Sector Trend Analysis – Chocolate confectionery in Japan

Trade of cocoa and cocoa preparations

In 2021, Japan imported from the world a total value of US$1.0 billion (267,200 metric tonnes) of cocoa and cocoa preparations (including cocoa beans, cocoa butter, fat and oil, unsweetened or sweetened cocoa powder, cocoa pastes, cocoa shells/husks/skins and other waste, and Chocolate and other preparations). The largest import markets for cocoa products were Malaysia (US$163.7 million), Singapore (US$160.7 million), and Ghana (US$105.8 million). Canada was Japan's 24th largest import market at a value of US$4.5 million in 2021.

In 2021, Canada supplied to Japan a total value of Can$3.6 million (480.9.9 thousand tonnes) in cocoa and cocoa preparations, which represents a compound annual growth rate (CAGR) decline of −9.0% over the last 5 years (2017-2021) - equivalent to a decline of −24.5% over 2020. Top Canadian imports from Japan were chocolate & cocoa preparations in packages <=2 kilograms (excluding in blocks, slabs or bars and cocoa powder) at Can$2.7 million (HS:180690), followed by chocolate & cocoa preparations in blocks, slabs or bars weighing >2 kilograms (in liquid, paste, powder or other bulk format) at Can$842.8 million (HS:180620), and similar cocoa preparations in blocks, slabs, bars <= 2 kilograms (excluding filled) at a total of Can$77.8 million (HS:180632) in 2021.

Retail sales of chocolate confectionery and snack products

In 2021, Japan registered total retail sales of US$6.9 billion in the chocolate or chocolate snack sector, which included almost 74% from the chocolate confectionery category and 26% among chocolate coated biscuit food products. The chocolate confectionery category declined by −6.9% in current value terms and by −3.1% in retail volume terms over last year, to reach US$5.1 billion (158.8 thousand tonnes) in 2021. While chocolate coated biscuits declined by −4.5% in current value terms and by −2.2% in retail volume terms over the same period, to reach US$1.8 billion (79.7 thousand tonnes) in 2021. During this period, chocolate pouches and bags was the most dynamic category with a value growth of 1.5%, followed by chocolate tablets (+0.2%). All other chocolate confectionery categories registered declines over the 2021/2020 period with boxed assortment (−20.4%) and seasonal chocolate (−12.8%) experiencing the largest declines in value terms. Over the forecast period (2022-2026), chocolate confectionery (incl. chocolate coated biscuits) is projected to see a CAGR of 2%, to reach US$7.5 billion in 2026.

In Japan, chocolate confectionery in general has experienced a shift to larger pack or multi-pack economy sizes in wake of the pandemic. In 2020, single portion and smaller packs most popular with office workers saw a larger decline in sales due to the decline in impulse purchases, as people switched to home working arrangements and spent less time outside. In response to the shift towards larger pack sizes manufacturers are focusing on adding value to their ranges in order to maintain their profit margins. Albeit, the average unit price of chocolate confectionery is set to decline by 4% in 2021.^{Footnote 1}

Another challenge in chocolate confectionery since COVID-19 has been the declining demand for gifting. With St Valentine's Day traditionally being an important part of Japan's culture the decline in gifting on this day hurt sales in this category in 2021. Since the impact of COVID-19 was not felt until after this highly marketed day in 2020, the sale of boxed assortments in Japan centred on the month of February benefitted from the strong demand seen around this seasonal event. However, gifting chocolate sales in 2021 (also popular during other seasonal events) did significantly impact the boxed assortments category due to increased home seclusion and fewer in-person communications.^{Footnote 1}

Competitive landscape

In 2021, leading retail companies (and top brands) in the chocolate confectionery category in Japan included the Meiji Holdings Company (Meiji, Chocolate Kouka, Galbo) at 10% value share, the Lotte Group (Ghana, Mary's, Crunky) at 9%, and Pladis Ltd. (Godiva) at 5%. Private label chocolate food products with it's great value for money held a 3% market value share.

