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Sector Trend Analysis – Confectionery products in Japan

August 2018

Executive summary

With retail sales of US$9.4 billion in 2017, Japan is currently the sixth-largest confectionery market in the world.

Confectionery retail sales in Japan are expected to grow over the 2018 to 2022 period, reaching US$11 billion by 2022. This is largely due to manufacturers’ implementing smaller pack sizes rather than increasing prices, as an attempt to cover rising input costs (capital and labour).

Japan was the eleventh-largest confectionery importer (US$700.7 million) in the world in 2017 and had a negative compound annual growth rate of −1%. Canada was the sixteenth-largest confectionery exporter (US$4.7 million) in 2017 to Japan, accounting for less than 1% of Japan’s total imports and with a −13% compound annual growth rate from 2013 to 2017.

The top five global confectionery companies (Mars, Mondelez, Nestlé, Ferrero and Hershey) do business in Japan; however, Japan represents a marginal proportion of their overall sales, all below 1.7%.

Chocolate confectionery is the largest subsector in Japan and was the best performing from 2013 to 2017, with a compound annual growth rate of 6%, reaching sales of US$4.9 billion in 2017. It represented 53% of retail sales followed by sugar confectionery (36%) and gum (11%).

Chocolate growth is being supported by increasing awareness among Japanese consumers about the health benefits of chocolate, which have often been featured in local media, with research revealing that polyphenol in cacao is effective for improving various health indicators.

Positioning confectionery products in the world

Mars Inc. is the largest confectionery company in the world with retail sales of US$23.8 billion in 2017, followed by Mondelez, Nestlé, Ferrero and Hershey.

Retail sales of top ten confectionery companies worldwide, US$ billions, 2013 to 2017
Company 2013 2014 2015 2016 2017 CAGR* 2013-17
Mars Inc 25.8 26.1 24.1 23.4 23.8 −2%
Mondelez International Inc 26.7 26.4 23.3 22.3 22.8 −4%
Nestlé SA 14.8 14.1 12.2 11.7 11.8 −6%
Ferrero Group 10.2 10.7 10.1 10.2 10.8 1%
Hershey Co, The 8.4 9.0 9.0 8.9 9.0 2%
Perfetti Van Melle Group 6.0 6.0 5.3 5.3 5.4 −3%
Chocoladefabriken Lindt & Sprüngli AG 4.3 5.3 5.0 5.2 5.3 5%
Lotte Group 2.7 2.8 2.4 2.5 2.6 −1%
Arcor SAIC 2.8 2.6 2.5 2.2 2.4 −4%
Haribo GmbH & Co KG 2.2 2.3 2.1 2.2 2.3 1%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Note: For the purposes of the trade data in this report, "confectionery" was defined by the Harmonized System (HS) codes 1704 and 1806

Mondelez International Inc's retail sales in the world were US$ 22.8 billion in 2017, the second-largest in the world, while in Japan, their retail sales were US$391.3 million in 2017, representing 1.7% of global retail sales. Mondelez International Inc. was ranked as the fifth-largest company in the confectionery market in Japan. Among the top five global confectionery companies, Ferrero Group and Hershey Co. had compound annual growth rates of 1% and 2% respectively from 2013 to 2017. The other three: Mars, Mondelez and Nestlé, had negative compound annual growth rates ranging from −2% to −6% over the same period.

Retail sales of top ten confectionery companies in Japan, US$ millions, 2013 to 2017
Company 2013 2014 2015 2016 2017 CAGR* 2013-17
Lotte Group 1,371.6 1,335.9 1,293.3 1,328.7 1,364.7 0%
Meiji Holdings Co Ltd 842.1 838.1 916.0 951.1 1,011.3 4%
Morinaga & Co Ltd 563.4 650.3 658.1 655.7 650.9 3%
Asahi Group Holdings Ltd 289.6 328.3 343.5 371.1 394.5 6%
Mondelez International Inc 417.3 406.2 402.3 399.7 391.3 −1%
Pladis Ltd 329.9 343.1 N/A
Fujiya Co Ltd 247.1 256.4 246.8 257.7 265.4 1%
Mikakuto Co Ltd 211.0 220.6 223.1 227.2 230.0 2%
Ezaki Glico Co Ltd 199.9 211.4 217.1 216.4 216.2 2%
Kanro Co Ltd 187.9 181.5 189.9 197.0 202.5 2%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate.

