MARKET OPPORTUNITIES FOR EUAGRIBUSINESSES IN THE CONTEXT OF THE
EU-JAPAN EPA

William Fournel, MINERVA visiting fellow
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

1

SCOPE
1. Trends only, no technical advice
provided
2. Food products:– Sections I to IV (HS 2012 )– Non-edible products excluded

3. Data:– MoF – Japanese customs– Customized classification based on DG
Agri’s classification
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

2

OUTLINE
ExplainAnalyze

Internal drivers

Trade integration:
EU-Japan EPA,TPP?, etc.
External driver

Food expenditures, diet,consumption patterns...

Opportunities
Market accessCurrent issues and EPA benefits

Recommend

Economic anddemographictrends

Market trends

Interview
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting3

INTERVIEWS• EU Embassies andChambers ofCommerce• EU food exporters,
importers and localproducers• A renowned Chef• A Japanese importer
with a EU franchise• Prominent Japanese
economists
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

4

STRUCTURE
An economy
driven bystrong trendsA progressive
economicrecovery

An inexorable
demographicdecline

2017/9/15

A growingneed forimported foodproducts

The wind oftradeintegration

A large,wealthy andchanging
demandTrade policy
as a shieldA declining
domestic
supplyThe
multiplicationof FTA
negotiations

A leadingimporter offood products

Toward amore open
market with
the EU-Japan
EPA

Trends andopportunities
in a changing
marketRecommendations

Consumption
patterns

Policyrecommendations

Sectorial
review

Recommendations forbusinesses

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

5MARKET OPPORTUNITIES FOR EU AGRIBUSINESSES IN THE
CONTEXT OF THE EU-JAPAN EPA

AN ECONOMY DRIVEN BY STRONGTRENDS

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting6

A PROGRESSIVE ECONOMIC RECOVERY
Contribution to percent change in real GDP growth4%
2%0%-2%-4%-6%

Private Demand
Public Demand
2005

2007

2009

2011

External DemandGDP

2013

2015

2017
Source: CAO

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting7

AN INEXORABLE DEMOGRAPHIC DECLINE

ActualProjections

12565 +Total:86 M

1007535 M

15-645044 M

2500-141970

20002030*Medium fertility/medium mortality scenario

2017/9/15

8M
2060

16

12.14

12.97

100+0.7 M
1275850

40Growing butaging!

Thousands

150

Population change in theprefecture of Tokyo
MillionMillionPopulation based on standard
projections*

25020052010
2015
Foreign residents
Japanese
Net internal migration (right scale)

Source: NIPSSEU Delegation to Japan, EU Agricultural Counsellors' Meeting

Source: Statistics Bureau

8MARKET OPPORTUNITIES FOR EU AGRIBUSINESSES IN THE
CONTEXT OF THE EU-JAPAN EPAA GROWING NEED FOR IMPORTEDFOOD PRODUCTS

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

9A LARGE, WEALTHY AND CHANGING
DEMANDInternational comparisons of population, purchasing power andold-age share, in 2015

GDP per capita PPP€60 000€50 000

USASAU

FRA
GBR

AUS

€40 000
KOR€30 000

ESP
POL€20 000
MEX€10 000

IND

CHN

DEU

ITA

LTU

EUN
509,6 M inhabitants;
19.2 years old;
€34,984;

JPN
126,9 M inhabitants;
26.3 years old;
€36,846;€00510
15
20Population ages 65 or above

2530

Source: World Bank

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

10A LARGE, WEALTHY AND CHANGING
DEMAND (2)Average monthly food expenditures, per age of household’shead and Engel’s coefficient
30%

€700

€600

27.6%

28%

€500
€400

26.5%
25.7%

€30026%

26.7%
24.6%

24.6%

23.3%

24%

€200

22%

€100

€0350

139

286

Overall
30-39…-29Home cooking
Eaten out

371

374

40-49
50-59
Prepared meals

400

350

20%

60-69
70-…
Engel's coefficient

Source: MIC

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting11

A LARGE, WEALTHY AND CHANGING
DEMAND (3)Share of monthly food expenditures for home cooking, per ageof household’s head, in 2016100%

-21.6%-18.2-14.9%-14.5%
-7.0%
-1.0%
+2.2%

80%
60%

40%

+14.7%

20%
0%+23.3%+36.7%Overall

30-39
40-49
50-59
FruitsFish and crustaceans
Dairy products and eggs
Oils, Fats and Seasonings
MeatCakes and sweets
Soft drinks
…-29

