Japanese Frozen Food Market Edges Up; Industry Eyes Seniors for Future Growth

Aging and shrinking population, more single households, short-sighted pricing policies and now the China syndrome combine to create headaches for domestic producers.

Frozen food consumption is greater than people thought it was, according to the Japan Frozen Food Association (JFFA). But it’s still a lot smaller per capita than in Europe or the United States, and with an aging and declining population it may not get much bigger for some time to come.

Overall consumption for 2006, as reported by the JFFA, was nearly 2.7 million tons. For the first time, however, that counted an actual figure – 315,000 tons – for imported frozen food. And without those, and 832,000 tons of imported vegetables, consumption would hardly have budged.

Japan’s population peaked at 127.8 million in 2005, and is expected to decline to 101 million by 2050. Per capita frozen food consumption, at 21.1 kilograms, is less than half that in the United States, or European countries like Denmark and Sweden. Unlike consumers in those countries, moreover, Japanese prepare relatively little frozen food at home: the market is 63% institutional.

There are some sharp contrasts between retail and institutional trends. Domestic production of fried prepared food for retail was up 4.4% to 101,298 tons, for example, whereas production for institutional markets declined 5.1% to 268,969 – dragging the overall total down 2.7% to 370,267. Outputs of other prepared foods were up 3.9% for retail at 426,561 tons but down a fraction for institutional at 513,833, with overall production up 1.7% to 940,394 – at 45.4%, that category had the largest retail share.

Only in farm products (fruits, vegetables and potato items) did institutional production outpace retail last year – and only there and in the tiny category of livestock products (meat and poultry) did institutional output actually increase. Largest gains in retail production were 29.6% for meat and poultry and 17.7% for confectionery. Largest increases in individual items included the basics: 15% to 272,519 tons for noodles and 10% to 159,099 for rice. The sharpest decrease was for Chinese buns, 24.2% to 12,519.

The value of domestic frozen food production declined slightly to ¥666 billion last year, although tonnage was up just as slightly, and the number of frozen food factories fell from 816 to 778. Outsourcing has been on the increase for years, with a number of Japanese processors setting up operations in China. Imports of Chinese frozen vegetables were up 9.4% to 378,706 pounds last year, and Chinese plants may also account for much of the imported prepared food.

Recent scandals about tainted food from China could hurt the frozen food market, according to The Japan Times. “We will have to work harder in disclosing the information regarding the suppliers of ingredients in China to confirm that they are safe,” Yoshihiko Soma, president of Nichirei Foods, which has two plants in China, stated during a news conference in July. But the demographic issue is apparently more serious and certainly more long-term.

Mail-Order Frozens Chosen

Nichirei Foods, a major player in the industry, is trying to tailor offerings to suit the older generation, especially in mail-order frozen food items. But persuading consumers to overcome traditional notions of cuisine is proving easier said than done, especially with the elderly. People 50 and up account for half the adult population and, says the The Japan Times, “are also set in their ways, often believing food should be made with fresh ingredients and cooked from scratch.”

“People of that age have been the most unlikely to eat frozen meals,” said Toshihiro Haga, a manager at industry leader Ajinomoto Frozen Foods’ marketing division. In a move to woo finicky consumers, Ajinomoto is expanding its lineup of high-end frozen Chinese-style dishes made with quality ingredients.
Some examples include gyoza (dumplings) containing brand-name pork from Kagoshima Prefecture, extra-plump steamed shrimp gyoza and happosai stir-fry featuring a premium selection of vegetables. These and other items in the range retail for about ¥450 each, as much as 40% more than Ajinomoto’s regular frozen fare.

In August, Ajinomoto added four frozen items to its My Pack series of reduced-size servings of such delectables as fried lotus root and steamed dumplings. Each pack contains one serving and goes for ¥130 to ¥150. Individual packaging is intended to cater to the needs of older people and singles who hanker for a wide variety of small dishes for each meal, as is typical in Japanese cuisine. But this strategy may put a strain on production lines.

Nichirei’s strategy is to sell mail-order frozen food items in sets that include a main course such as hamburger steak or ginger-fried pork and several side dishes. Yet total calorie content is less than 320, with low sodium content. Rice is not included. Since launching the mail-order frozen food delivery service in December 2004, the number of meal sets has risen to 28 from seven. Each is priced between ¥700 and ¥1,300.

“Our main customers are couples in their 50s whose children have grown up and moved away,” said Nichirei spokesman Yoshinori Okada. These middle-aged couples, Okada added, eat less than they used to and therefore often have leftovers when they cook for themselves. In addition, freezers have gotten bigger in recent years, allowing consumers to store much more frozen items, he noted. “People of that age are more health-conscious and our (healthy recipe) delivery service can meet their demands.”

Another obstacle that frozen food makers have to surmount is the long-established practice of keeping prices artificially low at both wholesale and retail to stimulate demand. Frozen food products, regardless of makers and brands, are featured at deep discounts nearly every week, encouraging consumers to wait for prices to drop. Hidenori Tanaka, a senior researcher overseeing the food industry at marketing research firm Fuji Keizai Co., believes this practice is the reason behind the dim prospects for the industry.

“The problem is that no one buys frozen food items at regular prices,” he said, adding that consumers’ insistence on low price makes it difficult for manufacturers to shift to high-quality, pricier goods. However, without singling Nichirei out for praise, Tanaka said selling high-end frozen products exclusively through home-delivery service is an effective way to prevent consumers from being lured away by rival discount items at retail outlets.

But there’s also the issue of drawing in younger consumers. Japan Tobacco, which has a frozen food operation, is pinning its hopes on the rising number of single-member households that the government expects to represent more than a third of the total by 2015. It is now marketing its butano kakuni (soy-simmered pork belly) burger for young independent consumers, retailing for ¥200. “Young people are more open to the idea of using frozen food items,” said Koji Iwashita of the company’s food-business division.

“People living in single-person households, regardless of age, are less hesitant about using frozen meals,” observed Shinichi Taneya of the Japan Frozen Food Association. “They prefer items that are preservable and convenient, because they can’t go shopping every day.”

One example of that is frozen blocks of food developed and first marketed in 1999 by Nippon Suisan Kaisha, commonly known as Nissui. These handy items, now available from other manufacturers as well, can be plunked into an empty lunch box straight out of the freezer, and later eaten at room temperature.