How can Japanese fruit stay on top in an increasingly innovative Hong Kong market?

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)

Source: Japanese Ministry of Agriculture, Forestry and Fisheries

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.

Japanese Yuubeni variety strawberries from Kumamoto Prefecture, $109 HK per pack (left) and Korean Berry Licious brand strawberries $89 HK (right) sold side by side in Hong Kong.

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.

New Zealand’s Rockit apples are marketed in branded plastic cylinder packaging and seem to be good as gifts in Hong Kong.

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.

Source: Japanese Ministry of Agriculture, Forestry and Fisheries

New!  Revised Meros – USDA Food Export Guides to Japan Online Now

Meros once again teamed up with the US Embassy Japan’s Agricultural Trade Office (ATO) to develop a new revised version of well-received series of export guides originally developed in 2019.  The series details the regulatory requirements for 24 specific products, from cheese to chocolate, seafood to spirits. While the aim of these guides is to support American SMEs who are interested in exporting food products to Japan, the detailed guides can be of interest to food exporters of all backgrounds.

Within the first month of their release in March 2022, the revised guides were downloaded over 1000 times.

The revised guides have added sections on new Japanese policy related to agricultural biotechnology as well as updated tariff schedules for each product to reflect changes that have come about since the US-Japan Trade Agreement came into effect on January 1, 2020.  Other changes include updated product labeling regulations as well as some product-specific changes.

USDA Meros Agricultural Biotechnology Japan Import
New sections include updates on Japan’s regulations on food and food additives derived from agricultural biotechnology.

Exporting to Japan can seem daunting with numerous required forms and official resources not always available in English. In these guides, we take potential exporters step-by-step from pre-embarkation to import clearance and lay out the expected forms and preparations necessary at each stage.

For new food exporters to Japan, common challenges include differences in food additive standards which may mean a product that is allowed for food products in the home country may not always be allowed in Japan.  Japan’s strict, low tolerance standards for agrochemical residues (MRLs) also trips up some potential exporters.  These guides aim to point out some of these common pitfalls in advance, so exporters are better prepared. They are not meant as “do-it-yourself” guides but as a tool to help exporters better navigate the export process together with their Japanese importers and distributors.  

We provide examples of required ingredients lists, manufacturing process charts as well as labeling for each type of product – but it is important for exporters to always keep in mind that requirements can change without notice – especially whenever sanitary or phytosanitary risks are involved. Ultimately, a successful export business to Japan requires ongoing vigilance for regulatory changes, as well as strong relationships with importers and partners in Japan.

Download the guides here.

CBD, Hemp Fiber, Seeds and Oil: Meros – USDA report series on Japan’s market for hemp-derived products released

Anyone exploring the shops and cafes of Japan’s major cities in the past two years has certainly noticed the explosion of CBD products on retail shelves, online shops and in a growing number of cafes. CBD consumer products range from tinctures and gummies to cosmetics and even pet products, some imported and some manufactured in Japan using CBD raw materials primarily from the U.S., China and the EU.

While CBD products are a major current trend, interest in the Japanese market for a variety of hemp-derived products has grown dramatically in the past few years.Hemp seed and hemp seed oil appear poised for growth in the Japanese health food sector; longer term, there may be opportunities for hemp fiber in construction, insulation and plastic.

Meros recently teamed up with the U.S. Embassy Japan to develop a series of reports on the Japanese market and import regulations for hemp-derived products, to serve as a resource for U.S. exporters planning their business development in Japan.  The 2018 U.S. Farm bill  legalized the production of industrial hemp in the U.S., defined any cannabis plant or derivative thereof, that contains not more than 0.3 percent delta-9 tetrahydrocannabinol (“THC”) on a dry-weight basis. This authorization of production in the U.S. has brought optimism that a new commodity crop can be developed in the U.S., with a wide range of uses in industrial, feed and wellness markets and potential for export to global markets.

While Japan has a long history of hemp cultivation, today Japan’s domestic hemp use is mainly limited to fiber for traditional uses linked to the Shinto religion, such as shimenawa ropes decorating shrines or the belts of top ranked sumo champions. To grow cannabis in Japan, a cultivation license is necessary and as of 2019 there were only 35 licensed cannabis cultivators, primarily in Tochigi Prefecture, and a total of 9 hectares under cultivation. There is little expectation that this number will increase in the near term.

And yet industrial hemp has a wide potential range of uses in Japan from seeds for human and animal consumption, fiber for use in apparel, building insulation, plastics and construction materials to hemp extracts such as CBD and other cannabinoids in cosmetics and wellness products.  It is expected that these raw materials will need to be imported to Japan; this makes it essential for potential hemp product suppliers to have a deep un

Under Japan’s legal regulatory framework, the Cannabis Control Act bans importation of “cannabis”. The Act defines ‘cannabis’ as “the cannabis plant (Cannabis sativa L.) and its products. However, mature cannabis stalks and products made from stalks (excluding resin, which is illegal), as well as cannabis seeds and products made from the seeds are excluded from this legal definition of “cannabis”. Japan has a zero-tolerance level for tetrahydrocannabinol (THC) in any product.

The Cannabis Control Act does not explicitly mention THC, however, in practice, the Ministry of Health, Labour and Welfare (MHLW) interprets the presence of THC in a product to mean that parts of the cannabis plant other than mature stalks or seeds were used.Unacceptable parts include flowers, buds, leaves, immature stalks, or roots.

Exporting hemp products to Japan, therefore, requires various documentation and administrative steps in order to comply with the import regulations for legal hemp products.

In this new series of reports, Meros not only looks at the current market dynamics of each product category, but also examples of the import flow and documentation required for hemp fiber, hemp seed, hemp seed oil, CBD and hemp extract products.

Further regulatory changes are expected Japan’s hemp product market in the coming years, so success as a supplier to Japan’s hemp product markets will require on-going observation of the changing dynamics of each market and potential changes in regulation. As always, strong relationships with importers and partners in Japan will be critical for suppliers to navigate these dynamic markets.

The series of reports can be found at the following links:

The Japanese Market for Hemp Fiber

The Japanese Market for Hemp Seed and Hemp Seed Oil Products

The Japanese Market for CBD and Hemp Extracts