N/A: not available

Lotte Group, the largest confectionery company in Japan had a compound annual growth rate of 0% in retail sales from 2013 to 2017. The next three largest confectionery companies, Meiji Holdings, Morinaga, and Asahi Group holdings all had positive compound annual growth rates of 4%, 3% and 6% respectively from 2012 to 2017. The fifth-largest confectionery company, Mondelez, had a negative compound annual growth rate of -1% over the same period.

Top five confectionery companies worldwide and their market share in Japan, US$ millions, in 2017
Company International Confectionery Sales Confectionery Sales in Japan % of business in Japan
Mars. Inc 23,760.9 38.8 0.2%
Mondelez International Inc. 22,785.3 391.3 1.7%
Nestlé SA 11,844.9 187.3 1.6%
Ferrero Group 10,763.9 9.5 0.1%
The Hershey Co. 9,030.6 15.0 0.2%

Source: Euromonitor International, 2018

The top five global confectionery companies (Mars Inc, Mondelez International Inc., Nestlé SA, Ferrero Group and the Hershey Co.) are active in Japan; however, Japan represents a marginal proportion of their overall sales, all below 1.7%. Japan's confectionery dependence on imports was 7.4% in 2017 as it imported US$700.7 million.

The confectionery market in Japan in 2017
Indicator Value
Retail sales, 2017 (US$ million) 9,444.7
Imports of confectionery from the world, 2017 (US$ million) 700.7
Exports of confectionery to the world, 2017 (US$ million) 195.7
Dependence on imports (%) 7.4%

Source: Euromonitor International, 2018; Global Trade Tracker, 2018

World's top Importers of confectionery, US$ millions, 2013 to 2017
Country 2013 2014 2015 2016 2017 CAGR* 2013-17
United States 3,789.7 4,055.9 4,162.8 4,489.7 4,603.1 3%
Germany 2,784.7 3,081.5 2,812.9 2,980.4 2,788.1 −2%
France 2,323.2 2,478.2 2,398.2 2,537.2 2,375.8 −1%
United Kingdom 2,552.5 2,914.3 2,654.4 2,491.2 2,367.8 −5%
Netherlands 1,233.7 1,406.2 1,273.7 1,378.9 1,421.8 0%
Canada 1,285.5 1,333.1 1,347.8 1,365.5 1,334.5 0%
Belgium 1,048.6 1,132.9 1,010.9 1,133.1 872.4 −6%
Poland 762.2 850.4 852.3 855.7 791.9 −2%
Australia 687.9 714.4 703.9 670.7 729.6 1%
Spain 762.1 820.9 702.2 772.4 727.7 −3%
Japan (11) 711.0 753.6 653.5 643.2 700.7 −2%

Source: Global Trade Tracker, 2018

*CAGR: compound annual growth rate

HS codes used: 1704 and 1806

Japan was the eleventh-largest confectionery importer (US$700.7 million) in the world in 2017 and had a negative compound annual growth rate of -1% from 2013 to 2017. During the same period, the Unites States had the highest compound annual growth rate of 3% while Canada had a compound annual growth rate of 0%.

