Exporting to Japan 2010 - 2011

An interview with Neal Arakaki, President, Hawaii Candies & Nuts (Menehune Mac)

Hawaiian Candies & Nuts is primarily a manufacturer of chocolate and baked confectioneries. The company also engages in specialty retailing, wholesale, and custom manufacturing. Founded by local business visionary and Hawaii Food Manufacturers Association founder, Patrick Arakaki, Neal became President of this family owned company in 1988. Additionally, the company actively exports to the Far East, and through Neal, conducts export consulting and product and system development consulting.

Neal and his siblings have been active in the company since they were in grade school.  Neal graduated with a business degree from Loyola Marymount University in Los Angeles. He additionally underwent six months of import and distribution training in Tokyo and Osaka and is fluent in Japanese.

Neal leads HFMA's Japan Distribution initiative. He has introduced 15 Hawaii food companies to the Japan market in the past 3 years.

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HFMA: Neal, what is the latest trend in exporting to Japan?

NA: The most important recent development is deflation in Japan and the appreciation of the yen, which is making imports to Japan much more affordable to the Japanese. The yen is currently around 80 yen to the dollar. The most recent high in June was over 90 yen to the dollar. So the past 5 months have seen the cost of dollar based imports decline by approximately 11%.

 HFMA: How are you taking advantage of this?

 NA: It's a rather unique situation in Japan. While the yen purchasing value is increasing, there is a strong pressure for retailers to sell products at discount pricing in order to remain competitive. Taking advantage of the situation is proving rather challenging. The idea now is to focus our product presentations with unique diversity and selling the "Hawaiian lifestyle" in terms of consumer usage. While the traditional omiyage based companies seem to be resisting non-discounted items, there are other markets that are taking an interest in offering new and different products.

HFMA: Historically, the multi-layered Japanese distribution system has made it difficult for foreign companies to penetrate the Japanese market. And Japanese partners weren't always interested in small batches of goods. How are you getting around this to facilitate getting Hawaii products into Japan?

NA: There is a trend among medium size importers to control purchasing and inventory in order to preserve their cash reserves. This has led to an increased amount of air shipments in smaller volumes than the traditional ocean shipments. The general idea is to develop sales for multiple Hawaii products through these key importers and to raise the critical volumes over time where ocean shipping (and lower shipping costs) becomes practical.

HFMA: How about Japanese consumer attitudes. Are Hawaii products still popular? What kind of Japanese customer is likely to purchase Hawaii - made products? 


NA: Japan consumers still regard Hawaii products in high esteem. However, retailers are not offering the consumers any product choices that they deem to be too expensive to realize their profit margins. This is similar to what is happening in Hawaii markets as well. The current focus is to work with specialty retailers and Internet sites to raise consumer awareness of the diversity and quality of Hawaii products, and to also direct them to the appropriate retailers.

HFMA: What are some characteristics of Japanese consumer products that Hawaii food companies need to be aware of?

NA: One of the most important aspects is packaging, especially packaging size. Japanese consumers do not typically purchase large bags of chips, for example. They are much more likely to purchase a small bag of, say 15 chips. The design is the packaging is also very important.

Hawaii companies tend to package in sizes that are too large for personal consumption in Japan. We have to take this with a grain of salt because reasonable packaging options are limited in Hawaii. However, Hawaii manufacturers need to seriously study this aspect of their product in order to make an educated evaluation of their products marketability. It is very rare for a Hawaii product to meet both Hawaii and Japan market expectations. There are workable options to this issue but the Hawaii manufacturers have to make the commitment to seriously consider this issue as a major marketing point if they wish to have some modicum of success in the Japanese market. 

HFMA: What about ingredients. This is a big deal getting products into Japan isn't it? How would you compare Japan's restrictions on ingredients with, say, Wholefoods? 



NA:
this is a real issue for not only Hawaii manufactures but U.S. manufacturers in general. The real issue is that the Japan ministry of health regulations do not match with the standard U.S FDA and food regulations in a myriad of categories. There has always been a perception that this is causes an artificial non-tariff barrier for U.S. food products to enter the Japan market. So understanding what is and is not acceptable for Japan import is a criteria that is often overlooked by even the largest of U.S. manufacturers. Since there is no middle ground to this, manufacturers have to be prepared to reformulate or at least be able to recognize what these differences are. To make things even more complicated, the import inspection process will randomly shift its focus from one type of ingredient to another. This means that even products that have already been successfully imported into Japan can possibly face issues when the Japan inspectors suddenly focus on another ingredient in detail. It’s hard to be more specific on this because processed foods tend to be quite unique in formulation, but there are experts who can assist with these types of issues. As an overall comment, Hawaii food manufacturers have to accept the fact that they must meet Japan food import requirements at all times without exception. One cannot seriously consider entering this market with a closed mind in terms of product ingredients.