Click here to read this month's editorial: Japan Offers More Export Potential
Japan is a long way from the United States – a 13-hour plane ride, or two weeks on the ocean if you're talking about a shipment of U.S. pork.
Despite the distance, the U.S. pork industry has made great strides in the Land of the Rising Sun. In 1995, technological advances allowed U.S. exporters to ship chilled product to Japan. Also in 1995, World Trade Organization negotiations further opened the market and U.S. packers began to more actively pursue opportunities. Since then, the United States has advanced steadily to
replace Denmark as Japan's No. 1 pork importer.
While the 2002 numbers are not yet complete, it appears that U.S. pork will have another banner year. Through October 2002, 7 percent more U.S. pork (on a volume basis) entered the Japanese market, marking more than 12 years of annual growth. Projections for 2003 suggest more of the same.
There are many reasons for this, not the least of which is the on-site work by U.S. Meat Export Federation staff. The federation receives funding from USDA and various agricultural commodity groups like the National Corn Growers and American Soybean Associations. But specific to pork, the National Pork Board and National Pork Producers Council lend significant support.
USMEF tackles market development within foreign countries. Actual product marketing efforts focus on creating demand for U.S. meat through promotion, trade and consumer education, advertising and public relations. The staff also provides services such as aligning buyers with sellers, as well as conducting market and product research. The federation's third charge is to provide detailed insight about a country.
NPB provides support in terms of money (checkoff), promotional and educational materials, product research and market direction, among other things.
NPPC tackles the legislative and regulatory side, which includes such things as addressing trade disputes, directing policy and working to open new markets.
The United States now sells nearly 10 percent of its total annual pork production to foreign markets.
But all that work falls short, if the product fails to meet demand. As the first link in the supply chain, it's important that you understand the opportunities and challenges that U.S. pork faces in your No. 1 export market.
While Denmark and Canada are the United States" hottest competitors in Japan's import market, domestic pork presents the greatest overall competition. Japanese consumers trust and prefer domestic pork.
U.S. chilled pork imports into Japan have increased 20 percent in the past five years, to about 150,000 metric tons annually. Of that, nearly 75 percent is sold at retail. Restaurants also use imported, chilled pork especially for the popular breaded-loin dish known has tonkatsu, and for the thinly sliced and boiled shabu-shabu.
All imported frozen pork is further processed into ham, sausage and bacon, or used in foodservice, including restaurants, hotels and other institutions.
On the chilled-pork side, there is a knowledge and comfort hurdle for any imported product to clear in Japan. It takes five to seven days for domestic pork to reach the store; it takes 20 to 30 days for U.S. pork's chilled vacuum-packaged product. Therefore, the perception is that U.S. pork (any imported pork) is lower quality than domestic pork. However, it does tend to be less expensive, often by 15 percent to 20 percent compared to the domestic product.
Freshness is important. In a Jiji Press survey of 1,750 Japanese women last September, 89 percent said they consider product freshness when shopping.
Toshimi Nomura, a meat buyer for Aeon, a leading Japanese retailer, points out that on a product's second day in his meat case the price is discounted. On the third day, the product is thrown out. Tight inventory control and purchasing data lets him limit waste to 3 percent.
Retailers are working to present U.S. pork's extra storage time as a positive. For example, Nomura promotes the fact that U.S. pork is "aged" during transport, making it "more tender and juicy."
He says U.S. suppliers have improved freshness. Also, there is less pale soft and exudative pork and fewer packing problems today.
"The consumer's impression of U.S. pork is changing," says Nomura. "Our sales (2002) have increased 200 percent over last year (2001)." He attributes the gain to USMEF-sponsored activities such as in-store demonstrations, on-package recipes and cooking instructions.
Increasingly, brands are the route to capturing consumer loyalty in Japan as in America.
