South Korean conglomerate Lotte plans to invest $1.2b in Japan to expand its confectionery products.
Japan’s spending on confectionery is projected to be worth approximately $26.7b (JPY2.9t) by 2023 following an increasing demand for Japanese confectionery from tourists and domestic consumers, according to a report by Fitch Solutions.
In 2019, Japan’s confectionery market is estimated to be worth $22.3b (JPY2.5t). The country’s projected growth in confectionery spending is forecasted to average an annual expansion of 3.6% between 2019 and 2023, compared to the 1.4% increase seen between 2014 and 2018.
The report highlighted how South Korean conglomerate Lotte announced plans to invest $1.2b (JPY130b) in capital expenditures in Japan in a bid to expand the company’s supply of mainstay products such as ice cream and chocolate.
“This figure marks a 40% increase in spending from the previous five-year period to fiscal year 2018,” Fitch Solutions added. “Between 2019 and 2023, this will increase production capacity at plants which manufacture ice cream and chocolate in the city of Saitama and Fukuoka Prefecture, as well as candy and gum plants in Saitama Prefecture.”
The robust demand from tourists is regarded as the main driver for growth in Japan’s confectionery market as some local sweets and chocolates such as Nestle’s wide range of Kit Kat flavours and Meiji’s milk chocolates have become a common souvenir to bring home due to their uniqueness.
“Growth in spending will also be driven by Japanese consumers themselves as they move towards premium and higher quality chocolates,” Fitch Solutions noted, citing that in per capita terms, domestic consumers will spend $175.7 (JPY19,331) in confectionery in 2019 amidst the traditional Japanese diet being regarded as one of the healthiest in the world. This is estimated to rise to $213.2 (JPY22,812) in 2022.
“Opportunities in the confectionery market in Japan will lie in chocolates which either have perceived health benefits or those catered towards Japan’s rapidly ageing population,” Fitch Solutions noted, including how firms such as Meiji and Glico are already tapping into this demand.
The report noted how Meiji in particular announced plans to extend its manufacturing lines at two domestic plants with an investment of $245m (JPY27b) in a bid to expand its health-focused chocolate line. Glico on the other hand was revealed to have created a product called ‘gaba’ which contains gamma-micro butyric acid that reportedly reduces stress.
Fitch Solutions regarded how such innovations may be successful in reaching Japan’s ageing population where those over 65 years old and above represent 29% of the world’s projected population in 2023.
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