Top exporters of confectionery to Japan, US$ millions, 2013 to 2017
Country 2013 2014 2015 2016 2017 CAGR* 2013-17
South Korea 124.2 126.8 103.9 99.6 118.5 −1%
Singapore 152.3 182.2 130.8 109.3 115.9 −7%
Belgium 71.6 74.5 66.4 75.1 73.5 1%
United States 59.7 64.3 62.1 57.0 56.2 −1%
France 49.7 53.7 39.3 42.5 45.7 −2%
Australia 23.0 33.3 29.5 26.7 31.5 8%
Germany 25.7 27.3 27.0 28.1 29.3 3%
China 26.8 30.1 31.3 29.6 28.6 2%
Thailand 28.3 20.7 22.5 26.2 24.8 −3%
Malaysia 24.4 19.2 17.8 23.1 24.2 0%
Canada (16) 8.1 10.2 6.1 5.3 4.7 −13%

Source: Global Trade Tracker, 2018

*CAGR: compound annual growth rate

South Korea was the largest confectionery exporter to Japan (US$118.5 million) in 2017. It had a −1% compound annual growth rate from 2013 to 2017. Canada was ranked the sixteenth-largest confectionery exporter (US$4.7 million) in 2017 to Japan, less than 1% of Japan's total confectionery imports, and had a −13% compound annual growth rate from 2013 to 2017.

Confectionery distribution channels in Japan, with % breakdown, based on retail value
Outlet type 2013 2014 2015 2016 2017
Store-based retailing 97.8 97.6 97.1 96.8 96.5
Grocery retailers 87.4 87.2 86.3 85.9 85.8
Modern grocery retailers 57.2 57.8 57.8 58.1 57.8
Convenience stores 7.6 7.7 7.8 8.1 8.2
Discounters 6.5 6.7 6.6 6.7 6.7
Forecourt retailers 4.8 4.9 5.2 5.2 5.2
Hypermarkets 13.3 13.6 13.6 13.4 13.3
Supermarkets 24.9 24.9 24.6 24.7 24.4
Traditional grocery retailers 30.3 29.3 28.5 27.8 28.0
Food/drink/tobacco specialists 8.2 8.0 8.0 7.9 8.0
Independent small grocers 15.8 15.3 14.9 14.6 14.7
Other grocery retailers 6.3 6.0 5.7 5.3 5.3
Non-grocery specialists 6.1 6.0 6.1 6.1 5.9
Health and beauty specialist retailer 3.7 3.7 3.9 4.0 3.9
Other foods non-grocery specialists 2.4 2.3 2.2 2.1 2.1
Mixed retailers 4.3 4.4 4.7 4.8 4.9
Non-store retailing 2.2 2.4 2.9 3.2 3.5
Vending 1.0 1.0 1.0 1.0 1.0
Homeshopping 0.1 0.1 0.1 0.1 0.1
Internet retailing 1.1 1.4 1.8 2.1 2.4
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International, 2018

Supermarkets (representing 24.4% of the confectionery market in 2017) have an extensive network across Japan. They offer a wide range of products, frequent sales promotions and remain the major shopping channel for consumers. Sugar confectionery is typically being purchased during daily shopping trips, while the second largest distribution channel is independent small grocers (14.7%) followed by hypermarkets (13.3%) and convenience stores (8.2%). Convenience stores are increasing in importance, especially in fast growing categories such as power mints and pastilles, gums, jellies and chews. The fact that these products are often placed on visible shelving in front of cashiers also helps to boost sales.

Consumer attitudes and economic drivers

Japan was the sixth-largest confectionery market in the world in terms of overall value sales between 2012 and 2017 and is forecast to be the sixth-largest from 2018 to 2022 as seen from the tables below. Known to be particularly food-conscious with a preference for fresh items, Japanese consumers tend to reach for products from the baked goods sector for their sweet fix, rather than confectionery. Sales of sweet biscuits, ice cream, cakes and pastries each surpassed chocolate confectionery and sugar confectionery. However, confectionery products do hold some favour with Japanese consumers, particularly those that offer convenience in terms of portability and share-ability, ease of consumption, and specific benefits. About half of Japanese consumers who choose chocolate or sugar confectionery products as a snack, do so for an afternoon pick-me-up between lunch and dinner. Products that offer a boost in alertness and energy are popular, especially among young adult consumers, as they are items that offer advantages like teeth whitening and breath freshening (Euromonitor International, 2017).

