Dietary supplements market size in Japan

Recently, my friends from Moscow sent me two cans of dietary supplement Algasgel. They wanted to know my expert opinion on what kind of market there might be in Japan for such products.

Since I have been dealing with this topic for quite a long time, I decided to present my answer in the form of an article.

Japan’s population is aging at a globally unprecedented rate. As of 2020, there are 36.17 million people aged 65 or more, accounting for 28.7% of the total population (the world’s highest proportion of the elderly), and is expected to reach 35.3% by 2040. Against the backdrop of this “super-aging society”, the public and private sectors are working together to establish a “society of health and longevity”, which means extending each individual’s healthy life expectancy. On the other hand, national medical expenses have been increasing every year. In FY 2019-20, the estimated medical expenses reached a record high of 43.6 trillion JPY.

Japan is the world’s third-largest dietary supplements market, valued at USD 9.4 billion (JPY 1 trillion). A rapidly aging population and a rise in health consciousness amongst Japanese consumers should boost the sector’s further growth. Dietary supplements and health foods that help prevent or reduce risks of lifestyle-related diseases are gaining popularity, while those that target anti-aging, weight loss, and beauty care also have good potential.

Who is taking supplements?

The elderly population is focusing on adapting to nutritional supplements specifically tailored to their needs to maintain their good health and quality of life. The process of aging results in various changes in an individual, including psychological, physiological, and social, which affects their dietary and food choices. Aging population increasingly relies on habitual food choices and tailored dietary consumption patterns.

Women in their fifties represent the largest group of consumers taking supplements, while men in higher age groups represent the common target group among the male population. A major expectation of consumers is the maintenance of physical health by improving and strengthening the immune system, contributing to the market success of nutritional supplements and vitality boosters.

According to a survey by Rakuten Insight on dietary supplements in Japan conducted in July 2020, around 45 percent of the respondents stated that they took dietary supplements. The majority of the respondents answered that they took dietary supplements every day.

The Japanese health food market

In the busy lifestyle of the aging Japanese society, supplements are catering to the demand for a nutritionally balanced lifestyle among consumers. In recent years, the health food market benefitted from the growing health awareness as manufacturers are expanding their portfolios to include a variety of healthy prepared meals and snacks. Apart from commonly available products such as sugar-free or allergen-free alternatives, foods with health claims such as the governmentally approved foods for specified health uses (FOSHU) are recording steady sales.

As far as imported dietary supplements products are mostly purchased at department stores, specialty food stores, supermarkets and online. However, specialty shops also have their own online shops and/or a store on an online retailer platform.

Moreover, gift retail has also potential for growth for exporters of high quality products. Most of the Japanese retailers hold special sales events every six months to cater to customers wishing to send gifts (seasonal gifts tradition) to business contacts, clients, teachers, respected elders, family members etc.: a large gift giving event takes place at the end of each year (seibo) and a smaller one in July (chu gen). The majority of these gifts consist of food items, many of which are high-end and imported. Such as tradition, custom, entering such a market might be especially advantageous for exporters stressing the health benefits of their packaged functional food products especially for elderly, since seasonal gifts are typically produced in limited quantities and sold at premium prices.

Within this retailing sector, the following channels represent the most opportunities for exporters in general. Department stores and specialty shops could be among the most fitting distribution channels for finalized European-made products since their price bracket is usually higher than other packaged imported foods and beverages.

For European exporters choosing the right channel can be a challenge. European companies need first to evaluate the retail price in Japan of their products and understand which channels handle products in those price brackets. Then, they should also evaluate the average customer base of those channels and the kind of expectations that these consumers have in terms of quality, brand reputation, value, size, packaging, etc., to see if their products match or are completely off the mark and imply a lot of product adaptation. The customer expectations must also be taken into account, regarding for example minimum and average volume supply.

For European exporters the direct access to these retailers depends on whether a potential target imports directly its foreign products or not. Otherwise, going through an importer or trading house is necessary, and it will be those intermediaries that will do the necessary work to propose the products to the best channels. Even when a specific channel directly imports and is considered as the most proper, a tailored approach is necessary. For example, the functional food and beverage floors of department stores, where high quality imported foods can be found, are usually managed by sub-contractors, and not the department stores themselves. Even within a chain, those floors are managed by different contractors in each city, sometimes even several of them. Therefore, being distributed in Mitsukoshi Isetan in Osaka will not necessarily mean to be distributed in Mitsukoshi Isetan in Tokyo, nor in Fukuoka. Also supermarket subsidiary Isetan Mitsukoshi Food Service is expected to turn an operating profit in fiscal 2022; its subsidiary will continue reviewing costs in its struggling home delivery business.

