Insights from New Zealand's first virtual trade mission to Japan
In June 2021, NZTE and MFAT delivered the New Zealand Government's first virtual trade mission, with Japan as the destination. It was an opportunity for New Zealand business leaders to connect with their Japanese counterparts for robust discussions on collaboration and partnership.
It was attended by 20 New Zealand business delegates from the premium food and beverage (F&B), technology, and renewable energy sectors, which together represent 60% of exports to Japan. Led by Trade Minister Damien O'Connor, the mission commenced with a video message from Prime Minister Jacinda Ardern.
The trade mission followed earlier online meetings between Minister O'Connor and his Japanese counterpart, Minister Kajiyama Hiroshi, on 24 May and with Japan's Economy Minister Yasutoshi Nishimura, on 19 May this year. Minister O'Connor also spoke at the Nikkei "Future of Asia" Conference on 21 May about regional economic recovery from the pandemic.
During the mission, delegates from each sector participated in their respective discussion groups and surfaced the challenges and opportunities present, the importance for greater collaboration between New Zealand and Japan as both countries work towards recovery.
Below is a recap of the situation, discussion topics covered and insights surfaced by each group in the key industry areas.
Premium food and beverage
COVID-19 has caused shifts in consumer behaviour and businesses have had to adapt accordingly. Some immediate changes in the F&B sector include an e-commerce boom and demand for healthier, immune-boosting food, providing opportunities for New Zealand exporters to highlight our traits of healthy, sustainable, premium and trustworthy.
Border restrictions, labour shortages and workforce issues have created logistical challenges. This has led to an increased focus on supply chain resilience, with the growth of multiple vendors, both locally and regionally.
E-commerce in Japan is undergoing a tremendous period of growth, increasing 30-50% per annum, representing 9% of retail sales. Japan is the fourth largest e-commerce market in the world, with significant potential for further growth.
Online F&B purchases in Japan doubled in 2020 year-on-year (more demand for omni-channel experiences; increased carrier costs and volume restrictions).
Japan's e-commerce growth was both in B2B and B2C, but primarily the latter, creating huge opportunities for many New Zealand companies. Retail channels will recover, but there are increasingly blurred lines between online and offline.
New Zealand companies need to provide consistent high-quality standards to capture the market. Variable quality undermines New Zealand exporters' reputations and bottom lines.
Healthy, safe, functional F&B
Japanese consumers are becoming increasingly discerning and looking for everything that New Zealand excels in: premium products, products that are safe, sustainable, and trustworthy.
There appears to be a perfect partnership in the functional food space, where New Zealand's 'seeds' could be fed into abundant Japanese R&D resources.
This leads into how healthy foods are increasingly incorporated into diet and lifestyle, which is exciting for New Zealand companies. Healthy foods can include protein, good oils, vegan, gluten-free, low-sugar products and probiotics.
In Japan's baby product market - which is not solely F&B oriented - the same messages of trust and safety were the key for success.
Additionally, younger consumers are beginning to look for sustainable products from companies able to demonstrate their contributions to making the world a better place on social and environmental issues.
Fonterra's low-carbon products are doing very well in Japan, while Sealord is looking at addressing issues such as marine plastics and antibiotics, which is becoming increasingly important for businesses and consumers.
Provenance is important for New Zealand – we are seen as a healthy, safe source of F&B products. It is crucial to have the marketing ability to communicate directly with consumers, using strong, consistent messaging and storytelling, backed up by scientific data and evidence that we are delivering on sustainability commitments and functional food claims.
Both New Zealand and Japan have committed to reaching Carbon Zero by 2050. New Zealand and Japan have complementary strengths in renewable energy which create opportunities for collaboration:
About half of New Zealand's greenhouse gas emissions are from agriculture, whereas only around 4% of Japan's emissions come from agriculture.
Around 80% of New Zealand's electricity is from renewable sources, but little progress has been made in decarbonising our transport and industrial sectors.
80% of Japan's electricity comes from fossil fuels, but Japan is looking to double the share of renewable electricity and has a target to double geothermal production.
Two major Japanese companies are investing in Joint Ventures in New Zealand to produce green hydrogen from wind and geothermal energy.
