Click image for details

Introduction: This article analyzes consumption trends in Japan before and after the 1990s, especially in the food and beverage industry, to provide reference for understanding current industry trends.

The basis of the research is that China's current economy shares some similarities with Japan's economy around the 1990s.

  1. Macro aspects: slowing economic growth, high real estate prices, and US-initiated trade wars;

  2. Demographic characteristics: intensifying population aging and singlehood;

  3. Consumption characteristics: coexistence of so-called consumption downgrading and upgrading, with cost-performance becoming a trend;

  4. Consumer groups: new generation of young people (Japan's "new humans" then and China's post-90s and post-00s now) and female groups becoming main consumers;

  5. Resident mentality: anxiety about personal development and consumption choices due to unclear future expectations.

Taking history as a mirror and staying prepared for adversity, the consumption changes in Japan before and after the 1990s may serve as a somewhat extreme but still valuable mirror for viewing China's future consumption trends. Reviewing the development of Japan's food and beverage industry in the 1990s, economic fluctuations led to a reduction in some discretionary consumption, but did not change the trends of convenience, health, and Westernization brought about by social structure and dietary culture evolution. Three Changes: 1) Reduction in household food and beverage expenditure. After the real estate bubble burst in the 1990s, the absolute monthly household food expenditure fell from 82,000 yen in 1992 to 74,000 yen in 2000, but the proportion of food and beverage expenditure in total household expenditure remained relatively stable, staying between 23% and 25% from 1992 to 2000; 2) Reduction in dining out. The rate of dining out fell from 19% in 1990 to 17% in 2000. Affected by the reduction in dining out, Japan's restaurant market growth was sluggish and began to decline in the late 1990s; 3) Pursuit of cost-performance in discretionary consumption. Consumption upgrading products mostly appeared before the bubble burst, while consumption downgrading products mostly appeared after the bubble burst. In the list of hot-selling products in Japan from 1993 to 2001, low-priced wine, low-priced beer, half-price hamburgers, low-priced cola, and sparkling liquor (happoshu) all appeared. Three Constants: 1) The convenience trend remained unchanged. After the real estate bubble burst, this trend was not affected by economic fluctuations. For example, the proportion of convenience food expenditure in household food expenditure continued to rise from 6.2% in 1981 to 11.2% in 2000; 2) The health trend remained unchanged. In the 1990s, food and beverage sub-sectors continued to upgrade towards health, such as lower alcohol content in alcoholic beverages, soy sauce upgrading to low-salt and organic, carbonated beverage consumption declining but unsweetened tea beverage consumption growing rapidly; 3) The Westernization trend remained unchanged. Economic fluctuations led to a reduction in dining out, with the number of general restaurants falling from 503,000 in 1986 to 443,000 in 1999, but this did not change the overall Westernization trend of Japanese diet. The number of Western restaurants steadily increased, and demand for Western seasonings increased steadily. Exploring sub-sectors one by one: essential consumption stabilized, while Westernization, health, and convenience trends continued. 1) From market performance: after the bubble burst in 1990, the Nikkei index fell sharply, but consumer sectors such as pharmaceuticals, food and beverage, and electrical appliances outperformed the index, with the food and beverage sector ranking fourth. 2) From sub-sector fundamentals: Exploring one by one, essential consumption such as dairy products and seasonings generally stabilized, while discretionary consumption such as alcoholic beverages declined. Most sub-sectors maintained the trends of Westernization, health, and convenience. 3) From a company perspective: Companies that navigated the fog during the economic recession had several characteristics: first, gradually expanding overseas markets to bring new growth points, such as Kikkoman's deep cultivation of the US market; second, keenly observing changes in consumer demand and actively launching new products to seek change, such as Asahi Breweries launching a refreshing beer to increase share; third, transforming the value curve through product upgrades to create blue ocean markets, such as Kikkoman creating the healthy soy sauce market and Ito En opening the bottled tea market. Looking at the present and future in China: several trends are also occurring, and attention should be paid to the development of related targets.

