Health and Wellness Series – Organic packaged food trends in Japan

Market overview

The Japanese packaged food market is one of the largest in the world, with total sales being equal to US$180.3 billion. Despite this, the sales for organic packaged food totaled only US$0.4 billion, making Japan the fourteenth largest market for organic packaged food. Organic packaged food is expected to see relatively sluggish growth in the coming years, even as sales of packaged food post dynamic growth.

Japan had a GDP of US$4.9 trillion in 2021, making it the third largest economy in the world after the United States and China. Japan has GDP per capita of US$39.3 thousand, the second highest in the Asia pacific region, after Singapore. Although Japan is large and rich, the economy is also suffering from stagnation, and the economy significant growth in decades. Japan's GDP and GDP per capita were both smaller in 2021 than they were in 1997, immediately before the Asian financial crisis. From 2016-2021, GDP grew at a CAGR of −0.1%, and GDP is forecast to grow at a CAGR of 2.1%.

The nation also struggles with low levels of domestic demand and regularly experiences deflation. In 2022 Japan abruptly shifted to experiencing the strongest inflation in decades, however inflation levels have remained well below the levels seen in nations such as Canada or the United States. Euromonitor forecasts that inflation for the year 2022 will be 2.2%, followed by 1.5% in 2023. As of 2021, Japan had the highest public debt to GDP ratio of any nation in the world, at 262.5%.

Consumer characteristics

Japan has one of the lowest fertility rates in the world, with 1.3 births per woman as of 2021. The Japanese population is also the second oldest on earth, behind only Monaco. In 2021, Japan's median age was 49.0, forecast by Euromonitor to rise to 54.3 by 2040. In 2021, Japan's dependency ratio was 68.4%, expected to reach 84.7% by 2040. Despite the relatively old population, Japan also has one of the lowest rates of obesity of any developed country, with just 4.8% of the population clinically obese as of 2021.

Japanese consumers tend to be uninterested in organic packaged food and tend to be unaware of organic food's purported health benefits and are less concerned about the sustainability of their consumption habits than consumers in similarly wealthy countries. Furthermore, consumers generally have confidence in non-organic products, meaning there is little desire to find a substitute. With little reason to switch to organic products, consumers are heavily deterred by the price of organic food, which tends to be much higher than its non-organic counterpart.

Total health and wellness packaged food saw total retail sales of US$23.2 billion in 2021, accounting for 12.9% of the total Japanese packaged food market. Retail sales of organic packaged food grew at a CAGR of 0.7% from 2016-2021, and is forecast to grow at a CAGR of 1.6% from 2021-2026. Fortified and functional products enjoyed the greatest market share in 2021, with US$11.7 billion in sales. Naturally healthy products saw the fastest growth from 2016-2021, followed by organic products. From 2021-2026, "free from" (such as "free from gluten") products are forecast to see the fastest growth followed by naturally healthy.

Market size

In 2021, total retail sales of organic packaged food in Japan were equal to US$416.6, making Japan the fourteenth largest for organic packaged food globally, with the Japanese market accounting for less than 1% of global retail sales. Japan had total organic packaged food sales of US$180.3 billion, meaning organic packaged food accounted for just 0.2% of the Japanese packaged food market. The category of packaged food which saw the most organic sales was bread, with organic sales of US$161.2 million. 3.7% of total bread sales were organic in 2021, making it the packaged food subsector with the greatest % share of organic products. In total, organic bread sales accounted for 38.7% of Japanese organic packaged food retail sales. The second largest category was organic sauces dressings and condiments with US$69.8 million in sales and organic rice, pasta, and noodles with US$65.9 million in sales. Both of these subcategories had organic sales which accounted for 0.4% of the market.

The market for organic packaged foods saw sluggish growth from 2016-2020, and a slight downturn in 2021. Overall, the market grew at a CAGR of 1.2% from 2016-2021, substantially below the global growth rate of organic packaged food, which occurred at a CAGR of 7.8% over the same period. Moreover, it is also well below the growth rate of retail sales of all packaged food in Japan, which grew at a CAGR of 5.1% over the same period. Sales of organic packaged food in Japan are expected to grow at a CAGR of 1.4% from 2021-2026, compared with the global organic packaged food market which is forecast to grow at a CAGR of 6.7%, and the Japanese packaged food market which is expected to grow at a CAGR of 6.5%. By 2026, it is forecast that total retail sales of organic packaged food in Japan will have reached US$446.5 million, and that Japan will be the sixteenth largest market globally.