Historical top confectionery markets worldwide, US$ billion, 2013 to 2017
Rank Country 2013 2014 2015 2016 2017 CAGR* 2013-17
1 United States 31.0 31.6 32.7 33.2 33.8 2%
2 China 14.7 16.2 15.7 15.7 16.0 2%
3 Russia 7.4 8.1 9.4 10.4 11.4 11%
4 Germany 10.5 10.7 11.1 11.2 11.4 2%
5 United Kingdom 10.4 10.6 10.7 10.6 10.6 0%
6 Japan 8.4 8.7 9.0 9.2 9.4 3%
7 Brazil 7.2 7.5 7.6 7.5 7.5 1%
8 France 6.7 6.8 6.9 7.0 7.0 1%
9 India 2.2 2.6 3.0 3.5 4.1 17%
10 Italy 4.0 3.9 3.8 3.7 3.7 −2%
12 Canada 3.0 3.1 3.2 3.3 3.4 3%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Forecast top retail confectionery markets worldwide, US$ billion, 2018 to 2022
Rank Country 2018 2019 2020 2021 2022 CAGR* 2018-22
1 USA 34.8 35.8 36.8 37.8 38.8 3%
2 China 16.6 17.4 18.5 19.8 21.3 6%
3 Russia 11.9 12.5 13.1 13.9 14.6 5%
4 Germany 11.7 12.1 12.5 12.8 13.2 3%
5 United Kingdom 10.8 11.0 11.2 11.3 11.4 1%
6 Japan 9.7 10.1 10.4 10.7 11.0 3%
7 Brazil 7.7 8.0 8.4 8.8 9.3 5%
8 France 7.1 7.3 7.4 7.6 7.8 2%
9 India 4.6 5.1 5.7 6.3 7.0 11%
10 Argentina 3.0 3.5 4.1 4.6 5.1 14%
13 Canada 3.5 3.6 3.7 3.8 3.9 3%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

It is forecast that Argentina will replace Italy as the tenth largest confectionery market from 2018 to 2022. Demographic factors play an important role in this market, with an aging population and declining birth rates resulting in a shrinking consumer base for confectionery products. The proportion of residents aged 65 and over, who are generally marginal confectionery consumers, has been steadily rising. It does not affect confectionery sales now but will if products are not innovative. As well, childhood obesity is becoming a concern, with the Japanese Ministry of Education, Culture, Sports, Science and Technology noting that obesity among children aged 9-17 years has been on the rise over the last three decades, due largely to changes in diet (Euromonitor International, 2017). With a growing emphasis on health and the tailoring of products for senior and young consumers, this environment presents opportunities for products whose benefits are well-marketed, innovative, or developed with premium ingredients.

Retail environment

Overall, the confectionery market in Japan grew slightly from 2013 to 2017, landing at sales of US$9.4 billion or 418,000 tonnes. Chocolate confectionery remains the top subcategory, representing 52.8% of total confectionery sales, and was the best performer over the period with a compound annual growth rate of 5% from 2012 to 2017. Retail sales of gum have been declining with a negative compound annual growth rate of −6% in dollar value and −7% in volume from 2013 to 2017.