Challenges and opportunities
A number of businesses from New Zealand and Japan are keen to add a renewable energy pillar to the New Zealand-Japan economic relationship.
New Zealand and Japan's long partnership history in renewable energy was acknowledged during conversations. Fuji, Toshiba, Mitsubishi and Sumitomo are all long-term partners of the geothermal industry in New Zealand.
Long-standing research partnerships will also continue. New Zealand's GNS Science and Japan's JOGMEC acknowledged the opportunities to expand on those.
Young partnerships are also developing in hydrogen, with Japan's Obayashi and New Zealand's Tuaropaki, as well as Japan's Mitsui and New Zealand's Hiringa, collaborating on projects.
There is a strong commitment to continue our complementary geothermal relationship.
In the geothermal research field, there are opportunities for GNS Science and others to collaborate and to look at supercritical heat, and resource extraction, and share thoughts on how to manage those.
New Zealand capability can help Japan to sustainably manage and develop geothermal resources, especially the untapped potential that sit across Japan's national parks.
New Zealand and Japanese businesses can collaborate and take our complementary skill sets into third party countries to support the global climate challenge.
The hydrogen market
The hydrogen market will likely develop like LNG (liquefied natural gas) did. The obligation is to create the demand, the supply chain to deliver it, and then scale it rapidly. Sharing research and development capability will be required to make sure that it can scale, and scale at low cost. The cost of hydrogen production must come down too.
Governments play a key role in this development. New Zealand and Japan need to work together to take the lead on the setting of international hydrogen standards. It is important to ensure green credentials for hydrogen, to define what green hydrogen is and what it is not.
The other key role for governments is setting targets to help drive demand initially.
There is an immediate opportunity for a great southern hydrogen project in New Zealand — a global scale, baseload, and reliable renewable resource in the lower South Island. It involves hydro-generation being electrified and converted into ammonia or hydrogen and shipped to Japan, which Japanese partners are very interested in importing. At present, the opportunity lies in how quickly it can happen.
There is a shared sense of purpose around climate change, enabling a global challenge rather than national targets, leveraging the history, complementary skills, technologies and resources between Japan and New Zealand.
Japan will need to import capability and resources, and New Zealand has the capability and resources to meet some of that demand. Opportunities exist for energy intensive investments such as data centres.
More collaboration is the way forward for technological progress. New Zealand is open for business with a huge and vibrant start-up community, and more Japanese companies are looking for investment opportunities to be able to work with New Zealand companies. There are a lot of new virtual collaboration platforms and in order to succeed post-COVID, we need to be able to co-develop online using these cloud platforms.
An initiative supporting collaboration is the digitalisation of government services, which the Japanese Government has made a top priority and has announced new funding to promote a shift towards e-government.
Technology enables the creation of new business models, especially with new business opportunities in research – particularly in agritech, horticulture and agriculture – and a lot more in livestock. There is potential for agriculture companies to increasingly collaborate.
A decreasing and ageing population in Japan has also caused labour shortages in farming. We heard from Fujitsu that in the agriculture sector they are not using data as much as relying on intuition and tradition, so there is a huge opportunity in that area.
One of the exciting areas in collaboration is a prominent and progressive partnership between Robotics Plus and Yamaha Ventures. Despite New Zealand and Japanese agriculture industries being quite small in comparison to the US, it is a good example of an investment into New Zealand by Yamaha Motors, to be able to develop technology and take it onto the global stage. This is an example of two companies that are bringing their strengths – New Zealand's innovation, agritech and robotics combined with the power of Japan – to create a partnership to take on the world.
The global pandemic has also accelerated automation, ICT and robotics. Those in hardware and software are in a prime position to do well, while human resource development is going to be incredibly important going forward.
The way forward
Overall, the insights from the discussions have highlighted the way forward for greater growth and supported New Zealand's trade strategy with Japan.
F&B remains a key engine of growth. The changing preferences of Japanese consumers towards e-commerce and safe and healthy food provide a huge opportunity for New Zealand to deliver on our health and sustainability credentials.
In technology, deeper collaboration will lead to greater development in agritech and potential for scale, while in the field of renewable energy, our commitment to shared goals will further develop innovations, deepen research and share resources to develop solutions that are good for the world.