From 2016-2021, the category of organic packaged food in Japan which saw the fastest growth was confectionary, which saw retail sales grow by a CAGR of 2.5%, followed by breakfast cereals with a CAGR of 2.4%. From 2021-2026 the category of organic packaged food which is expected to grow the fastest is organic baby food with a forecast CAGR of 3.5%, followed by breakfast cereals with a CAGR of 2.1%.

Competition and distribution

The Japanese organic packaged foods market is relatively fragmented. Players in the Japanese market also generally did not have a significant presence across multiple categories of packaged food. The top player, Alce Nero, Gruppo, held a 6.4% share of the total organic packaged food market in 2021 and was only a significant player organic rice, pasta, and noodles category. The next largest player, Takanashi Dairy Co Ltd, held a 3.3% market share, and only had a significant presence in the organic dairy market. The third largest player, Ajisenshioji Co Ltd, had a 1.7% market share and was only a player in the baby food market.

The Japanese market for organic packaged foods relies heavily on e-commerce sales, which accounted for 32.6% of the market in 2021, up from 29.4% in 2016. Store based retailing accounted for just 57.8% of sales, playing a significantly smaller role than in countries where organic food is popular. As organic food is generally not popular in Japan, it is often not available at grocery stores, forcing consumers to turn to alternative platforms.

Subsector growth

Organic baby food

The Japanese market for organic baby food is small, with total sales of US$11.1 million in 2021, and grew at a CAGR of 0.5% from 2016-2021. Sales were mostly prepared baby food, and organic milk formula and dried baby food both had a negligible market presence. Organic milk is not produced domestically in Japan and can only be acquired through expensive foreign brands.

Nevertheless, this category is expected to see faster growth from 2021-2026, as Japanese consumers of baby food become more aware of organic food's purported health benefits. Sales are expected to grow at a CAGR of 3.5%, reaching US$13.2 million in 2026. In 2021, 62.7% of sales of organic baby food were attributable to one company, Ajisenshioji Co Ltd.

Organic bread and breakfast cereals

The market for organic bread in Japan is the largest of any organic packaged food category, with sales of US$161.2 million in 2021. Sales are forecast to grow at a CAGR of 1.6% from 2021-2026, reaching US$174.2 million in 2026. In 2021, 99.7% of sales were artisanal. Sales of breakfast cereals were more modest, totalling US$2.7 million in 2021.

Organic cooking ingredients and meals

Organic sauces, dressings and condiments were a relatively large category of organic packaged food, with sales totalling US$69.8 million in 2021, while edible oils totalled US$21.5 million and organic spreads totalled US$20.1 million. Organic sauces dressings and condiments are expected to see a CAGR of 1.7% from 2021-2026, making it the category expected to see the second fastest growth. Although organic ready meals are forecast to enjoy a faster calculated growth rate, the sales figures are not reported with enough precision for this to be meaningful. Organic sauces, dressings, and condiments was a fragmented market with the largest player holding a 9.9% market share.

Organic dairy

In 2021, Japanese sales of organic packaged food totalled US$25.8 million, including US$17.4 million in milk and US$8.4 million in cheese. The category grew at a CAGR of 1.2% from 2016-2021 and is forecast to grow at a CAGR of 1.7% from 2021-2026. Sales of organic cheese are forecast to grow at a CAGR of 2.7% from 2021-2026, while organic milk grows at a more sluggish CAGR of 1.2%.

Organic dairy is much less popular in Japan than in many peer countries due in part to a lack of domestic organic milk production. Consequently, any organic milk must be sourced from imported foreign brands, that are substantially more expensive than the non-organic milk available to Japanese consumers. Organic milk is not widely available at supermarkets and generally has to be sourced from the internet. Overall, organic milk in Japan is a very niche produce.