Historical retail sales of confectionery, in US$ millions (current prices, fixed 2017 exchange rate), in Japan, 2013 to 2017
Category 2013 2014 2015 2016 2017 Share 2017 (%) CAGR* 2013-17
Confectionery 8,445.2 8,690.8 8,950.5 9,199.4 9,444.7 2%
Chocolate confectionery 4,000.1 4,266.1 4,534.0 4,758.2 4,987.7 53% 6%
Sugar confectionery 3,171.1 3,242.6 3,300.3 3,377.4 3,437.4 36% 2%
Gum 1,274.0 1,182.1 1,116.2 1,063.8 1,019.6 11% −5%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Historical retail sales of confectionery, volume sales in '000 tonnes, in Japan, 2013 to 2017
Category 2013 2014 2015 2016 2017 Share 2017 (%) CAGR* 2013-17
Confectionery 401.6 404.1 405.8 412.4 418.0 1%
Chocolate confectionery 136.2 141.5 144.8 149.7 154.3 37% 3%
Sugar confectionery 228.7 229.1 229.5 233.0 235.4 56% 0%
Gum 36.6 33.5 31.5 29.8 28.3 7% −7%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Over the forecast period of 2018 to 2022, confectionery sales are expected to increase to US$10.9 billion in 2022 from US$9.7 billion in 2018. According to Euromonitor, in an effort to protect consumers from rising ingredient costs, many manufacturers are launching smaller product packages rather than raising prices.

Forecast retail sales in US$ millions (current prices, fixed 2017 exchange rate), in Japan, 2018 to 2022
Category 2018 2019 2020 2021 2022 CAGR* 2018-22
Confectionery 9,740.6 10,069.0 10,412.4 10,710.1 10,990.1 3%
Chocolate confectionery 5,231.6 5,484.2 5,738.3 5,961.9 6,171.7 4%
Sugar confectionery 3,518.2 3,613.3 3,715.2 3,801.6 3,881.6 2%
Gum 990.7 971.5 958.9 946.6 936.8 −1%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Forecast retail sales of confectionery, volume sales in '000 tonnes, in Japan, 2018 to 2022
Category 2018 2019 2020 2021 2022 CAGR* 2018-22
Confectionery 422.5 426.5 429.9 432.8 435.1 1%
Chocolate confectionery 158.0 161.2 163.9 166.1 168.1 2%
Sugar confectionery 237.4 239.2 240.8 242.1 243.1 1%
Gum 27.1 26.1 25.3 24.5 23.9 −3%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Chocolate confectionery

Chocolate confectionery continued to grow in 2017, with retail sales rising by 5% to US$4.9 billion. This is in line with the compound annual growth rate of 5% posted during the review period, when growth was fuelled by the strong performance of chocolate with high cacao content (for example, over 70%). Although eating chocolate was long perceived as unhealthy, growth is now being supported by increasing awareness among Japanese consumers about the health benefits of chocolate, which have often been featured in local media, with research revealing that polyphenol in cacao (beanlike seeds from which cocoa, cocoa butter, and chocolate are made) is effective for improving various health indicators. Cacao contains a fine balance of minerals, such as calcium, iron and magnesium, which is effective in reducing blood pressure, preventing arteriosclerosis, obesity and cancer and minimising the level of stress and effects of allergy and rheumatism.

The launch of smaller pack sizes also helped to boost sales in chocolate pouches and bags. Chocolate products with anti-melting features mostly come in smaller 30 grams (g) to 50 grams flexible packaging. This pack size, known as Kobukuro-Choco, meaning "chocolate snacks in small bags" in Japanese, is contributing to sales of chocolate pouches and bags in Japan thanks to the on-the-go trend and office snacking culture.

Boxed assortments was the second fastest growing area in 2017, with current value sales rising by 6%, driven by continuous strong demand for premium chocolate, with average current unit prices in the area increasing by 3%. Boxed assortments are increasingly popular gifts, as well as a treat for daily hard work, especially among Japanese women.

According to Euromonitor International, seasonal chocolates are typically sold at a higher price point than other types, and premium variations marketed in support of special events and celebratory occasions are popular gift items.

