薬食同源 Japan’s Nutraceuticals Today
By Paul Yamaguchi
-Industry Shows Its Resilience-
Japanese nutritional supplement product sales rose to ¥1.23 trillion ($11.1 billion) in 2004, a 12 percent sales increase over 2003, according to Japan’s leading industry newspaper, The Health Industry News (HIN). (kenko-media.com) This double digit increase is significant because just a year earlier, the sales increase was only 7 percent. In 2004, the Japanese GDP (Gross Domestic Product) rose only 1.7 percent and consumer spending was flat, according to the Nikkei (nikkei.co.jp), a Japanese economic journal. The Japanese nutritional supplement market rebounded in 2004 and did so in not only rather difficult economic times, but also under challenging regulatory circumstances for the industry.
This environment is described in the new report, Nutritional Supplement Japan 2005 by yours truly, Paul Yamaguchi, as publisher of the Japanese market report functionalfoodsjapan.com: The industry was expecting a new registration system that recognizes nutritional supplements, but that didn’t happen; instead, government agencies are tightening the laws surrounding the industry. “The industry is trapped in a closed space that limits its growth”. But it didn’t turn out to be an annus horribilis despite these constraints. The industry showed its resilience by bringing new products to the market in timely fashion, and applied creative marketing to attract not only the elderly but found a new market in young consumers. Most of all, large food, beverage, cosmetics, pharmaceuticals and other industries saw a future in the nutritional supplements and joined the bandwagon that helped the industry gain double digit growth in 2004.
Again, Direct Sales Were the Winner
$8.2 billion of sales came from the direct sales channel, including multi-level marketing, door-to-door, mail order, the Internet, promotional sales and TV shopping. In 2004, the direct sales channel increased 15 percent over the year before. Direct sales channels make up 74 percent of nutritional supplement sales, the largest portion of this $11.1 billion market. As people feel more comfortable shopping through the Internet, mail order and TV, sales have increased significantly. Another reason for this significant increase was that “large corporations that are not traditionally part of direct sales operators entered the channel” and contributed to the sales increase. “Distribution of nutritional supplements are still in the mix, the scarcity of retail stores led large corporations to enter the direct sales and catalog channel rather than going through traditional retail store channels,” Yamaguchi explains.
The Drug Store Channel Gains 5** Percent
The drug store channel showed a 5 percent increase in sales from the year before, taking the channel from $1.8 billion in 2003 to $1.9 billion in 2004. The drugstore channel includes pharmacies, discount and non-discount drugstores and voluntary chains, totaling over 80,000 stores. The drugstore channel benefits as more people become knowledgeable about self-medication. Discount and self-service drugstores continue to increase sales in the nutritional supplement market. Despite the decreasing number of drugstores and declining sales of OTC medication, the pharmacy channel units rose by 1.3 percent to about 50,000 stores. New ingredients and products are coming into the market all the time; people seek consultation and assistance to choose products in pharmacies. Unlike the US, the number of nutrition specialty stores in Japan is less than 600, but its numbers are increasing steadily at a pace of about 150 units a year. When the economy improves and new stores like Fancl (fancl.co.jp) continue to have blockbuster openings, we’ll see more supplement stores.
Food Store Channel Growth Remains Flat.
Sales of nutritional supplements in food channels stayed flat in 2004. The food channel’s sales share is the smallest among the 3 distribution channels, at less than 10 percent, and sales stayed the same as the year before - $1.0 billion. Supermarkets, units within department stores, mass merchandisers, natural food stores, and convenience stores (C-stores) comprise the store channel, approximately, 38,000 stores. The food store channel has been squeezed in between direct sales and the drug store channel. People stayed away from full price department stores and lower price, no-assistance mass merchants. One bright sign was the C-store, with its convenient locations and hours, as They target younger audiences who have up-to-date product information. As soon as younger consumers see a commercial or health news story on TV, they check it at their local C-store. Vitamins, minerals CoQ10, collagen, amino acids, cosmeceuticals, and, of course, diet products are among the sales leaders in C-stores. Along with supplement special stores, C-stores will become an important part of the nutritional supplement distribution network in Japan.
*1.1 trillion yen ($10 billion) does not include $5 billion FOSHU (Foods for Specified Health Use).
** 5 percent instead of 6 percent was a result of the lower exchange rate (110 yen to a dollar) applied in 2004.
Sources; The Health Industry News, Nikkei, Health Food Journal and PYA.
Paul Yamaguchi is president of Paul Yamaguchi & Associates, Inc., Tarrytown, NY. USA. His company publishes a number of Japanese nutrition market reports. His latest report is Nutritional Supplement Japan 2005 and Functional Foods and FOSHU Japan 2004, Market & Product Report. For details and information on the reports, visit: www.functionalfoodsjapan.com or contact Paul at [email protected]