  1. Under the trend of dietary convenience, the frozen food and compound seasoning industries are developing rapidly;
  2. Under the health trend, seasonings (soy sauce, vinegar, organic, zero-additive), dairy products (organic/milk source), soft drinks (soy milk/sparkling water) and other related products continue to upgrade, and the health products industry benefits fully;
  3. Under the Westernization trend, butter and cheese consumption in dairy products is gradually rising, baked bread is growing rapidly, and yeast also benefits;
  4. Under the cost-performance trend, the recent light bottle liquor market is a typical example, and short-shelf-life bread also has development space. Looking ahead, the alcoholic beverage industry should actively pay attention to the demands of young consumer groups, the dairy industry should focus on leading companies' overseas layout and diversified expansion, seasonings upgrading towards health remains the direction, and the soft drink industry should seek hit products that conform to health trends. Table of Contents

Main Text ** I. Research Significance: Using History as a Mirror to Illuminate the Future** Preface: The changes in consumption structure and trends after the burst of Japan's economic bubble in the 1990s have always been a research hotspot. This article analyzes the development trends of Japan's food and beverage industry in the 1990s, attempting to provide reference for China's future industry development trends. China's current economy shares some similarities with Japan's economy around the 1990s, such as:

  1. Macro aspects: slowing economic growth, high real estate prices, and US-initiated trade frictions;
  2. Demographic characteristics: intensifying population aging and singlehood; 3) Consumption characteristics: coexistence of so-called consumption downgrading and upgrading;
  3. Consumer groups: the new generation (Japan's "new humans", China's post-90s and post-00s) and female groups becoming main consumers;
  4. Resident mentality: residents' expectations for future economic development have become unclear, and they have begun to feel anxious about their own development. Of course, it should be clarified that there are more differences between the Chinese and Japanese economies. We remain confident in China's long-term economic development and consumption momentum, but taking history as a mirror and staying prepared for adversity, the consumption trend changes brought about by economic fluctuations before and after the 1990s in Japan may serve as a somewhat extreme but still valuable mirror for viewing China's future consumption trends. After 1986, Japan implemented expansionary monetary policy, and real estate and stock market bubbles soared. After the Plaza Accord was signed in 1985, the continued appreciation of the yen led to a slowdown in external demand, and the government implemented expansionary fiscal and monetary policies to expand domestic demand. After 1986, the Bank of Japan successively lowered interest rates to 2.5%, and the growth rate of M2 money supply increased from 8.4% in 1985 to 11.7% in 1990. During this period, a large amount of funds poured into real estate and the stock market. The land price index of Japan's six major cities tripled between 1985 and 1990, and the Nikkei index rose from 13,000 points to nearly 39,000 points, with high real estate and stock market bubbles. In the early 1990s, Japan's real estate and stock market bubbles burst, and economic growth stagnated. In the late 1980s, residents and enterprises still had high expectations for real estate investment, and the leverage ratios of households and non-financial corporate sectors continued to rise to highs of nearly 70% and 140%. In 1989, Japan implemented a tightening monetary policy, with the central bank rate raised from 3.25% in 1989 to 6% in 1990. The monetary policy shift pricked Japan's stock and real estate bubbles, and the Nikkei index fell from nearly 39,000 points at the beginning of 1990 to 22,000 points at the end of the year. After that, Japan's stock market remained in a slump; In the 1990s, land prices continued to decline, with the price index of six major cities falling nearly threefold between 1991 and 2000. After the stock and real estate bubbles burst, Japan's GDP and CPI growth rates declined or even turned negative, and the economy fell into a long-term deflationary state. II. Navigating Through the Fog: Three Changes and Three Constants in Industry Development During Economic Fluctuations Reviewing the development of Japan's food and beverage industry in the 1990s, economic fluctuations led to a reduction in some consumption, such as reduced household food and beverage expenditure, reduced dining out, and a consumption habit of pursuing cost-performance. However, the trends of convenience, health, and Westernization in food and beverage consumption brought about by social structure and dietary culture evolution did not change.

Change One: Reduction in household food and beverage expenditure Economic fluctuations led to a decline in household food expenditure, but its proportion of total household expenditure remained relatively stable. After 1955, Japan's economy developed rapidly, and residents' living standards steadily improved. The proportion of food and beverage expenditure fell from 38.7% in 1963 to 25.4% in 1990. After the real estate bubble burst in the 1990s, the absolute monthly household food expenditure fell from 82,000 yen in 1992 to 74,000 yen in 2000, but the proportion of food and beverage expenditure in total household expenditure remained relatively stable, staying between 23% and 25% from 1992 to 2000. Change Two: Reduction in dining out Residents' expectations for the future became unclear, and dining out decreased. In the 1990s, Japanese residents' disposable income declined, unemployment rate rose, and consumers' expectations for the future became unclear. During this period, residents dined out less, with some returning to home cooking and others consuming convenience foods. According to data from the Ministry of Health, Labour and Welfare, the rate of dining out fell from 19% in 1990 to 17% in 2000. Affected by the reduction in dining out, Japan's restaurant market stopped growing and began to decline in the