The main share of food additives is distributed through pharmacies. Only one-third is provided through direct sales and other channels.

European and other exporters should take into account that on average, in Japan, retail price of imported food products is between two and three times higher than that of their ex-works price. Regarding dietary supplements products, prices differ greatly depending on the distribution channel and the health properties of a product. For example, demonstration channels such as door-to-door sales are fit for products where explanations are necessary. Consumers agree to pay more for them (average price range for door-to-door sales: JPY 5,000 to JPY 10,000).

Most of the well-known dietary supplements products that are consumed on a daily basis, bought by the consumers themselves without any assistance, price of more nutraceuticals affordable or even cheap (average price range for products bought in convenience stores: JPY 200 to 300). If the nutraceuticals products have a clear established effect on consumers health the price can be high, the Japanese consumers will be willing to pay for premium products with health benefits.

Research shows that for functional foods backed by certification, price does not affect consumers’ choice. In such a case, consumers tend to believe that price corresponds with quality.

Supplements are the best selling international products on the Japanese eCommerce market. It is also one of the fastest-growing categories, making it perfect to tackle for businesses who want to start selling in Japan. Japanese consumers want supplements that they can trust and the unsteady ground that domestic products have been standing on has left them running over to international manufacturers.

DuPont is not the only company that sees Japan as the right place to develop products for the elderly; several other Western and Japanese firms are doing the same. Japan is often portrayed as a unique country with unique consumer products, but when it comes to aging, it may be just the place to design materials suited to global needs.

BASF sees Japan as an innovation leader in nutrition and health—both for the elderly and consumers more broadly.

“The Japanese pharmaceutical and food industries are big opportunities where we seek to create solutions, not only provide materials,” says Tomoyoshi Kajiura, the firm’s vice-director of pharma solutions, nutrition, and health. Using Japan’s new-product heritage and its strength in basic materials, BASF aims to develop such solutions in Japan and take them worldwide, he says.

In its vitamin and food supplement business, BASF is developing new products for Japan. Whereas consumers in the West tend to buy health supplements as stand-alone products, in Japan they are often added to drinks, jellies, yogurt, and even candies. “Japan is the best place to supply functional food that consumers can consume every day without feeling that they’re taking a pill,” Kajiura says.

The elderly, according to Kajiura, eat smaller portions than younger people and are thus more prone to store and reheat leftovers. Repeated heating or exposure to acidity caused by oxygenation can destroy the vitamin content of food.

“When we can offer powdered vitamins for packaged food that meet the needs of Japan’s elderly, it will be adopted worldwide,” Kajiura says.

As for DuPont, its global sales of nutrition and health-related products amount to about $4.5 billion annually, and Japan is the second-largest market for these products, coming after only the US. The company supplies Japan mostly by importing enzymes, proteins, and other nutrients made at DuPont facilities worldwide.

Mitsubishi has also strengthened its R&D for the food segment. The Eisai acquisition brought researchers and know-how that Mitsubishi has incorporated into its food research center in Yokohama. The company simultaneously added cooking capabilities to the center so researchers can test how their additives perform in real life. Actually cooking food with new additives is an essential step, says Toshiya Katsuragi, who heads Mitsubishi’s high-performance chemical planning department.

Chemical companies from Japan and around the world are making the right choice in using the country as a testing ground for new products aimed at the elderly, according to Perez-Cullell. “Japanese consumers are demanding in terms of effectiveness, quality, ease of use, and other characteristics,” she says.

It’s still early days for Japan’s role as a proving ground for products for the aged, but encouraging early results at Pierre Fabre and other firms suggest that the country’s role in easing the lives of the elderly will continue to increase.

Asia Pacific is expected to witness significant growth over the 2021-2028. The market is expected to be the largest regional market by 2028 owing to the growing consumer base. Increasing expenditure on health-enhancing products in the region owing to growing per capita income and increasing awareness is expected to drive the demand for dietary supplements over the forecast period.