development

[ Search the Investment and Trade Site ]

Background

Japan, with a population of over 125 million people, is the world's largest net importer of agri-food products and is Alberta's second largest agri-food export market after the U.S. Alberta's agri-food exports to Japan totaled over $782 million in 1997, with processed beef products accounting for over $45 million. In 1998, Alberta's total agri-food exports dropped to $579 million, with beef products accounting for $65 million. Agri-food imports continue to show promise due to particular marketplace fundamentals, such as Japan's declining food self-sufficiency rate and the high cost of labour and land.

Canada/Alberta's beef exports to Japan

One of the most important reasons for the growing beef import market in Japan is the decreasing self-sufficiency ratio of beef in the Japanese domestic production industry. The major causes for the decline of local production are threefold:

increasing urbanization and a serious shortage of young people who want to follow their parents into the farming industry;
environmental problems caused by odor and polluted water; and
the instability in stock feed prices and beef carcass prices.

There are no quick solutions in sight for these problems, and in fact the number of cattle farms and domestic herd size are decreasing, while the size of each cattle farm has been growing.

In contrast, beef imports from the United States, Australia, New Zealand and Canada have been increasing since 1991 when the import quota was lifted. In addition, import tariffs have been lowered annually, despite a temporary disturbance due to problems of BSE and E.Coli 0-1257H7 in 1996. This trend towards imported beef is expected to continue and Japan's self-sufficiency in beef is likely to drop to about 30% by the start of 2001.

Future Outlook of Supply and Demand

Although Japan's self-sufficiency in beef is projected to decline, beef is expected to have the strongest potential for growth in demand compared with other forms of protein sources. The Japanese do not have a long history of eating beef as a part of their diet, but globalization and the diversification of diets has made beef a consistent part of the Japanese consumer's diet. Some of this change can be attributed to demand from members of the population who have experienced living overseas in recent years.

However, a high consumer interest in health, quality and freshness has led to the following developments. First, the demand for beef is expected to shift from well marbled, high quality local beef with high prices to moderately marbled and lean beef with reasonable prices. Second, we are seeing an increasing differentiation of such products as those produced under HACCP guidelines, or those fed with feed containing minimal or no chemical residues, or products free from HGP, antibiotics or other artificial additives. These kinds of "natural" products are seen as having additional value and are being successfully promoted to consumers.

Strategy for Expansion in the Japanese Beef Market

Within the Japanese market we can identify three segments as good potential targets.

The first segment consists of those consumers who are highly concerned with safety, reliability, and health, such as consumers co-ops, supermarkets, food service industry, hotels, and institutional caterers. Positive attributes of Alberta beef in this area include the clean and hygienic image of Alberta as perceived by Japanese consumers. These attributes have been demonstrated through the achievement of a growing share of the Japanese market, particularly in Canadian chilled beef.
The second segment includes catering for hospitals and senior citizen care centers. In Japan, the population has been aging considerably and this segment will continue to grow to be a substantial market factor. This segment is often more concerned with health than price. Once products have been accepted in this segment, therefore, the safety of these products will be highly recognized in the Japanese market, and further market penetration can be expected.
The third segment is called the home meal replacement market (HMR), or "Sozai" in Japan. The rising number of female workers, married or unmarried, is only a recent social phenomenon in Japan. The "Sozai" market has been expanding very quickly to meet the demands of a more active workforce for convenient, time-saving products. In this segment it is important to introduce value-added products, which can be easily processed or included with recipes for high nutritional value. In particular, Canadian beef has shown very high growth in the frozen food section and it is being well received among food service and industrial users. The HMR or "Sozai" market appears to be a very promising market segment for Canadian and Alberta Beef.

Conclusion

Japan's food market remains highly competitive with expectations of excellence in packaging presentation and quality. The Japanese market will play an important role in Alberta's target to achieve a $20 billion agri-food industry into the next century. As such, Alberta is committed to developing long-term relations in the Japanese market. The long term focus for exporters to the Japan market will be to provide high quality, value-added market-specific products for the retail and food service industries. However, the reduced buying power of the yen means that price has become more important and margins will be squeezed as buyers search for the most price- competitive supplier. Alberta's promotional efforts and competitive positioning in this market are thus becoming more critical.

This information is maintained by: Gail Atkinson
Last Revised/Reviewed March 12, 1999

[Top of Document]