late 1990s. Change Three: Low-priced discretionary consumption Consumer behavior developed towards low prices, and low-priced discretionary consumer goods in the food and beverage industry were popular. In the annual list of hot-selling products and hot events published by the Nihon Keizai Shimbun, we see that consumption upgrading products mostly appeared before the bubble burst, while consumption downgrading products mostly appeared after the bubble burst. The pursuit of cost-performance or low prices in consumer behavior also appeared in daily consumption such as food and beverages. In the list of hot-selling products and hot events from 1993 to 2001, low-priced wine, low-priced beer, half-price hamburgers, low-priced cola, and sparkling liquor (happoshu) all appeared. Constant One: The convenience trend in diet remained unchanged Economic fluctuations did not change the convenience trend in diet, and the socialization of women was an important driving factor. The traditional role of Japanese women was as housewives, mainly responsible for cooking at home and doing housework. After the 1970s, the role of Japanese women shifted from housewives to career women, and the frequency and duration of cooking at home decreased, with cooking willingness and skills gradually declining. In this context, household dietary consumption developed towards convenience. After the real estate bubble burst, some women returned to the family, but the convenience trend in diet was not affected by economic fluctuations or women returning to the family. The proportion of convenience food expenditure (such as prepared foods and frozen foods) in household food expenditure continued to rise from 6.2% in 1981 to 11.2% in 2000, and consumption of staple convenience foods and frozen rice and noodles grew steadily (detailed in the sub-sector analysis below). Constant Two: The health trend in diet remained unchanged Economic fluctuations did not change the health trend in diet, and products with rapid growth in the 1990s were mostly related to health, lightness, and low prices. Around the 1990s, food and beverage sub-sectors mostly upgraded towards health, such as alcoholic beverages developing towards lower alcohol content, soy sauce upgrading to low-salt and organic, carbonated beverage consumption decreasing while unsweetened tea beverage consumption grew rapidly (detailed below). In addition, products with rapid growth in Japan in the 1990s were mostly related to health, lightness, and low prices. According to data from the Ministry of Internal Affairs and Communications, from 1990 to 2000, foods with faster growth rates in household food expenditure included wine, broccoli, chocolate, salad, shochu, scallops, salad, bananas, etc. Among them, alcoholic products were relatively low in alcohol content, and most food products were related to lightness and health. Constant Three: The Westernization trend in diet remained unchanged Economic fluctuations did not change the Westernization trend in diet, with the total number of restaurants decreasing but the number of Western restaurants increasing. In the 1990s, economic fluctuations led to a reduction in dining out, with the number of general restaurants falling from 503,000 in 1986 to 443,000 in 1999. However, economic fluctuations did not change the overall Westernization trend of Japanese diet. The number of Western restaurants increased from 23,000 in 1986 to 32,000 in 1999. In addition to the Westernization of dining, in the food and beverage sub-sectors, the seasoning industry saw steady or increasing consumption of Western sauces such as mayonnaise and jam, and the dairy industry saw rapid growth in cheese and butter consumption (detailed in the sub-sector analysis below). III. Exploring Sub-sectors One by One: Essential consumption stabilized, while Westernization, health, and convenience trends continued First, from market performance, after the stock market bubble burst, essential consumer goods industries performed relatively well. From 1990 to 1992, the Nikkei index fell from a high of nearly 39,000 points to 16,000 points, a decline of 56%. By sub-sector, during the sharp decline of the Nikkei index from 1990 to 1992, consumer sectors including pharmaceuticals, food and beverage, electrical appliances, textiles and apparel, and retail performed relatively better than the Nikkei index. Among them, the food and beverage industry index, representing essential consumption, fell by 45.55%, ranking 4th in the entire market, and outperformed the Nikkei index most of the time in the 1990s, showing a certain anti-cyclical attribute. Secondly, from sub-sector fundamentals, essential consumption such as dairy products and seasonings generally stabilized, while discretionary consumption such as alcoholic beverages declined. Most sub-sectors maintained the trends of Westernization, health, and convenience. Below we analyze each sub-sector (alcoholic beverages, soft drinks, dairy products, seasonings, convenience foods) with data. (1) Alcoholic beverage industry: shrinking consumption, declining average prices, and popular low-priced sparkling liquor 1. Per capita alcohol consumption declined After the war, with Japan's rapid economic development and rising disposable income, alcohol consumption grew steadily. From 1965 to 1990, Japan's per capita alcohol consumption rose from 35.9 kg to 76.1 kg, with a CAGR of 3.1%. Entering the 1990s, the growth rate of per capita alcohol consumption slowed, stabilizing at around 80 kg from 1992 to 2000. On the one hand, Japan's aging trend accelerated in the 1990s, reducing the proportion of the main drinking population. The proportion of people aged 20-49 fell from 46% in 1980 to 41% in 2000; on the other hand, increased health awareness, declining disposable income, and unclear future expectations also negatively affected the consumption of higher-priced discretionary alcoholic beverages. 