Organic rice and pasta

Organic rice and pasta sales in Japan totalled US$65.9 million in 2021. The category saw a temporary spike in sales in 2020 with sales reaching US$$70.8 million, however sales are not expected to again reach this figure by 2026. Sales grew at a CAGR of 1.3% from 2016-2021, and are forecast to grow at a CAGR of 1.3% from 2021-2026. Organic pasta sales are forecast to grow at a CAGR of 1.5%, while organic rice grows at a CAGR of 0.8%. The top company, Alce Nero, Gruppo, controlled 40.3% of sales in 2021.

Organic snacks

In 2021, organic fruit snacks was the largest category of snacks with sales totalling US$18.1 million. However, the category is forecast to see no growth from 2021-2026. In contrast, organic nuts, seeds, and trail mixes, which had total sales of US$15.6 million in 2021, is forecast to grow at a CAGR of 0.9% from 2021-2026. Organic chocolate confectionary, currently valued at US$3.5 million, is forecast to see the fastest growth rate at a CAGR of 0.9%. Organic chocolate confectionary and organic nuts, seeds, and trail mixes are both notable for experiencing positive, albeit modes, sales growth in 2021, while most other categories of organic packaged foods experienced a contraction.

New product launch analysis

From 2017-2021, Japan saw a total of 204 product launches of organic packaged food, averaging 41 new products per year. A total of 66 new products were launched over this period, making for an average of 13 new products per year. Popular claims included the absence of additives or preservatives, artificial colourings, and products being microwavable. The most common flavour was plain with 65 launches, with the most popular ingredient being salt with 66 launches. The most popular package types were bottles and flexible products.

Examples of new products

Organic labelling

Japan and Canada currently have an organic equivalency arrangement which includes plants, livestock products, and processed foods of plant origin or containing livestock ingredients. Organic products originating from Canada to Japan must come with an export certificate completed by a Certification Body that is accredited by the Canadian Food Inspection Agency. Canadian products certified as organic under this agreement must bear a Japanese Agricultural Standards seal and may also elect to use the Canada Organic logo. Selling any product which does not bear the Japanese Agricultural Standards with a name such as "organic foods" is prohibited.

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

• Find a Trade Commissioner

More agri-food market intelligence:

International agri-food market intelligence
Discover global agriculture and food opportunities, the complete library of Global Analysis reports, market trends and forecasts, and information on Canada's free trade agreements.

Agri-food market intelligence service
Canadian agri-food and seafood businesses can take advantage of a customized service of reports and analysis, and join our email subscription service to have the latest reports delivered directly to their inbox.

More on Canada's agriculture and agri-food sectors:

Canada's agriculture sectors
Information on the agriculture industry by sector. Data on international markets. Initiatives to support awareness of the industry in Canada. How the department engages with the industry.

Resources

• Euromonitor International:
  • Country Report; Economy, finance and trade: Japan, March 2022
  • Country Report; Organic packaged food in Japan, December 2021.
• Canadian Food Inspection Agency. Overview: Japan – Canada Organic Equivalency Arrangement (JCOEA), modified July 2022
• Mintel Global New Products Database, 2022

Health and Wellness Series – Organic packaged food trends in Japan
Global Analysis Report

Prepared by: Brendan Dwyer, Student (co-op)

© His Majesty the King in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2023).

Photo credits
All photographs reproduced in this publication are used by permission of the rights holders.
All images, unless otherwise noted, are copyright His Majesty the King in Right of Canada.

To join our distribution list or to suggest additional report topics or markets, please contact:

Agriculture and Agri-Food Canada, Global Analysis
1341 Baseline Rd, Tower 5, 3rd floor
Ottawa ON  K1A 0C5
Canada
Email: aafc.mas-sam.aac@agr.gc.ca

The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada (AAFC) assumes no liability for any actions taken based on the information contained herein.

Reproduction or redistribution of this document, in whole or in part, must include acknowledgement of agriculture and agri-food Canada as the owner of the copyright in the document, through a reference citing AAFC, the title of the document and the year. Where the reproduction or redistribution includes data from this document, it must also include an acknowledgement of the specific data source(s), as noted in this document.

Agriculture and Agri-Food Canada provides this document and other report services to agriculture and food industry clients free of charge.