Leading companies (and top brands) in the chocolate coated biscuits category in Japan included Ezaki Glico Co. Ltd. (Pocky, Friend Bakery) at 29% value share, the Meiji Holdings Company (Takenoko No Sato, Kinoko No Yama, Fran) at 19%, and the Bourbon Corporation (Alfort) at 6.5% in 2021.

In 2020, Meiiji's chocolate brand (Galbo) suffered from a drop in sales within its most popular small packaging products due to home seclusion, as the brand's products are commonly consumed away from the home. Meanwhile, the company enjoyed stronger growth for its products which come in large packs such as some of its tablets and chocolate pouches and bags. Meiji continues to promote the preventative health benefits of cacao in its products that focuses on its prebiotic attributes and more on its low sugar content that uses oligofructose to give it sweetness, called Oligo Smart.

Lotte continues to offer various chocolate products that delivers a premium image for its Ghana brand, as well as expanding its customer base for its Rummy & Bacchus brands that contain alcohol in 2021. Lotte's, Mary brand in Japan is also a leader with its affordable premium price positioning that's been around over 70 years. Lotte likes to create premium versions of its existing brands, along with innovating in terms of creating healthier brands with probiotic and prebiotic attributes with a revised price reduction that appeals to a wider consumer base with its concept of being both a dessert and a supplement with medicinal benefits.^{Footnote 1}

Retail distribution channels of chocolate confectionery sector (off-trade)

In 2021, store-based grocery retailers represented the largest distribution value share at a total of 40.7%, followed by mixed retailers (40.1%), non-grocery specialty stores (9.8%), and non-store retailers such as e-commerce and homeshopping sales (9.4%). In Japan, there were little notable shifts in value market growth amongst all distribution channels over the year, as a result of the pandemic. The largest percentage point changes were from within the supermarkets and e-commerce retailing outlets (+0.5 p.p) in 2021.

Product launch and trend analysis

Global trends in chocolate brands include the improvement of their ethical certification credentials, ensuring sustainable cocoa production made with ethical qualities and commitment to people and the environment ie; illegal deforestation, decreased child labour (Tony's Chocolonely % slave-free chocolate), helping small farmers (fairtrade) etc.^{Footnote 2}

Europe, Russia and Turkey are forecast to record the strongest value growth. European consumers want to see innovation in chocolate brands that are more exciting and take a bold approach to introducing new flavours. Quality taste (78% in UK) is the key driver to satisfy chocolate indulgence with hazelnut remaining as the most popular flavour and aromatic citrus oil flavours like orange chocolate are seeing an increase in launch activity. Brands continue to explore alcohol-flavoured chocolates, especially with gin and tonic or craft beer flavourings.^{Footnote 2}

In the Asia-Pacific (APAC) region, Australia has the highest per capita consumption of chocolate and growth in low-consumption markets are expected in Vietnam and Indonesia. Chinese and Asian consumers enjoy unconventional, rich-textured, sensual, gooey chocolate flavours to treat themselves that offer a unique/memorable experience in taste and smell (ie; Philippines - Risa Bacon Chili Chocolate with applewood bacon, Japan - Fujiya Loo Muscat flavoured Blue Jewel Chocolate coloured with butterfly pea powder etc).^{Footnote 2}

In Japan over the years, Nestlé combined matcha green tea with nuts and berries for a luxury KitKat chocolate product with a slightly different form and an unusual flavor and an innovative textural experience (October 2017).^{Footnote 3} The Bourbon company, also has introduced new innovative chocolate products like a thin slice of chocolate ganache that can be versatile in other recipes for a quick and easy snack - used as a spread on toast or dessert, as brioche or in pastry applications etc.^{Footnote 4}

Mintel indicated that there were 7,664 chocolate food (98.5%) and drink (1.5%) products launched (including new variety/range extension, packaging, formulation or relaunched) in Japan between the period of January 2017 and February 7th, 2022.