Historical retail sales of chocolate confectionery in Japan by segment, US$ millions
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Confectionery 8,445.2 8,690.8 8,950.5 9,199.4 9,444.7 3%
Chocolate confectionery 4,000.1 4,266.1 4,534.0 4,758.2 4,987.7 6%
Chocolate pouches and bags 1,389.4 1,429.9 1,481.5 1,551.5 1,604.5 4%
Boxed assortments 966.3 1,052.7 1,144.1 1,216.1 1,284.9 7%
Chocolate with toys 67.4 69.8 71.6 74.3 77.7 4%
Countlines 263.0 282.7 299.8 306.4 312.5 4%
Seasonal chocolate 739.4 808.2 861.5 862.8 900.1 5%
Tablets 557.2 604.6 657.0 728.2 788.8 9%
Other chocolate confectionery 17.3 18.3 18.6 18.9 19.2 3%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Chocolate tablets had the highest compound annual growth rate of 9% from 2013 to 2017 followed by boxed assortments (7%). Meiji continues to lead chocolate confectionery and is set to post a value share of 13% in 2017. The Meiji company has a significant presence in snacks in Japan and has been leading chocolate confectionery thanks to its wide product portfolio in chocolate pouches and bags and tablets, where it is set to account for 26% and 32% of value sales respectively in 2017. Sales of Meiji's Galbo brand are increasing thanks to strong demand among office workers because the chocolate melts in mouth only as opposed to on fingers.

Lotte ranks second within chocolate confectionery with a value share of 11% in 2017 thanks to its strong presence in tablets. The company led innovation within functional chocolate with the launch of its probiotic chocolate, Nyusankin Chocolate, in October 2015, creating the trend of adding probiotics to non-dairy snacks in Japan and the brand being displayed alongside yoghurt in some convenience stores.

Forecast retail sales of chocolate confectionery in Japan by segment, US$ millions
Category 2018 2019 2020 2021 2022 CAGR* 2018-22
Confectionery 9,740.6 10,069.0 10,412.4 10,710.1 10,990.1 3%
Chocolate confectionery 5,231.6 5,484.2 5,738.3 5,961.9 6,171.7 4%
Chocolate pouches and bags 1,658.5 1,714.6 1,770.9 1,817.8 1,860.8 3%
Boxed assortments 1,361.4 1,442.1 1,524.8 1,600.5 1,673.5 5%
Chocolate with toys 81.3 85.1 88.8 92.0 94.9 4%
Countlines 320.7 330.1 340.1 348.8 357.1 3%
Seasonal chocolate 942.9 988.6 1,035.5 1,077.9 1,118.5 4%
Tablets 847.1 903.7 957.7 1,004.0 1,045.6 5%
Other chocolate confectionery 19.6 20.0 20.5 20.9 21.3 2%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Chocolate confectionery in Japan is expected to continue posting growth over the forecast period, with a compound annual growth rate of 4% from 2018 to 2022 and a retail value of US$6.2 billion by 2022.

Leading chocolate confectionery manufacturers have been emphasising the health benefits of chocolate. As a result, consumers in Japan are expected to seek chocolate confectionery with functional features and health benefits, rather than premium ingredients or new flavours over the coming years.

Top five chocolate confectionery companies in Japan – % breakdown based on retail value sales
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Lotte Group 14.0 13.6 13.0 13.6 13.9 0%
Meiji Holdings Co Ltd 13.2 12.2 12.9 12.9 13.3 0%
Morinaga & Co Ltd 8.7 9.9 9.4 8.9 8.5 −1%
Fujiya Co Ltd 4.2 4.1 3.9 3.9 3.9 −2%
Nestlé SA 4.0 4.0 3.9 3.8 3.8 −1%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Sugar confectionery

Sugar confectionery is the second-largest category within the Japanese confectionery market, with sales of US$3.4 billion in 2017. It has been growing at a compound annual growth rate of 2% from 2013 to 2017. This growth was mainly fuelled by the popularity of power mints and pastilles, gums, jellies and chews, with most other areas seeing a decline in sales. Retail sales are expected to post a positive growth, at a compound annual growth rate of 2% from 2018 to 2022, reaching US$3.9 billion in 2022.

Pastilles, gums, jellies and chews led growth in 2017, with current value sales rising by 7% from 2013 to 2017. Gums and jellies performed particularly well due to aggressive product development, with products in this area being targeted at children. However, manufacturers have also started to target adults by producing more value-added product ranges.

