In May we celebrated the Tokyo launch of the the AgFunder SIJ Impact Fund, Japan’s first ever agrifood tech investment fund with an impact investing focus. . We are excited to confirm that interest in the fund is continuing to build and AgFunder’s Michael Dean and John Friedman will be back in Japan to explain more about the fund and gather with other VCs and agtech innovation supporters to hear pitches from some of Japan’s promising agrifood tech start-ups.
After years of aiming at a one trillion yen export goal, in 2021, for the first time, Japanese agricultural, forestry and fishery products’ export value finally exceeded one trillion yen ($9.09 billion USD).
Export Value of Japanese Agricultural, Forestry and Fishery Products (2017-2021)
Hong Kong has long been a core market for Japan’s food and agriculture exports and it accounted for about 20% of Japan’s total exports in 2021. In particular, Japanese fruit is very popular in Hong Kong as premium fruit.
There are three main reasons why Japanese fruit has long been considered a premium fruit in the Hong Kong market. First, the fruit itself is considered by consumers to be extremely tasty with a beautiful appearance. Secondly, Japanese fruit tends to be nicely packaged, so between the appearance of the fruit itself and the attractive packaging, Japanese fruit is often used as a gift in Hong Kong. Finally, Hong Kong consumers’ general image of Japan as a supplier is positive: Japan is considered to be clean and safe with high quality products.
Strawberries, apples, and grapes are especially in high demand, with each export value exceeding two billion yen ($18.18 million USD). In recent years, however, other countries have been putting effort into developing new higher quality varieties, improving growing methods for existing varieties, developing creative gift packaging, and actively marketing their products. As a result, Japan’s position is increasingly under threat.
Meros recently worked in Hong Kong on issues of fruit branding and fruit variety market protections. We looked at three important premium fruit markets and what the rising new suppliers are doing to take on Japan’s long-time lead in the Hong Kong market.
Strawberries in Hong Kong
Japanese strawberries are exported to Hong Kong mainly from winter to spring. Korean strawberries are also exported during this same period. However, according to fruit importers and retailers in Hong Kong, Japanese and Korean strawberries are not in direct competition. The reason is that consumers feel Japanese strawberries are superior in taste and juiciness and are willing to pay higher prices (at the highest end, Amaou, the most common Japanese variety in Hong Kong costs about 130 HKD (16.90 USD) per pack). Korean strawberries are about half the price of Japanese strawberries, but have typically been inferior in taste and juiciness to the Japanese berries. But newer Korean brands and varieties are catching up.
A new variety called Kingsberry, which began to be imported from Korea a few years ago, reportedly has almost the same quality and similar price range as Japanese strawberries. At present, Kingsberry is not a threat to Japan because of its limited supply and low recognition, but Korea appears to be marketing Kingsberry in Hong Kong with Korean government support. If consumers awareness grows and the supply increases in Hong Kong, it is likely to become a strong rival to Japanese strawberries.
Apples in Hong Kong
Japanese apples are exported to Hong Kong mainly from fall to spring. Hong Kong also imports apples from countries other than Japan, including the US, China, and New Zealand. Imports from New Zealand in particular have increased in recent years. New Zealand has been putting effort into developing new varieties and is actively marketing these new apple varieties to other countries. Because New Zealand is located in the southern hemisphere, their apple season is the opposite of Japan, and New Zealand apples are mainly exported from spring to summer. However, improvements in storage technology are lengthening the period when apples can be sold, and the sales periods of Japanese and NZ apples are beginning to overlap. This should be worrying to Japanese apple exporters.
The New Zealand apple brand most commonly available in Hong Kong is Envy. According to importers and retailers in Hong Kong, Envy sales are increasing in recent years because of its good taste, juiciness, and crunchiness, with a price is less than half of the typical Japanese apples. New Zealand also began selling an apple called Rockit, which is very small in size but not much different in price from Japanese apples. Rockit is sold in a unique vertical tube package and makes a good gift. It is already selling well in China among the wealthy. The supply of Rockit in Hong Kong is still limited, but there is no reason to think it won’t increase in the future.