Description of above image

	2017	2018	2019	2020	2021	2022 (up to February 7)	Total
Food	1,224	1,636	1,520	1,627	1,364	177	7,548
Drinks	23	27	27	22	16	1	116

Source: Mintel, 2022

Out of a total of 7,664 new chocolate food and drink products launched in Japan between January 2017 and February 7th 2022, these products contained cocoa ingredient types (may overlap) as followed: cocoa butter (9,552), cocoa fat (3,483), cocoa liquor (3,600), cocoa powder (2,464), cocoa and cocoa products (812), cocoa beans (410), cocoa or other fillings/cream pastes (1,026), cocoa nibs (58), white chocolate (3,591), chocolate/milk chocolate (3,603/7,356), dark chocolate (236), chocolate chips (739), and semi-sweet chocolate (26).

According to Mintel, top parent companies launching chocolate food & beverage products in Japan over the last 5-year period were Yamazaki Baking (1,140), Lotte (747), Fujiya (621), Bourbon (616), Morinaga & Company (588), and Meiji (552). Top chocolate food brands included Seven & i Premium (203), Ministop Café (188), Nestlé Kit Kat Mini (139), Bourbon (133), and Fujiya Country Ma'am (128). Top chocolate drink brands included Starbucks/Origami Personal Drip Coffee/Starbucks by Nespresso & Premium Mixes (25), Coffee Tanbo (13), Mt. Rainier Caffé Latte (10), Meiji Savas Whey Protein 100 (+for women)/Athlete Weight Down (7), Glico (5), and Kirin Gogo No Kocha (4). New chocolate brands launched in the Japanese market include YBC Nago Me Time Spice & Chocolate (apple & cinnamon chocolate coated biscuit), Patisserie Terrace (chocolate Ganache & Tiramisu parfait), Ministop Café Fun! Fan! Sweets (chocolate cake), and Tokyo Meiraku (chocolate banana drink).

The fastest growing flavours in chocolate products in Japan were eclair (+400%), crème brulé/Catalan cream (+300%), sea salt (+300%), pistachio (+250%), raspberry (+200%), and Muscat grape (+200%)

[Q1-2020/Q1-2022]. New ingredients included orange oil, gingerbread, grapeseed oil, Kirsch, pear cider, Sorbitan Esters of fatty acids, Bergamot extract, vegetable juice concentrates, coconut pulp, and mango Compote. Top growing claims at +100% were event merchandising, functional - weight and muscle gain, and low/no/reduced calorie, followed by added calcium (+75%), and ethical - toxins free (+69%). While declining claims (−100%) included low/no/reduced saturated fat, innovative ingredient, functional - skin, nails & hair, novel, and organic.

In Japan, bakery products was the largest food and drink category with 3,242 new product launches (42.3%), followed by the chocolate confectionery category 2,460 new products (32.1%), and the desserts and ice cream category at 1,373 (17.9%) over the 5-year period. Top growing categories included chocolate confectionery (+107.3%), dairy (+100%), hot beverages (+100%), desserts and ice cream (+53.2%), snacks (+22.2%), and bakery (+20.5%); while declining categories included breakfast cereals (−50%) between Q1-2021 and Q1-2022.

Product examples

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Resources

• Euromonitor International. July 2021. Country Report: Chocolate Confectionery in Japan
• Euromonitor International, 2022. Data statistics (2017-2026)
• Global Trade Tracker, 2022
• Mintel. A year of innovation in chocolate confectionery, 2021
• Mintel Global New Products Database, 2022
• Mintel. March 2018. Nestlé KitKat Everyday Luxury Chocolate

Sector Trend Analysis – Chocolate confectionery in Japan
Global Analysis Report

Prepared by: Erin-Ann Chauvin, Senior Market Analyst

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