Supermarkets represented the major distribution channel in this area, accounting for 41% of value sales in sugar confectionery in 2017.

Historical retail sales of sugar confectionery in Japan by segment, US$ millions
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Sugar confectionery 3,171.1 3,242.6 3,300.3 3,377.4 3,437.4 2%
Boiled sweets 410.9 403.5 393.1 382.1 373.2 −2%
Lollipops 25.9 25.1 26.0 25.2 24.8 −1%
Medicated confectionery[1] 666.7 660.3 655.7 650.2 645.5 −1%
Mints 433.3 470.4 502.9 530.5 554.8 6%
Pastilles, gums, jellies chews 732.2 783.4 839.7 905.8 956.9 7%
Toffees, caramels and nougat 404.3 408.4 397.2 391.2 384.5 −1%
Other sugar confectionery 497.9 491.5 485.6 492.4 497.8 0%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

[1] Medicated Confectionery: Any sugar confectionery product containing herbs and/or plants extracts. Medicated mints fall into this subsector.

Forecast retail value sales of sugar confectionery in Japan by segment, US$ millions
Category 2018 2019 2020 2021 2022 CAGR* 2018-22
Sugar confectionery 3,518.2 3,613.3 3,715.2 3,801.6 3,881.6 2%
Boiled sweets 368.3 366.3 366.3 366.3 367.2 0%
Lollipops 24.7 24.7 24.9 24.9 25.0 0%
Medicated confectionery 647.6 653.3 661.5 668.3 675.6 1%
Mints 580.4 607.8 636.0 660.9 683.9 4%
Pastilles, gums, jellies and chews 1,009.4 1,063.6 1,117.0 1,162.5 1,202.3 4%
Toffees, caramels and nougat 381.8 381.3 382.2 382.3 382.6 0%
Other sugar confectionery 506.0 516.1 527.3 536.5 545.1 2%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

As shown in the table below, Asahi Group Holdings is the most prominent company within the Japanese sugar confectionery market, largely due to Mintia, the leading brand in sugar confectionery. Asahi Group has found success by marketing Mintia products to younger consumers, promoting their sweet, fruity and interesting flavour variations, and by using celebrity endorsements. The other top companies each hold less than 10% of the market, making for a fairly fragmented environment. Due to the low unit cost of sugar confectionery items overall, consumers tend to prefer familiar branded products over private label, which holds a negligible presence in sugar confectionery.

Top five sugar confectionery companies in Japan – % breakdown based on retail sales
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Asahi Group Holdings Ltd 9.1 10.1 10.4 11.0 11.5 6%
Meiji Holdings Co Ltd 6.3 6.5 7.2 7.5 7.8 5%
Mikakuto Co Ltd 6.7 6.8 6.8 6.7 6.7 0%
Morinaga & Co Ltd 6.8 7.1 7.1 6.8 6.6 −1%
Kanro Co Ltd 5.9 5.6 5.8 5.8 5.9 0%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Gum

Gum continued to decline in 2017, with retail volume and current retail sales falling by 5% and 4% to 27,700 tonnes and US$1 billion respectively. Gum sales have been falling for over a decade due to the decline in the number of smokers, who are the main target of products in this area in Japan. Driven by increasing consumer health consciousness, smoking is perceived as being unhealthy, while cigarettes are relatively affordable compared to other countries of a similar economic level. Moreover, the mints category gained consumers from gum because of the extra convenience offered and the fact that mints do not create waste. In response, some manufacturers in Japan are looking to withdraw from the area. For example, Bourbon Corp withdrew from gum in 2015 and launched ice cream in 2016, according to the Euromonitor International. The Japanese government plans to limit smoking inside, including within pubs and restaurants, before the Olympics in Tokyo in 2020, but as of December, 2017, the government had still not announced any decision regarding this topic. If smoking is limited inside by law, the smoking population is expected to decline even further, which will result in a stronger decline in consumption of gum in Japan.

