Recovery of the economy means more reason than ever for British companies to build business in Japan. Don't let that high buggeration factor' put you off, says Julian Hunt The mayhem caused in downtown Tokyo by the launch of Sony's PlayStation2 earlier this month generated headlines in newspapers around the world. Queues of computer geeks formed outside any store that had secured supplies of the whizzy new games console. And wannabe players were prepared to wait for days to get their hands on the much hyped kit. What this little story demonstrates ­ aside from the fact there are some very sad people on this planet ­ is that confidence is starting to return to the Japanese economy. For further proof, take a stroll down the trendy boulevards around the entrance to Tokyo's famous Meiji Shrine. It's here that you will find pavements and shops packed with young, Gap-clad shoppers eager to stock up with the latest gear ­ most of it imported. You can sense there's real buzz in the air. It's not just consumers who are perking up. Local commentators say the first green shoots of recovery can be seen across the economy. That has led some to predict growth could hit 2% this year and next as Japan finally starts shaking off the recessionary gloom that kept it in the doldrums for most of the 1990s. Okay, things are still a bit shaky. Household spending, for instance, fell 3.2% in January ­ the fifth consecutive monthly decline. And retail sales were down 4.3% last year. But officials at the country's trade ministry are confident they will soon be reporting the first signs of a turnaround. They believe stable prices and stronger industrial output will boost retail sales from the second quarter, while consumer sentiment is set to improve with the first signs of economic recovery. No doubt those caught up in the PlayStation2 mania will help make that prophecy come true, because it is spending on leisure items ­ as well as gardening and health related products ­ that are really fuelling the resurgence in consumer spending. "The Japanese have been through a tough time," says Matthew Rous, first secretary (commercial) with the British Embassy in Tokyo. "But when people focus just on the headlines, they forget the underlying truths about the market, particularly its size. "This is a huge economy. To those companies who say to us: We are not doing Japan because it is too far away, too expensive, they speak a difficult language and it's too much trouble', we reply: Would you give up your business in Germany, France and Italy?' The Japanese market is as big as those three countries combined." It is also far and away the world's largest importer of food and drink products. So against this backdrop of economic recovery, you would have thought British grocery firms would have wised up to the fact this is an area ripe for further development. Wrong. When The Grocer visited Tokyo almost two and a half years ago, Britain's share of the £30bn worth of food and drink products shipped into Japan was about 1%. And that figure has remained stubbornly consistent ever since. But the message from Dan Thomas, md of Food from Britain's office in Tokyo, is clear enough: exporters who ignore Japan are making a big mistake. "Consumers over here are more and more willing to increase their consumption of foreign food and drink. That changes year on year, but the long-term trend is that the diet is getting more international and consumers are getting more cosmopolitan. It's only a small part of the overall diet but young people and people living in cities are among the world's most adventurous eaters," he says. Take pasta. These days, every food store you go into has some sort of pasta on its shelves. The 7-Eleven and Lawson convenience chains even sell fresh spaghetti lunchboxes' from their chillers. There are a number of reasons why Italian cuisine is mega right now, but topping the list is the fact the Japanese have bought into the notion a Mediterranean diet is a healthy diet. This fascination with healthy eating is an important trend in Japan. Sales of red wine are booming on the back of suggestions it is good for you, and many buyers expect the tea business to rocket this year as more consumers buy into the good news stories about antioxidants. There are other less obvious spin-offs, says Akihiro Sawada, a senior buyer with the Jusco supermarket chain. He points out blueberry jam's share of the domestic market has almost trebled in the last three years because of reports suggesting this particular fruit is good for the eyes. Combine this interest in healthy eating with the boom in international cuisine and you can quickly understand how fine food firm Petty, Wood was recently able to sell a containerload of its Epicure organic spaghetti to Japan. Export sales manager Alan Field was displaying the products on his firm's stand at this month's Foodex show in Tokyo. This was Field's fifth visit to Japan ­ all of them made as part of his search for a distributor who could give Petty,Wood an entrée into the premium food sector. Field admits securing deals can be a long haul and care has to be taken about who you sign up as a partner. "We have to make sure that we are right for them and they are right for us," he says. But at Foodex, Field was successful, with Epicure products now due to be sold through Maruka Shouji at the Printemps department store chain in Japan. Talk with any successful British exporter and they will tell you building successful partnerships takes time ­ whether you are looking to sign up a distributor or hoping to deal direct with a retailer. But they also tell budding exporters that once these relationships are forged, they last for decades. Walker's Shortbread, for instance, has worked