Editorial: A Day in Tokyo - Aligning Global Markets

By Len Monheit

On my way into Tokyo yesterday, the first roadside sign that I saw read ‘Gateway to ASEAN’ imprinting on me once again not only the global nature of trade itself, but also the looming force created by the alignment for trade purposes of this group of ten countries in Southeast Asia including Thailand, the Phillipines, Malaysia, Singapore and others. I then read in the Sunday edition of the Japan Times that Japan has just ratified its free trade pact with ASEAN and the import of the sign became clear. In ten years, Japan’s economy will be tariff free for the ten-member ASEAN alliance, the only program Japan currently has in place except for Chile and Mexico. It certainly makes sense for Japan to engage this looming power on its doorstep and the expanded block is set to be a real global force.

Global trade issues also hit the Japan Times home page, this time with a comment on the apparent slippage of momentum for the EU treaty, as recently a referendum in Ireland failed to show support. Apparently, this disgruntlement and lack of support not only challenges momentum for the EU treaty itself, it also is giving rise to more widespread criticism from countries such as the Czech Republic, which claims that the Irish vote has ‘killed the document’. While a regroup is now in order, throughout this newspaper at least, different visions of the EU’s prospective economic future are now being described, including at worst case, several different EU’s with incomplete overlap and while possibly a tariff-free zone, certainly not a harmonized regulatory and product accessibility environment. If this course does falter, it will be interesting to see what does become of the regulatory process, where companies (and governments) have invested many millions of dollars and years worth of work to achieve an ideal of regulatory harmonization and a united marketplace. Too, all relationships established throughout this process to ‘get the best deal’ or get the ‘best understanding of position’ will be lost as subsequent generations of bureaucrats and regulators enter the dialogue with perhaps little or no grounding and history of what has come before. Will processes and consensus need to be forged anew? A Times article (http://www.time.com/time/world/article/0,8599,1816775,00.html) disagrees about the significance of the Irish referendum, predicting that things will soon be on track.

I then learned for the first time of the BRIC alliance, a trade and military alliance encompassing Brazil, Russia, India and China, all with emerging middle classes, and a group of countries when aligned, representing significant trade clout.

So here I am, my first day in TokyoJapan this trip, and the mind already awhirl with global issues. It promises not to stop as in a day, I am scheduled to deliver perspectives on nutraceuticals and functional foods from North America and Europe to a Japanese industry audience.

Here in Japan, one barely gets off a place before viewing the first functional products. Immediately upon landing, I went to the vending machine for a health beverage, in this case a green tea-based drink containing aloe and electrolytes. Vending is a huge market for functional products in Japan, much more prolific than elsewhere. And in my first day here I reaffirmed that dining and eating are truly pleasurable, with all pressure and hurriedness absent as diners are left to enjoy a ‘healthy’ repast, typically with far smaller portion size than one would find in North America. In fact, at my dinner Sunday evening at a well-appointed restaurant, my host observed that we must be getting the ‘North American portion size’ as the food kept coming course after course.

When we speak of the Japanese market, we typically view them as on the leading edge for functional products. After all, probiotics here have been a staple for over 50 years, and products for energy and general tonics are part of the mainstream. For all this background, recent data (Global Nutrition Group, 2008) indicates that Japan’s market for supplements as well as functional foods has declined year over year (2006 to 2007), rather than the growth experienced elsewhere. There is a probably a combination of economic, regulatory and other factors leading to the decline, which does seem strange when one considers the familiar demographics of an aging population, increases in CVD, hypertensive conditions and obesity, presumably strong predictors of growth.

On the other side, Japanese industry is keen to learn from other areas including North America. And, new Japanese players are entering both national and international scenes, several on the ingredients side with marine and other derived phytoactives. Expect to see these companies make gradual inroads into foreign markets, following companies like Kyowa Hakko, Kaneka, Fuji, Mitsubishi and others, especially as domestic product development, innovation and market growth may falter.

This brings up an interesting question.

Just where will future direction and innovation really come from? For an organization to truly be on top of future prospects, where do they have to be tied in? What regions should they be watching around the globe? Is it enough to rely on domestic intelligence? Is South America the answer? We’ve also recently noticed a lot of momentum out of India with pharmaceutical companies aligning and investing in the nutraceuticals arena. Or for certain products and areas, will Scandinavia continue to be a driver?

In the Canadian marketplace, many companies are looking to Asian exports for the next phase of their growth. Multilevel marketing companies are solidly interested in Latin America, Eastern Europe and Asia, all regions with high middle class growth rates. And with much ingredient development still European-based, obviously much of industry’s future development will be dictated by events and activities there.

Going back to my Japan Times newspaper, I am struck anew at how headlines half a world away have serious implications for the future of our business.

As my current trip comes full circle and I return to New Orleans for IFT, I hope to bring back real ‘in the industry’ perspectives from Japan, and potentially some insights into the contribution that this market will make to global markets in years to come.

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