Historic retail value sales of gum in Japan by segment, US$ millions
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Gum 1,274.0 1,182.1 1,116.2 1,063.8 1,019.6 −12%
Bubble gum 47.3 40.2 31.0 29.2 27.9 −5%
Chewing gum 1,226.6 1,141.9 1,085.1 1,034.5 991.8 −5%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Forecast retail value sales of gum in Japan by segment, US$ millions
Category 2018 2019 2020 2021 2022 CAGR* 2018-22
Gum 990.7 971.5 958.9 946.6 936.8 −1%
Bubble Gum 26.9 26.1 25.6 25.1 24.6 −2%
Chewing Gum 963.9 945.4 933.3 921.5 912.2 −1%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

The declining birth rate is affecting sales of bubble gum, with manufacturers consequently not making great efforts to develop new products for younger people such as children and teenagers.

Gum is the smallest category within confectionery, with the retail sales of US$1 billion in 2017, or 10.6% of the total market (US$9.4 billion) in Japan. While chocolate (CAGR 5%) and sugar confectionery (CAGR 2%) have seen growth, gum sales have fallen in recent years, with a CAGR of −12% from 2013 to 2017.

Pellet is the most popular format of gum in Japan, accounting for around 80% of gum value sales in 2017. Both pellet and stick gum in Japan are typically individually packed with thin flexible paper or flexible aluminium/paper to wrap and throw away as waste after chewing.

Top five gum companies in Japan – % breakdown based on retail sales
Category 2013 2014 2015 2016 2017 CAGR* 2013-17
Lotte Group 51.1 50.3 48.2 48.8 50.1 0%
Mondelez International Inc 22.2 22.8 24.8 26.0 26.3 4%
Meiji Holdings Co Ltd 8.9 9.1 8.5 8.0 7.7 −4%
Ezaki Glico Co Ltd 3.5 3.7 3.8 3.9 4.0 3%
Marukawa Confectionery Co Ltd 1.3 1.2 1.1 1.2 1.3 0%

Source: Euromonitor International, 2018

*CAGR: compound annual growth rate

Lotte continues to lead sales and is set to post a value share of 50% in 2017. According to Euromonitor, Lotte launched its first Food for Specified Health Uses (FOSHU) gum health brand, Xylitol Oratect, in 2015, accredited by the Japan Dental Association, with the product being well received by consumers in Japan. In addition the company also introduced a new type of gum called Eat Mint in spring 2017, which was sold exclusively at kiosks on the Yamanote Line, Tokyo's main circular train line, with the innovative product having a gum texture for the first 30 seconds of chewing and then melting like chews afterward.

Mondelez Japan is set to remain in second place in 2017 with a value share of 27% thanks to its strong presence in sugar free gum. The company owns the second and third-largest gum brands in Japan, Clorets and Recaldent, which are set to post respective value shares of 12% and 8% in 2017. Meiji is set to remain in third place in 2017 with a value share of 8% and is the least active player among the leaders in the area. The company owns the Xylish brand, which accounts for 8% of value sales in 2017.

Conclusion

Confectionery sales have been steadily growing with a compound annual growth rate (CAGR) of 3% from 2013 to 2017 thanks to the growth in chocolate confectionery (CAGR 5%) and sugar confectionery (CAGR 2%) despite the decline in gum sales (CAGR −12%). The forecast over the 2018 to 2022 period presents the similar growth trend for confectionery as a whole with a CAGR of 3%. Leading chocolate confectionery manufacturers have been emphasizing the health benefits of chocolate. As a result, consumers in Japan are expected to seek chocolate confectionery with functional features and health benefits, rather than premium ingredients or new flavours over the coming years.

Manufacturers who produce innovative confectionery products that are healthful and beneficial to the Japanese consumers' life styles may be best suited to find success in this market.

For more information

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Resources

Sector Trend Analysis: Confectionery Products in Japan
Global Analysis Report

Prepared by: Hongli Wang, Market Analyst

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