2. Household alcohol expenditure shrank, and average purchase prices declined In the 1990s, household alcohol consumption shrank, with annual expenditure falling from 56,000 yen in 1994 to 50,000 yen in 2000. By type, the average purchase price of affordable Japanese sake and beer fell by 5%-10%, while the average purchase price of higher-priced Western liquor fell by more than 20%. Affected by the deflationary environment and consumer demand, from 1991 to 2000, the average purchase price of beer fell from 548 yen/liter to 508 yen/liter, a decrease of 7.2%; Sake fell from 92 yen/100ml to 87 yen/100ml, a decrease of 5.5%; shochu fell from 69 yen/100ml to 65 yen/100ml, a decrease of 5.4%; while the price of relatively higher-priced imported whiskey fell from 576 yen/100ml in 1990 to 341 yen/100ml in 2000, and the average purchase price of domestic whiskey fell from 284 yen/100ml to 172 yen/100ml, a decrease of 39.5%. Wine fell from 150 yen/100ml to 117 yen/100ml, a decrease of 21.8%. 3. Low-priced sparkling liquor (happoshu) developed rapidly, squeezing traditional beer space Sparkling liquor was favored by breweries due to lower liquor tax. In Japan, beverages with a malt ratio of 67% or more are beer, while those with a malt ratio below 67% are sparkling liquor. In the late 1980s, major breweries competed fiercely, and price reduction strategies hit bottlenecks, so breweries sought breakthroughs in taxes. At that time, one liter of beer required 222 yen in tax, while sparkling liquor only required 152.7 yen. To form a low-price advantage, breweries developed sparkling liquor. In 1994, Suntory launched the first sparkling liquor, Hops, which was welcomed by the market due to its low price, opening the sparkling liquor market. In 1996, the liquor tax policy was adjusted, and sparkling liquor with a malt ratio between 50% and 67% was taxed the same as beer. Subsequently, Suntory launched Super Hops with a malt ratio below 25% to respond to policy changes. Sparkling liquor squeezed the beer market with its low-price advantage. With the rapid development of sparkling liquor in the mid-1990s, its proportion of national alcohol consumption rose rapidly. From 1993 to 2000, the proportion of sparkling liquor in total alcohol consumption rose from 0.02% to 16.5%, while beer consumption fell from 72% to 54.5%. The rapid development of sparkling liquor was caused by both supply and demand factors: 1) Demand side: the economic crisis led to a decline in disposable income, and with the increased socialization of women, sparkling liquor with lower alcohol content and price but similar taste to beer was welcomed; 2) Supply side: because the tax rate for sparkling liquor was lower than beer, breweries quickly turned to selling sparkling liquor products for competitive reasons. (2) Dairy industry: per capita consumption stabilized, non-liquid dairy consumption increased 1. Per capita dairy consumption stabilized in the 1990s In the mid-to-late 1950s, the Japanese government promulgated the School Lunch Act and the Act on Promotion of Dairy and Beef Cattle Industry, and implemented a school milk program, leading to rapid growth in the dairy industry. After the 1970s, with the spread of Western eating habits in Japan, per capita dairy consumption further increased. From 1960 to 1996, Japan's annual per capita dairy consumption rose from 23.1 kg to 96.8 kg, with a CAGR of 4.1%. After that, per capita dairy consumption basically stabilized at around 96 kg. 2. Liquid milk consumption declined, while non-liquid dairy consumption continued to increase From 1960 to 1991, per capita liquid milk consumption rose from 10.7 kg to 41.6 kg, with a CAGR of 4.5%, and per capita non-liquid dairy consumption rose from 10.7 kg to 45.3 kg, with a CAGR of 4.8%. In the 1990s, per capita liquid milk consumption began to decline, from a peak of 42.4 kg to 39.4 kg in 2000, while per capita non-liquid dairy consumption continued to rise, from 45.3 kg in 1991 to 56.7 kg in 2000. The decline in liquid milk consumption was related to the squeeze from soft drinks. In the 1990s, Japanese residents increasingly pursued health and lightness, and bottled tea and mineral water were welcomed, squeezing liquid milk consumption to some extent. According to data from the Japan Soft Drink Association, from 1990 to 2000, the proportion of liquid milk and milk beverages in non-alcoholic beverage production fell from 38.4% to 31.5%, tea beverages rose from 8.2% to 19.3%, and mineral water rose from 0.9% to 4.0%. 3. Among liquid milk, fresh milk consumption declined, while fermented milk and milk beverage consumption increased During the 1990s, the proportion of fresh milk consumption in liquid milk consumption fell from 63.1% in 1990 to 55.0% in 2000, milk beverages rose from 12.1% to 16.8%, and fermented milk rose from 6.9% to 11.6%. This phenomenon may be related to three factors:

  1. The decline in school-age population led to a decrease in fresh milk consumers. From 1990 to 2000, the proportion of people under 14 fell from 18.3% to 14.6%;
  2. The increase in the rate of men skipping breakfast made some consumers absent from the main fresh milk consumption scenario. From 1990 to 2000, the rate of men skipping breakfast rose from 9.8% to 10.7%;
  3. Fresh milk consumption scenarios were limited. Fresh milk consumption was limited to meal times, while fermented milk and milk beverages were more suitable for drinking on the go and had higher consumption frequency;
  4. Dairy consumption continued to upgrade from fresh milk to fermented milk and milk beverages with higher nutritional value and more distinctive flavors. 4. Among non-liquid dairy, butter consumption was relatively stable, while cheese consumption steadily increased In the 1990s, annual household butter consumption in Japan stabilized at around 500g, while cheese consumption continued to grow, from 1705g in 1990 to 2286g in 2000. On the one hand, the Westernization of diet was not interrupted by economic fluctuations, and butter and cheese consumption increased steadily. On the other hand, residents' health awareness increased, and butter and cheese were welcomed for their high nutritional value. (3) Seasoning industry: overall demand stable, products upgrading towards functionality and health 1. Seasoning consumption overall remained stable, with Western seasonings increasing steadily From 1991 to 2000, Japan's per capita seasoning consumption was basically stable at around 10,000 yen, with little impact from economic fluctuations, though the growth rate showed an overall downward trend from 1991 to 1996. Structurally, traditional seasonings such as salt, soy sauce, miso, sugar, and vinegar saw varying degrees of slight decline, while Western seasonings such as mayonnaise, jam, and curry saw steady or increasing consumption, maintaining the Westernization trend in seasoning consumption. 