with the same distributor for 22 years, while Simpkins Confectionery has dealt with its representative for 38 years. This long-term approach also extends to deal making. The Japanese don't believe in "suck it and see". They want to go into the detail of every proposition to ensure nothing can go wrong ­ which is why exporters sometimes find they are bombarded with peculiar questions about totally bizarre things. And the fact some companies do not respond well to this questioning puzzles Japanese buyers. It can take years to clinch a deal or get new business off the ground. But those who have been through the process advise new exporters to persevere. "Progress can be glacial at first. But when your Japanese partners commit, your business can take off big time," says one. Exporters like Jim Walker of Walker's Shortbread agree it takes time to build distribution in Japan: "It's very painstaking work. We put in a lot of effort for a small return for a longer period than any other market until we got through and developed a business that now runs very well." But Walker adds: "Unless a company is prepared to commit fairly seriously to Japan they will not make it. Simply trying to give what you sell in a home market is not good enough. There are so many companies fighting for a small part of the Japanese market that only the best will get through." In other words, it's important to get to grips with all the issues that prevent exporters from doing well in Japan. As FFB's Dan Thomas explains: "First, portion sizes tend to be a little large for the Japanese. Products can also sometimes be a bit sweet for the Japanese palate. And like every country in the world, it has different regulations covering additives, preservatives and colourings. Packaging in Japan is also intricate, easy to open and is well designed ­ and British products are sometimes not of a high enough quality in that respect." Sorting out these things does lead to what one exporter calls a "high buggeration factor". That may have persuaded some British firms to ignore Japan ­ particularly at a time when they are putting so much effort into protecting what they have already got in maturer markets around the globe. A lack of knowledge about Japan and the fact it is so far away from Britain are also cited as reasons for not exploring the opportunities. So why should British firms bother? Thomas points out that a big bonus for exporters is the current stability of the yen, which is boosting the competitive position of sterling based exporters. That's important in a market where consumers may not necessarily look for cheapest on display, but are certainly looking for value for money. Another plus point, says Thomas, is the free access enjoyed by food and drink firms: "There's a general perception by exporters that there are trade barriers. But there are not. It's hard work communicating that fact." He points to factors in exporters' favour: Japanese consumers spend huge amounts on food and drink; supermarkets are growing increasingly interested in imported goods, with own label a massive opportunity; and, best of all, consumers are willing to try products other than traditional British fare such as biscuits, jam, salmon, tea and whisky. Sure, there is still a big education job to be done if every Japanese buyer is to be persuaded to think outside the box labelled "British". And it doesn't help that defining Britishness is pretty tough when it comes to food and drink ­ some buyers are amazed to discover we have 6,000 food and drink producers in this country, for instance, while others have trouble getting their heads around the idea of buying Italian sauces or Indian curries from Britain, saying they lack "authenticity". But at the end of the day, says Thomas, the majority of buyers want products that offer a combination of quality, innovation and convenience. And that has got to be good news for the Brits. The Japanese are no different to consumers elsewhere in the world in wanting to take some of the hassle out of cooking. A recent survey found the average time spent preparing a meal has fallen by 10 minutes to 48 minutes over the past 25 years. And sales of perishable goods have also been falling as packaged groceries take a bigger chunk of the market. Little wonder convenience is another trend that exporters are being urged to tap into. Whether you make breakfast cereals (which have the added benefit of being seen as healthy products) or sell ethnic cooking sauces (also popular because of the boom in international cuisine), this is clearly an area to exploit. Tim Barlow, md of G Costa & Co, agrees. His company has been selling to Japan in a small way for decades. But Barlow decided to exhibit at this year's Foodex show in the hope of finding distributors for his Blue Dragon, Curry Club and Zest brands. The move paid off ­ with the first shipments of Blue Dragon sauces in pouches and Thai products due to be on their way to Japan within weeks. As with any overseas market, exporters must do their homework if they are to succeed, says Barlow. But he says it's clear this is a country with great potential: "I can't understand why more British companies don't go over there. It's a fantastic market." And Barlow's not alone. Talk with upbeat British exhibitors who are already doing well in Japan ­ or listen to Thomas as he explains how very few companies have "struck out" in Japan ­ and it's hard not to get swept up by their enthusiasm. Okay, any investment in Japan is for the long term. And it's clear you need to persevere to reap any rewards. But those that do seem happy with the results. All of which begs an obvious question: why have more British firms not realised they, too, could be big in Japan? n {{COVER FEATURE }}