Grapes in Hong Kong
Japanese grapes are exported to Hong Kong mainly from summer to winter. In recent years, the most popular Japanese grape variety in Hong Kong has been the Shine Muscat. Shine Muscat is also grown in China and Korea and these countries sell during similar months as Japan in Hong Kong. Even though Japan, China and Korea are growing the same variety, there are differences in taste, crispness and size, and Japanese Shine Muscat tends to excel in these aspects.
However, according to local traders, the quality of Chinese Shine Muscat has been improving recently because of the improvement in cultivation methods, and some Chinese grapes are getting close to the Japanese quality level with a price is sometimes less than half of the Japanese Shine Muscat. In addition, Autumn Crisp, a grape brand developed in the US, has become increasingly popular in recent years in Hong Kong. Autumn Crisp is green seedless grape and looks quite similar to Shine Muscat, but is much less expensive.
Until recently, Japanese fruit were far ahead of fruit from other countries in terms of their taste, appearance, packaging, and recognition as premium fruit. However, because of the efforts of other countries, that gap is narrowing. In order to break out of this situation, Japan will need to put effort into developing new higher quality varieties, improving cultivation methods for existing varieties, trying more innovative and unique packaging, and actively marketing their products. Otherwise, there is a strong possibility that Japanese premium fruit will be replaced in Hong Kong by supply from other countries in the not-too-distant future.
Conversely, from the perspective of countries other than Japan, there is potential to gain even more share of the premium fruit market that has long been dominated by Japan. The gift market is particularly large in Hong Kong, where the number of people sending fruit as gifts is increasing, partly due to growing health consciousness. By focusing on packaging and effective marketing, it should be very possible for newer suppliers to take share in the fruit gift market in Hong Kong – and this should be wake up call to Japanese exporters to avoid becoming complacent in the changing Hong Kong market.
Carefully packaged Korean grapes (below) and similarly bright, but less expensive unpackaged Australian grapes (above) may rival Japanese premium Shine Muscat.
What were the high value products that Japan exported to tip it over the one trillion yen mark? Here is Japan’s exports by value by major category in 2021. Within Japan’s global trade, apples rank #13 in value.
Summer is here and that means….Kana is back! Kana Yamada is back for her second year as a summer research assistant. Kana just finished her third year at Wellesley College in the US, where she is a political science and music major, and has returned here to her hometown of Tokyo to continue her work with Meros.
“I wanted to come back to Meros for the summer because I had such a rich experience as an summer research assistant last summer. At the time I had barely any knowledge of consulting nor profound insights into the agriculture and food industry, but through the opportunity of joining some actual projects, I was able to learn research methods, ways to organize data, and how to conduct interviews. But the primary reason was that everybody on the Meros team is very welcoming, work-efficient, brilliant, and became my role models. The warm community enabled me to learn and grow, and as a second-year intern, I am hoping to be able to help the Meros team even more compared to last year.”
This summer Kana will be digging into the background of Japan’s new Green Food System Strategy and sustainability trends in trade and sourcing in the food and agriculture supply chain. “This summer, I am working on a research project on Japan’s new Green Food System Strategy. As the world is facing severe environmental challenges due to climate change and the agriculture industry in Japan has been stagnant for years, the Strategy is seen as a driver for a building a more sustainable society and more resilient supply chains. I am intrigued to see how the policy can (or cannot) be a trigger for a change and how the Japanese food industry will transition to a stronger and more sustainable system.”
Kana also plans to use the summer to plan for the future. “Some things I am looking forward to doing this summer are meeting up with friends and looking for jobs. I had not been able to see my friends as often recently as the COVID situation was very unstable with the new variants appearing. As many of my friends are already in their last year of college, I am hoping to see them and catch up with what has been going on with their life. In addition, I hope to use my summertime to clarify what job I would like to do after graduating college. Along with attending some career forums, I think working at Meros will enable me to meet people from many companies, industries, and positions, which would be an inspiration in figuring out what (and where) I see myself working in the future.
Welcome back, Kana! We look forward to your positive energy and contributions!
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