2. Traditional soy sauce consumption decreased, but the trend of functionality and convenience continued Affected by the Westernization of diet, traditional soy sauce consumption has declined since the late 1980s, but the consumption and market share of functional and convenient soy sauce derivatives such as soup stocks and sauces continued to increase. According to Kikkoman's information release materials, the soy sauce product market size remained generally stable in the 1990s, with the share of traditional soy sauce shrinking and the share of functional soup stocks and sauces expanding. It can be seen that the trend of functionality and convenience in seasoning consumption was not interrupted by economic fluctuations. 3. Health-oriented products had good pricing power Soy sauce upgraded towards health, and vinegar prices steadily increased. In the early 1980s, Japanese soy sauce mainly used defatted soybeans as raw material, with an average product price of around 24 yen/100ml. Around the 1990s, the Japanese soy sauce industry underwent health upgrades, using whole soybeans instead of defatted soybeans as raw material, increasing amino acid content, and the average purchase price rose to 28 yen/100ml, remaining stable during the 1990s. In addition, due to the health attributes of vinegar (anti-fatigue, lowering blood pressure and lipids, promoting digestion), the average price of vinegar products rose from 40.9 yen/100ml in 1990 to 50.0 yen/100ml in 2000. (4) Soft drink industry: market continued to expand, with healthy tea drinks and bottled water growing rapidly 1. Soft drink consumption continued to expand in the 1990s According to data from the Japan Soft Drink Association, from 1990 to 2000, per capita soft drink consumption rose from 86.9 liters to 122.1 liters, with a CAGR of 3.5%, and household soft drink expenditure rose from 39,000 yen to 46,000 yen. The reasons mainly include:
  5. In the 1990s, foreign companies and Japanese beer giants entered the soft drink industry, significantly increasing industry advertising investment;
  6. The production of 500ml PET bottles was liberalized, making soft drink consumption more convenient. In the late 1980s, Japan restricted the production of PET bottles below 1 liter due to environmental concerns. In the mid-1990s, Japan enacted laws related to container and packaging disposal, penalizing manufacturers and individuals who did not dispose of containers properly, and the production of 500ml PET bottles was liberalized;
  7. The maturity of vending machines broadened consumption scenarios;
  8. The development of new products in the soft drink industry was strengthened, and consumer choices became more diversified. 2. Carbonated beverage consumption declined, while healthy tea drinks and bottled water grew rapidly Carbonated beverage consumption declined, while unsweetened healthy tea drinks grew rapidly. With the enhancement of Japanese consumers' health awareness in the 1990s, from 1990 to 2000, per capita carbonated beverage consumption fell from 24.2 liters to 22.1 liters, fruit juice consumption fell from 21.1 liters to 17.8 liters, tea beverage consumption rose from 11.5 liters to 34.5 liters, with a CAGR of 11.6%, and bottled water consumption rose from 1.2 liters to 7.5 liters, with a CAGR of 22.5%. (5) Convenience food industry: frozen foods grew steadily After the 1980s, dietary convenience drove the development of convenience foods, which still grew steadily after the bubble burst. In Japan, convenience foods are mainly divided into staple and non-staple convenience foods. Staple convenience foods generally include prepared bento, prepared sushi, prepared rice and noodles, bread, etc., while non-staple convenience foods include prepared salads, eel, steak, tempura, and frozen foods. After the 1980s, with population aging, women's socialization, late marriage and singlehood, and urbanization bringing about concentrated urban living circles, residents' diet showed a convenience trend. Japan's annual household convenience food expenditure rose from 51,000 yen in 1981 to 85,000 yen in 1991, with a CAGR of 5.2%, and the growth rate gradually slowed to around 2% after the 1990s. Non-staple convenience food expenditure overall remained stable, while frozen convenience foods grew steadily. After the real estate bubble burst, residents dined out less, with some returning to home cooking and others consuming staple and frozen convenience foods. During the 1990s, annual household non-staple convenience food expenditure stabilized at around 60,000 yen, while household staple convenience food expenditure rose from 23,000 yen in 1990 to 39,000 yen in 2000, with a CAGR of 5.3%, higher than the overall convenience food expenditure growth rate. Among staple convenience foods, sushi convenience food expenditure continued to grow, from 16,000 yen in 1990 to 27,000 yen in 2000, with a CAGR of 5.1%; Frozen convenience food expenditure also rose from 2,908 yen in 1990 to 4,500 yen in 2000, with a CAGR of 4.5%. Among frozen convenience foods, frozen rice and noodles grew rapidly, while the foodservice channel began to decline in the mid-1990s. According to data from the Japan Frozen Food Association, by category, frozen rice and noodle production continued to grow in the 1990s. From 1990 to 2000, frozen rice production grew from about 60,000 tons to about 150,000 tons, frozen noodle production grew from about 40,000 tons to about 190,000 tons, while frozen meatballs, hamburgers, and sliced meat production remained stable; By channel, foodservice channel production began to decline in the mid-1990s, while retail channel production steadily increased, possibly related to the impact of economic fluctuations on the foodservice channel. IV. Key to Companies Navigating Cycles: Insight into Consumers, Internationalization, and Creating Blue Ocean Markets We found that during Japan's economic recession, products that could cater to changes in consumer demand still achieved rapid growth, and products with health attributes still had pricing power. During this period, some excellent companies achieved good performance growth and navigated the cycle. These excellent Japanese companies had several characteristics:
