With a market of more than USD $10 billion in dietary supplements and $21 billion in functional foods, Japan has maintained its position as the third largest nutrition market in the world. The market has been established by a number of domestic companies selling mainly via direct channels.
Unlike the U.S. dietary supplement market under the Dietary Supplement Health and Education Act of 1994 (DSHEA), Japanese health food marketers are restricted to vague interpretations about products’ health or functional benefits. However, foods with explicit health benefit claims, i.e., foods for specified health uses (FOSHU) and foods with nutrient function claims (FNFC)and foods for special dietary use (FOSDU) have accepted health benefits and claims. Thus, those products that cannot be categorized as foods with health benefit claims are classified as "health foods," and they are not allowed to claim health benefits.
However, this might change soon with a dramatic regulatory reform that has been long-awaited in the industry. As a part of Abenomics, a growth strategy by Prime Minister Shinzo Abe, the government decided to lift the ban on functional claims for food products, including dietary supplements, functional foods and agricultural foods. Abe claimed Japan will use the DSHEA framework as a reference to establish a Japanese version of a functional claim system.
A DSHEA-like system will present the industry with substantial new business opportunities.
The Consumer Affairs Agency (CAA), the regulator of food labeling, has just concluded eight committee meetings during the past year. The committee, formed by experts from academia, consumer organizations and the industry, discussed basic policies and responsibilities. In the final report from the meetings, the CAA said functional claims must be clinically substantiated by either scientific review of the finished product or a systematic review of the scientific evidence relating to the dietary ingredient.
Information about a product’s efficacy and safety should be disclosed, so consumers can refer to it when they choose a product. Consequently, the system has an opportunity not only for companies to educate consumers, but also for consumers to learn appropriate information. Before going to market, companies must notify the CAA of health claims and include safety and substantiation information.
This movement will surely make a change in the market. As of August 2014, the framework for the new system was still in draft form. The official guideline is expected to be published in September, followed by a public comment period before issuance of a final rule.
However, companies should prepare now to examine the impact on their businesses and what kind of benefit or effect they can expect from the new system. Otherwise, business will surely fail in the market.
After DSHEA, the U.S. dietary supplement market has continuously grown by double digits. Before 1994, dietary supplements were used by about 50 percent of the U.S. population, then increased to 65 percent by 2010, according to a NBJ Supplement Business Report. In Japan, 52 percent of the population is using dietary supplements, according to a consumer survey conducted in 2013 by Intage Inc. This figure is also expected to grow under the new claim system that will provide consumers with more information.
The Japanese nutrition market has been “natural" for most of its history. In particular, the Japanese dietary supplement market has seen an increase in products using royal jelly, green juice, chlorella, blueberries and black vinegar. Even though there is no Japanese term for “whole food supplement,", these products can be categorized as whole food supplements, and they enjoy a 40-percent share of the total dietary supplement market.
These products and ingredients are known traditionally in Japan, and the concept is similar to Chinese medicine. The health benefits of such ingredients are generalized, and companies do not rely on science to prove their benefits to consumers—just tradition. If companies will be able to claim more from a science-based angle, the marketing strategies for these ingredients may need to be reconsidered.
On the other hand, when you look at the comparison of top ingredients used in dietary supplements in the United States versus Japan, the difference is significant. If the trend in Japan follows suit with the United States, which has grown with evidence-based nutrition, industry will probably see a different picture of the market in five or 10 years.
Learn more from Global Nutrition Group’s Sachiko Kakisaka in the SupplySide West panel discussion “Hot International Markets" at 2 p.m. on Wednesday, Oct. 8, at the Mandalay Bay, Las Vegas. Kakisaka will join other industry experts to discuss opportunities and potential pitfalls when selling on a more global scale.
Sachiko Kakisaka is an experienced market researcher and analyst in Global Nutrition Group Inc., a nutrition business consulting firm based in Japan.