"The retail supermarket trade is very competitive and changing a lot," says Yoshihiko Maki, pork manager for USMEF Tokyo. "Store brands are developing, and they are focusing less on price and more on image."
According to Shinobu Shimada, consumer affairs manager for USMEF Tokyo, traits that appeal to Japanese consumers and that could serve as brand niches, include: identification of the product's origin, a traceback system, drug-free/natural, a specific breed or feeding program.
Some examples of brands that are surfacing in Japan are Tokyo X, from black-line, hybrid hogs, the product demands a 50 percent premium; J-Pork, a domestic product; Berkshire Gold, from the United States; Corn-fed Pork, from Iowa; and Idaho Natural Pork.
Following the 2001 bovine spongiform encephalopathy scare, and a labeling scandal involving some of Japan's food companies, already cautious consumers are even more so. During the BSE episode, consumers quickly replaced beef, boosting retail pork sales by nearly 40 percent.
According to the Niji Press survey, 81 percent of polled women said they worry about food safety. Beef presents the most concern, according to 80 percent of respondents. However, safety concerns involving imported foods came in at 74 percent; and 70 percent were worried about processed meats.
"From this point forward, quality and safety are key," says Chiyoshi Komatsu, chief editor of the Food and Beverage Journal. "Japanese consumers" major interest is safety. They want to be free of anxiety when purchasing food."
"Japanese consumers want more detailed information about a product," says Suzanne Hale, with USDA's Foreign Agricultural Service in Japan. "They want to know how, where and by whom it was produced, as well as who packaged and transported it."
It's known as story pork. She points out that with some brands, consumers can now go to an in-store kiosk and scan the product to learn more about its background.
Japanese consumers, retailers and meat suppliers all want to see more story pork whether it's domestic or imported product. "I would like to see more of this from the United States," says Yoshimi Ueno, chief editor of The Meat Journal. "It would make it easier to brand the product."
He adds that U.S. pork has closed the quality gap so much that domestic pork has had to distinguish itself by embracing the story pork approach.
The future offers potential for imported pork to expand further in this market. Domestic pork's market share sits at 60 percent, but production continues to decline by 1 percent or more each year. Already 70 percent of loins used in Japan are imported, notes Ueno.
While the United States has improved its position as a reliable pork supplier, it still falls short in terms of meeting cut specifications. For now, the increased labor required to meet Japanese specifications and the loss of yield to other cuts, keeps U.S. packers from committing more fully to this market.
"The United States is competitive in frozen pork, and by meeting cutting specs it could increase those shipments," says USMEF's Maki. "The United States also has an opportunity to grow imports of processed products."
Japanese processing companies rely heavily on imported product. Indeed, 75 percent of the pork that Prima Ham, a leading Japanese processor, uses is imported – 30 percent of that is U.S. chilled pork, says Kunji Uki, pork purchasing manager for Prima Ham. He views Canadian and U.S. pork as equal in terms of quality, consistency and safety.
"Canada is changing the equation. It is aggressively expanding into the Japanese market, and Canada is better at meeting the cutting specs," says Maki.
Japan will respond to whoever meets its needs, whether that's quality, safety, price, volume or cutting specifications, he adds.
Another key to expanding U.S. pork sales in Japan is traceability. Right now, the Japanese view U.S. packers as two types – commodity and premium. U.S. integrators appear to be gaining an edge with their perceived traceability.
Again, the labeling scandals and BSE crisis are driving this issue. Last April, the Japanese government began requiring traceability on all beef, notes FAS" Hale. "However, Japan does not have a fully traceable system – yet," she adds. "But it will be more of a factor in the future."
Indeed, U.S. pork will need a traceable system and more if it wants to continue its rise in Japan.
Priced to Close the Gate
Japan has a variable levy system and two safeguard provisions, which complicate the market for pork exporters and importers alike.