  9. Gradually expanding overseas markets to seek new growth points (e.g., Kikkoman's deep cultivation of the US market);
  10. Keenly observing changes in consumer tastes and actively launching new products to seek change (e.g., Asahi Breweries launching a refreshing beer);
  11. Changing the product value curve through product and technological innovation, actively promoting product upgrades, and creating blue ocean markets in red oceans (e.g., Kikkoman creating the healthy soy sauce market by using whole soybeans and reducing salt, and Ito En leading the bottled tea market). 1. Asahi Breweries: Insight into the taste changes of the new generation of consumers Japan's beer industry has a high concentration, with Kirin having a clear leading advantage. The concentration of Japan's beer industry has always been relatively high. In 1906, Sapporo, Nippon, and Osaka merged to form Dai-Nippon Breweries, holding 70% of the Japanese beer market. After the war, based on antitrust considerations, Dai-Nippon Breweries was split into Nippon Breweries and Asahi Breweries, with the former owning Sapporo and Yebisu, and the latter continuing its Asahi brand. Since then, the three major beer brands in Japan—Kirin, Sapporo, and Asahi—have consistently held over 90% of the market share. The leader Kirin had a clear advantage, with a market share exceeding 60% from 1972 to 1985, while Asahi's business continued to deteriorate, with its market share falling from 36% in 1949 to around 10% in the 1980s. Asahi perceived the taste changes of the new generation of consumers and launched the blockbuster product Superdry. In 1870, William Copeland, who studied under a German brewer, opened Japan's first beer workshop, and later Japanese people learned beer brewing techniques from foreigners. After 1887, domestic companies such as Nippon Beer Brewing Company, Osaka Beer Brewing Company, and Kirin Beer Company were established and continued the German-style taste. Starting in the 1980s, various Western liquors became popular in Japan, and the choices of the new generation of consumers became more diversified. At this stage, most breweries believed that the new generation still favored the bitter and heavy taste of German-style beer, but consumer tastes had already begun to change. In 1985, Asahi's marketing department head Matsui conducted a market survey of 5,000 people in Tokyo and Osaka, finding that the younger generation valued refreshing and mellow tastes rather than the simple bitterness of traditional German beer, which led to the launch of Asahi's blockbuster product "Superdry." With the excellent performance of Superdry, Asahi's market share surpassed Kirin. In 1987, Asahi launched the blockbuster product Superdry, whose refreshing and stimulating taste quickly won consumers' favor. That year, its shipments accounted for 3.2% of the entire beer market, while competitor Kirin's blockbuster Lager accounted for 46% of the beer market, still holding the mainstream market share. By 1990, Superdry's shipments accounted for 21.5% of the market, while Lager fell to 34.3%. Subsequently, Kirin launched Ichiban Shibori to counter Superdry, but Ichiban Shibori did not hinder Superdry's growth trend. By 2000, Superdry's shipments accounted for 34.2% of the market, while Kirin's Lager and Ichiban Shibori combined accounted for only 24.6%. Thanks to the success of Superdry, Asahi's market share rose from 11% in 1986 to 46% in 2000, while Kirin fell from 60% to 34% during the same period. Performance grew steadily, market share steadily increased, and the stock price had significant excess returns in the late 1990s. From 1990 to 1997, Asahi's revenue grew from 877.5 billion yen to 1,313.3 billion yen, with a CAGR of 5.9%, and net profit grew from 3.1 billion yen to 11.6 billion yen, with a CAGR of 20.8%. With sustained performance growth and steadily increasing beer market share, Asahi's market value grew from 451 trillion yen in 1993 to 902 trillion yen in 1997. 2. Kikkoman: Product upgrading towards health, deep cultivation of overseas markets In the 1990s, demand for traditional soy sauce in Japan declined, and industry competition was fierce. Affected by the Westernization of diet, soy sauce demand declined in the 1990s, industry competition was fierce, small and medium-sized enterprises accelerated their exit, and the number of soy sauce manufacturers fell from 2,307 in 1989 to 1,611 in 2000, with the industry gradually concentrating. To cope with the saturation of domestic traditional soy sauce demand, soy sauce leader Kikkoman actively promoted product upgrades to cater to health and convenience trends, and also began to increase overseas market layout to develop new revenue growth points. In the 1990s, it launched high-end new products, creating the high-end healthy soy sauce market. In 1990, Kikkoman launched Tokusen Marudaizu Soy Sauce, which used soybeans with higher nutritional value as raw material (the industry previously commonly used defatted soybeans), priced about 30% higher than ordinary soy sauce. In 1993, to cater to consumers' demand for low-salt diets, Kikkoman launched Low-Salt Marudaizu Soy Sauce, with half the salt content of ordinary soy sauce. In 1998, Kikkoman's new product Tokusen Organic Soy Sauce was launched, using organic soybeans and wheat as raw materials, further enhancing health attributes. By 2000, Kikkoman held a 60% share of Japan's high-end healthy soy sauce market. Catering to consumers' convenience needs, it actively developed functional sauces. According to company information release materials, in 1990, Japan's soy sauce product market size was stable at around 37 billion yen, with soy sauce products accounting for two-thirds in 1990, falling to one-half in 2000, while easy-to-use soup stocks and sauces rose from one-third to nearly one-half. During this period, Kikkoman seized industry development trends, launching two soup stock products in 1992 and 1995, and two sauce products in 1997 and 2000, achieving rapid growth in functional sauce sales with these four products. To cope with declining domestic market demand, Kikkoman deeply cultivated overseas markets. Kikkoman's