60-69
70-…
Vegetables and algae
Cereals
Alcoholic beverages
Source: MIC

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

12

A LARGE, WEALTHY AND CHANGING
DEMAND (4)Vegetables, fruitsBeef
Pork
Poultry

50%
Grains

25%

IND

2,717

JPN

WLD

ESP

KOR

GBR

DEU

0CHN

Sugar, fat

1

Other
meat

75%

VNM

Meat

2

USA

Change in seafood consumption
100%Eggs

3Others

4
DairyThousands

International comparisons ofaverage calorie intake, in 2011

0%

Seafood-24.6% in calorie value-17.5 PP

1981

1991

Source: FAO

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

2001

2011
Source: FAO

13

1040

Permanentmeadows
andpastures

8
Permanentcrops

642

Million

Demographic decline in ruralareas, from 1960 to 2015

Million hectares

Exploitable land area, from 1961
to 2014

40%
30%

3020%

Nonarable
agriculturalarea

20

Arableagriculturalarea

10%
Rural population-25.4% over the period,
about 11.6% of the land area
(4.2 million hectares in 2014)01961 1971 1981 1991 2001 2011

1001960

Rural population (% of totalpopulation)
Rural population growth (annual%)
Employment in agriculture (% oftotal employment)

1975

1990

Source: MAFF

2017/9/15

0%

EU Delegation to Japan, EU Agricultural Counsellors' Meeting2005-10%-20%

Source: MAFF

14Centaines

A DECLINING DOMESTIC SUPPLYA DECLINING DOMESTIC SUPPLY (2)$100

Whole sector

Per worker

$100

$80

$80

$60

$60

$40

Food self-sufficiency ratios inJapan, in 2015
Thousands

BillionLong-term growth in agriculture
value-added

$40

$20

$20

Total food self-sufficiency
ratio based on calorificvalue
Self-sufficiency ratio ofgrains for foodSelf-sufficiency ratio for
feeding
Grains (including feedgrains) self- sufficiency rate
Total food self-sufficiency
ratio based on production
volume3959272964

Source: MAFF

$01970 1980 1990 2000 2010

$0

Source: World Bank

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

15€2

3.39
3.38
3.28
2.33
1.48
1.47
1.37
1.19
1.14
1.08
1.05
0.97
0.95
0.87
0.86
0.83
0.74
0.74
0.63
0.62
0.45
0.40
0.39
0.39
0.36
0.23
0.23
0.19

€0€6

€4

7.30
5.88

11.44

€10USA
CHN
EUN
AUS
THA
CAN
BRA
CHL
KOR
FRA
VNM
NZL
PHL
IDN
RUS
MEX
NOR
ESP
ITA
DNK
MYS
TWN
IND
NLD
ARG
GBR
SGP
DEU
COL
ECU
BEL

Billion

A LEADING IMPORTER OF FOOD
PRODUCTS

Principal supplying countries to the Japanese market€14€12€8Source: MoF

2017/9/15
EU Delegation to Japan, EU Agricultural Counsellors' Meeting16

A LEADING IMPORTER OF FOOD
PRODUCTS (2)Change in import shares,by region
35%
29.0%

25%
22.3%
20.6%

15%

5%

2006

Commodities

Others;+3.5 pp

Primary agricultural
products

CHN;-3.2 pp

EUN;-0.1 pp

11.2%

2011

0%

Other
APAC;
+0.5 ppUSA;-0.7 pp16.9%

Specialization, in percentage ofimported value

2016

Primary seafood
products

50%
USACAN
BRA
CHL

Agricultural processed
products

OthersAUS

Processed seafood
products

CHN

Food preparations

ROKBeverages

Source: MoF

2017/9/15

100%

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

THAFRA

OtherEUN
Source: MoF

17

A LEADING IMPORTER OF FOOD
PRODUCTS (3)“Specific” products- Mostly B2C and upscale foodservice- Stronger competitions with EU
countries- Strongly differentiated- Price matters to some extent but
quality is absolutely necessary“Undifferentiated” products- Mostly B2B, large volumes- Strong competition with the US,
Australia, etc- Similar products- Price based on exceptional quality
matters the mostEU exports of food products2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