The variable levy system features a minimum import price – or gate price – which the Japanese government sets each year. Importers bringing in pork products priced below the gate price must pay the difference. The most recent gate price is roughly $1.98 per pound. A duty of 4.3 percent is added as well. However, any product that is already priced above the gate price is assessed only the 4.3 percent duty.
The gate price applies to the average value of a pork shipment. So, importers tend to mix high-value items, such as loins, with low-value items, such as picnics, in a container to minimize charges.
The Japanese safeguard is quite another bird. Safeguards are an attempt to reduce volume surges. A safeguard is triggered if the cumulative pork import volume on a quarterly basis exceeds the fiscal year's (April to March) three-year average for the corresponding period by 19 percent or more. The safeguard raises the gate price on pork imports by 24.6 percent for the rest of the fiscal year.
An extension to the safeguard goes into effect if the import total for the year exceeds the previous three fiscal years" average by 19 percent or more. It remains in place through the first quarter of the new fiscal year.
A special safeguard raises the duty by 33 percent (from 4.3 percent to 5.5 percent) when pork imports exceed 105 percent of the previous three years.
The United States is lobbying the World Trade Organization to eliminate these types of tariffs.
The Changing Faces of Japanese Consumers
A food's appearance, taste, presentation and variety remain high priorities in Japan. While a meal for a celebration may feature small portions of a dozen or more dishes, an everyday meal still includes three to five dishes. Today's cooks spend less time in the kitchen than in the past, but 45 minutes or more to prepare the evening meal is not uncommon.
Because of compact living quarters, few kitchens have an oven, making roasting meat a foreign concept. Boiling and stir-frying are mainstay preparations.
Daily afternoon grocery shopping is typical, but working women condense it into two or three visits a week.
Shopping venues also are changing. In the cities, large grocery/department stores provide one-stop shopping. In outlying areas, the U.S. warehouse/club store Costco has three units in place, with 20 more planned. This volume-buying concept is new but seems to be catching on because it offers greater value and variety.
After an unsuccessful first attempt in this market, Wal-Mart will try again. It has purchased one-third of Japan's Seiyu department store chain.
Fish leads protein consumption, claiming 55 percent of the per capita total (76.7 lbs). However, 20 years ago fish consumption was 70 percent. "The older people prefer fish, younger people prefer variety," says Shinobu Shimada, consumer affairs manager for U.S. Meat Export Federation Tokyo.
Poultry and beef consumption have increased slightly in 20 years, now at 22.5 lbs. and 16.7 lbs. respectively. Pork has remained stable at 23.4 lbs. Shimada thinks seafood consumption will continue to decline slightly.
Sizing up the Big 3
The United States, Denmark and Canada have the corner on the Japanese pork import market. However, Mexico, China and Brazil are eyeing the opportunities as well.
Here's a look at some characteristics of Japan's big three pork importers.
- No. 1 chilled pork supplier, at 67 percent of all imported chilled pork.
- U.S. chilled pork, primarily used as "table meat," also has carved a niche for tenderloins and CC loins for tonkatsu restaurant use.
- A high volume of frozen picnics is supplied for sausage use.
- Considered a reliable, high-volume supplier.
- No. 1 frozen pork supplier, used for further processing, primarily hams.
- Also supplies single-ribbed bellies for bacon production, and MM loins for Canadian-style bacon products.
- Viewed as superior in terms of consistent quality and meeting Japanese cut specifications.
- Supplies chilled pork for table meat, as well as frozen pork for processing and for hotel, restaurant and institution foodservice use.
- Most Canadian pork imports to Japan are frozen, but both frozen and chilled amounts are growing.
- View the products as similar to U.S. pork, but with less pale, soft and exudative pork and better color. Also, Canada is more responsive to customer demands.
- Canada is the greatest threat to U.S. pork imports," says Yoshihiko Maki, pork manager for U.S. Meat Export Federation Tokyo.
Editor's note: This article is based on a December 2002 trip to Asia. Next month, Pork will look at Hong Kong and China.