overseas soy sauce sales rose from over 50,000 kl in 1990 to 120,000 kl in 2000. Sales in the key US market grew 44% from 1994 to 2000, and market share rose from 46% in 1990 to 55% in 2000. By the end of 1999, overseas business accounted for 37.4% of Kikkoman's revenue and 49.0% of overseas operating profit, making overseas markets an important contributor to its revenue and profit. Therefore, in the environment of domestic economic recession and declining demand in Japan in the 1990s, Kikkoman achieved stable revenue and profit growth by promoting product health and convenience upgrades and deeply cultivating overseas markets. Kikkoman's performance remained stable, with a valuation center near 30X. Kikkoman has operated steadily since the 1990s. From 1990 to 1999, Kikkoman's revenue grew from 196.9 billion yen to 221.7 billion yen in 1999, with a CAGR of 1.3%; Net profit grew from 4.69 billion yen to 5.29 billion yen, with a CAGR of 1.4%. From 1992 to 2000, Kikkoman's stock price significantly outperformed the Nikkei index, with valuation fluctuating between 19-35 times, with a center near 30 times, remaining relatively stable overall. 3. Ito En: Catering to health and convenience trends, creating the bottled tea market Japanese tea was first introduced from China, and after spreading during the Edo period, the custom of drinking tea became popular among all classes in Japan and became an important part of Japanese life culture. Ito En was founded in 1966 in Shizuoka, Japan, engaged in the sale of packaged tea. In the 1970s, with the spread of Western beverages, tea consumption was impacted, and the way of brewing tea only appeared in traditional family life and formal receptions. In the mid-1970s, Ito En actively innovated and began to develop convenient tea drinks to try to reverse the decline of the tea industry. In 1980, Ito En took the lead in launching the world's first canned oolong tea beverage, sold in convenience stores and vending machines, sparking an oolong tea boom in Japan. After the success of oolong tea, Ito En accelerated the development of green tea beverages. In 1986, Ito En developed the world's first canned green tea, named Canned Sencha. The product achieved sales revenue of 600 million yen in the year of its launch, and by 1989, its sales reached 4 billion yen. In 1989, Ito En improved the green tea beverage, adding newly developed roasted tea and genmaicha, and the new green tea product was a great success. Subsequently, Ito En continued to seize opportunities in the tea beverage industry and launched bottled green tea to better cater to consumers' demand for healthy and convenient tea drinks. Ito En's performance was excellent, and its market value grew steadily. From 1992 to 2000, Ito En's sales revenue grew from 62.97 billion yen to 173.97 billion yen, with a CAGR of 13.5%; net profit grew from 1.01 billion yen to 6.53 billion yen, with a CAGR of 26.3%. Its market value grew from 8.75 trillion yen in 1994 to 65.2 trillion yen in 1999, and its P/E ratio rose from a low of 21 times in 1995 to a high of 92 times in 1999. V. Looking at the Present and Future in China: Several Trends Are Also Occurring The above analyzed Japan's food and beverage sub-sectors and leading companies in the 1990s. Looking at the present and future in China, we believe that several major trends are also occurring in the industry, and we should actively pay attention to the development of related targets. For example:
  12. Under the trend of dietary convenience, the frozen food and compound seasoning sub-sectors are developing rapidly;
  13. Under the health trend, seasonings (such as soy sauce, vinegar, organic, zero-additive), dairy products (such as organic/milk source), soft drinks (such as soy milk/sparkling water) and other related products continue to upgrade, and the health products industry is developing rapidly;
  14. Under the Westernization trend, butter and cheese consumption in dairy products is gradually rising, baked bread is growing rapidly, and yeast also benefits;
  15. Under the cost-performance trend, such as the recent light bottle liquor craze, short-shelf-life bread has great development space. Looking ahead, the alcoholic beverage industry should actively pay attention to the demands of young consumer groups, the dairy industry should focus on leading companies' overseas layout and diversified expansion, the seasoning industry should continue to upgrade towards health, and the soft drink industry should seek hit products that conform to health trends. 1. Convenience trend: the frozen food sub-sector maintains good growth With the continuous improvement of urbanization and fast-paced urban life, dietary convenience has become a trend. For example, in breakfast, time is an important factor affecting residents' breakfast consumption rate. The "China Residents Breakfast Diet Survey Report" shows that 35% of respondents cannot eat breakfast every day, of which 49% skip breakfast due to time reasons. In terms of breakfast time, 42% of respondents eat within 10 minutes, and 81% eat within 15 minutes. Frozen foods and compound seasonings benefit, and the industry maintains good growth. Benefiting from increased demand for dietary convenience, downstream catering chainization, and expansion of consumption scenarios, sub-sectors such as frozen foods and compound seasonings have maintained good growth and become highlights. In 2017, China's frozen food industry output reached 125 billion yuan, with a CAGR of 14.1% from 2011 to 2017. According to Frost & Sullivan data, the domestic compound seasoning market size is expected to approach 150 billion yuan in 2020, with an average annual compound growth rate of about 15% from 2015 to 2020. Among them, the hot pot ingredient market size is expected to reach 25.5 billion yuan in 2020, with an average annual compound growth rate of about 15%. In addition, other convenient instant foods such as self-heating small hot pots have begun to emerge, also broadening the convenience food category. Anjoy Foods: Stable performance and clear growth path. The company is a domestic frozen food industry mainly focused on hot pot ingredients. In the first three quarters of 2018, it achieved operating revenue of 2.94 billion yuan, a year-on-year increase of 