18

MARKET OPPORTUNITIES FOR EU AGRIBUSINESSES IN THE
CONTEXT OF THE EU-JAPAN EPATOWARD A MORE OPEN MARKET WITH
THE EU-JAPAN EPA

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

19

TRADE POLICY AS A SHIELDInternational comparison ofprotectionist policies, in 2015
Ranking,out of 151
countries
based on
GCI

Average tariffs effectively appliedin Japan, in percentage, in 2015
Sectioncode

JPNEUNUSA

01

19.67%

8.11%

4.78%

02

14.93%

2.69%

2.03%

11503

3.42%

3.26%

2.03%

33520411.01%

5.31%

5.70%

EUN(average)

540

FRA

576

DEU

564

ITA

548

ESP

586

Tradeweighted
averagetariffs

Prevalenceof tradebarriers

JPN36

USA

Source: ITC

Source: WEF Global Competitiveness Report

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

20

EPA BENEFITS
Timeline
Mediumto very
highmarket
share

Small tomedium
MS
Inexistentor small MS
2017/9/15“Specific” products“Undifferentiated”
products

Heavily restricted products

EIFStrong impact of some tariff
reductions (wine, cheese,chocolates, etc.) and a residual
impact on the rest
Strong impact of GI recognition

Strong impact of tariff
reductions but will also
depend on TPP11

Immediate impact of somesolved NTB and SPS issues

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

21

MARKET OPPORTUNITIES FOR EU AGRIBUSINESSES IN THE
CONTEXT OF THE EU-JAPAN EPA

TRENDS AND OPPORTUNITIES IN A
CHANGING MARKET2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

22

CONSUMPTION PATTERNSA need forconvenienceand proximity
Bulk ,discount andweekly
shopping trips

E-ShoppingFrozen
food

Preparedmeals

Increasingly
parsimonious
consumers

With highquality
expectations

Keen totry new
products

High-endfood

2017/9/15

Singleportions

Busylifestyles/
population
aging

Food
service

Privatelabeling

OnlineordersGIs

Growing
concerns overfood safety
and healthOrganicfood
Food
claimsEU Delegation to Japan, EU Agricultural Counsellors' Meeting

23

MARKET OPPORTUNITIES FOR EU AGRIBUSINESSES IN THE
CONTEXT OF THE EU-JAPAN EPARECOMMENDATIONS

2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting24

RECOMMENDATIONSPolicy recommendations
12Pursue EU level dialogues with Japanon market access issues related tofood products.
Communicate more effectively on EU
food products, especially with theEPA around the corner.

3

Recommendations to businesses
567
Raise awareness of national brands.

4

Understand what makes a foreigncompany successful in the Japanesemarket.
Prepare yourself and your product(s)carefully and specifically for theJapanese market.
Diversify and expand your consumer
base by competing in several
segments.

8
Increase educational projects orevents promoting EU food culture.
2017/9/15

Participate strategically in trade fairs
taking place in Japan.

EU Delegation to Japan, EU Agricultural Counsellors' Meeting25Conclusion
Market environment

Opportunities• A favourable economicoutlook• A demographic decline
which doesn’t undermine
market size
• A growing need for foodimports (a large andwealthy demand and a
declining domestic supply• A strong EU share inJapanese food imports anda dual specialization able tomeet the changing demand(food expenditures, diet,consumption patterns, etc.)•2017/9/15••

Emerging trends: frozen
food, organic food, GIs andfood service
Products benefiting frompreferential terms under theEU-Japan EPA: the largest
concessions made by
Japan regarding its foodmarket.
No “magical” products
selling rapidly, easily andforever… but all products ifadequately tailored toconsumers

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

26

Q&A
William Fournel, MINERVA visiting fellow
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting

27

DISCLAIMER & COPYRIGHT NOTICE
The information contained herein reflects the views of the author,
and not necessarily the views of the EU-Japan Centre forIndustrial Cooperation or the views of the EU Commission orJapanese institutions. While utmost care was taken in thepreparation of the report, the author and the EU-Japan Centre
cannot be held responsible for any errors. This report does notconstitute legal advice in terms of business development cases.

The author can be reached atwfournel@gmail(dot)com© EU-Japan Centre for Industrial Cooperation
2017/9/15

EU Delegation to Japan, EU Agricultural Counsellors' Meeting28