20.6%, and net profit of 196 million yuan, a year-on-year increase of 41.2%. In recent years, the company has steadily promoted a national layout of production capacity, with dual drivers of products and channels. In the medium and long term, the company is expected to continue to increase market share with advantages in production capacity, brand, and channels, with room for profitability improvement and a clear growth path. Yihai International: Leading mid-to-high-end hot pot base material, with steadily increasing market share. As a leading domestic mid-to-high-end hot pot base material company, the company has stable performance growth. Related party business benefits from the growth in the number of Haidilao stores and single-store revenue, and is expected to maintain stable growth; third-party business maintains a high growth trend driven by new product development and channel expansion. In the first half of 2018, the company achieved revenue of 1.0 billion yuan, a year-on-year increase of 59%, and net profit of 185 million yuan, a year-on-year increase of 163%. In the future, with the steady release of production capacity and active channel development, market share is expected to continue to increase. 2. Health trend: seasonings and dairy products continue to upgrade, and the health products sub-sector benefits fully Residents' health awareness continues to increase, and high-quality, health-oriented products are more concerned. Similar to Japan's consumption trends in the 1990s, China's seasonings such as soy sauce are also upgrading towards low-salt, organic, and zero-additive. In dairy products, high-end white milk and yogurt with higher nutritional value are growing faster. In soft drinks, carbonated beverage consumption growth is weak, while soy milk and bottled water market sizes are steadily increasing. In addition, the health products industry also benefits actively and has maintained good growth in recent years. The health trend in seasoning consumption drives continuous product upgrades. Products focusing on functionality and health will be the direction of industry product upgrades. In soy sauce, dark soy sauce is gradually upgrading to light soy sauce. Some mid-to-high-end soy sauce brands use non-GMO soybeans as raw materials, with amino acid nitrogen content higher than industry standards, and also segment functional categories according to consumer needs. In vinegar, many brands have also launched health- or organic-themed vinegar products, such as Hengshun's high-end products Three-Year Aged and Six-Year Aged maintaining good growth. In addition, compared to Japan where household vinegar purchase prices are higher than soy sauce, the current mainstream price of domestic vinegar is not high, and there is expected to be room for improvement in vinegar products in the future. Aging and increased health awareness drive the rapid development of the health products industry. Euromonitor data shows that from 2012 to 2017, the health products industry scale grew from 132.4 billion yuan to 229.3 billion yuan, with a CAGR of 11.6%. The industry has maintained good growth in recent years, especially with the rapid development of online e-commerce channels, with the e-commerce channel share gradually increasing. Taobao data shows that the health products industry on Alibaba's platform saw a year-on-year sales increase of 75% from January to November. 3. Westernization trend: the baking industry chain grows well Western-style catering and products are growing well, and the baking industry maintains rapid growth. According to Euromonitor data, in the past two years, the scale of Western-style catering in the catering industry has grown at a rate of over 15%, significantly faster than the overall industry growth rate; in the dairy industry, cheese and butter are also growing faster than the overall industry, such as cheese market size growth of over 20%; the baking bread industry benefits from the Westernization trend, maintaining rapid scale growth, and the upstream yeast industry also benefits. 4. High cost-performance trend: light bottle liquor is a typical representative, and short-shelf-life bread also benefits The low-end light bottle liquor market has large space, and high cost-performance drives share concentration towards leading brands. Currently, China's low-end liquor market size is about 200-300 billion yuan, mainly dominated by local low-end liquor and bulk liquor. According to Nielsen data, in the era of rational consumption, consumers are gradually shifting from "face consumption" to "substance consumption" or "health consumption." Statistics show that over 50% of consumers' purchase behavior is driven by cost-performance, and only 9% of consumers are willing to spend more on products that reflect their identity and status. Therefore, in the low-end mass liquor market, under the trend of high cost-performance consumption, liquor brands with high cost-performance products are rapidly increasing their share. For example, Niulanshan Erguotou, relying on the high cost-performance advantage of its aged single product and actively promoting nationalization through external channels, has achieved rapid growth and steadily increased market share. In addition, under the high cost-performance trend, industries such as short-shelf-life bread and frozen foods also have good growth momentum. Source: Huachuang Food & Beverage New Distribution will hold the 2019 (5th) FMCG + Internet Conference during the Chengdu Spring Sugar and Wine Fair from March 15 to March 18. This conference will focus on the topic of "Breaking the Game" and conduct in-depth discussions with many brand owners, supply chain service providers, distributors, and retailers. Compared to previous conferences, this summit will be fully upgraded. In addition to the original topics such as channel innovation, city distribution logistics, and distributor transformation, it will also add multiple parallel forums on new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail. Through three days of ten high-density, high-quality expert sharing and exchanges, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, finding new tools and methods for breaking the game in 2019 and returning to the track of rapid growth. Review of Previous Conferences -END-