Transcript: East Asia Market Realities - Japan

Shintaro Nakamura, NZTE Business Development Manager, Japan: So today’s topic is ‘Opportunities in Aging Societies’. But before that, I’d like to give you, first, current market update of Japan, and second, I’d like to talk about how we can approach those opportunities. 

So, today I’d like to ask you, frankly, how many of you think that Japan is a growing market? That’s why I’m here today! As you know, Japan has been suffering from the deflation for the last 25 years but now it is changing. Actually, Japan is growing, so let me tell you some background. 

Our financial policy has been reasonably successful, but not only that, the Japanese government is investing money into attracting tourism. Last year we had 28 million people coming over to Japan as a tourist and they spent US$35 billion. US$35 billion, by the way, is close to the national income of Australia and it’s growing by 20 percent rate, so it’s like exponential growth. 

As a tailwind we have Rugby World Cups and Olympic next year and the year after. As a result, our GDP stock price, even the commodity price, is up for the first time in 25 years and as [unintelligible] in the market I can feel that it is actually increasing. 

So today’s topic is about aging society. Japan is top leading country in terms of aging. In fact, one out of four people is more than the age of 65 years old, and some people might have a negative feeling about it, some people say Japan is in a critical situation, but is it really true? Let’s have a look.

So here is a word which describes ‘critical situation’ in Japanese. It’s called [Kiki]. It comes in two components. Left component symbolising risk, and right component symbolising the opportunities, so in every critical situation there is an opportunity and my question is where is the opportunity in aging society? 
So here’s one. Did you know that Japan is number two in the world in terms of number of millionaires? That is actually after the US and double the number of China so in Japan there are three million people who have more than US$1 million asset, and having asset is not really actually important. The most important thing is are they willing to spend money? Last year, the Japanese senior segment spent US$ 1 trillion. That’s a big chunk of money, more than the National Budget of UK. And it is actually growing by $10 billion per year so it’s a big market, but it’s also growing market.

How about an image of New Zealand from their perspective? Actually I have very good news for you. They have a very good image of New Zealand. So here’s a picture taken back in 1984 – happily married Japanese couple called Kenji and [Vosayu], and now they have turned 60 years old. They are the ones who spend $1 trillion per year and New Zealand used to be the most popular honeymoon destination back in 1980s, so they are the target. And I have a question for you now: if you have 36 million people – that’s the number of Japanese seniors – who are already rich, willing to spend money and have a very good image about New Zealand, would you like to miss these opportunities? 

So my next question would be how do you approach the Japanese senior segment? One of my experiences might help you achieving your goals in Japan. I started my career as a banker 20 years ago and I look like a typical banker, right? And I get to spend five years trying to look for what is the key secret of success in Japanese market and I found the golden rules. When I found it I was, like, oh, I found this. This is the golden rule, and, like, I nearly cried in the office! 

So when successful companies making a big hit in sales in Japan there are always two patterns: so successful companies always have a target, narrow target segment; number two, they always have a sound solution for that target segment. So I decided to call it ‘rational approach and emotional approach’. So the rational approach is to have clear target segment – targeting mass, targeting everybody used to until eighties and nineties back in the day when people had a same case and similar consumption patterns. But now it’s different. People have different values and different tastes and we can say the same things for senior people. 

In fact, a lot of Japanese companies, they are making the same mistake by targeting all the Japanese people. They’re saying actually our product is very high quality. That’s why you should buy this, but right now, they’re struggling to sell their product. So my idea is this: if you’re succeeding targeting small amount of people it will eventually reach some critical mass and tipping point and spread out to the rest of the market so targeting less is more.

My next one is emotional approach. Emotional approach is to deliver the solution with a story and why with a story? Because story has a power. I can promise you one thing: what I said today you will forget in three days but if I tell with a story you will remember and you’ll actually talk to someone else, and someone else will talk to someone else, and that will, again same principle, will reach to the critical mass tipping point and spread to the rest of the world. Another example would be the Maori legend. It’s been ... stories have been cascaded down from generations to generations so story has a power even to penetrate through the generations, so story has a power. 

And, yes, today’s topic is aging societies and we’re so in the middle of it. Now the question is how do we apply to approach this to aging society? Talking about Japanese senior segment there are 36 million people and that’s too many parameters, don’t you think? But if we take a close look we can divide them into three segments. 

So here is what a ... there’s active seniors, non-active seniors and passive seniors. So active seniors are the known as the early adopters and they’re always seeking for the value-added items, like my father – he always likes to travel, he likes to live life to the fullest, goes to the supermarket, grabs a big chunk of tuna fish all the time and it’s expensive so I said to my father, “Daddy, why do you buy so much, so expensive tuna all the time” and he says, “Don’t worry, son, I know what I’m doing. This fatty omega tuna, omega tuna fish contains Omega 3 in it, clears out my memory and lowers down my blood pressure. It is really good. It’s also tasty. Do you want to try some?” And he’s a typical active senior type. He likes to buy the things, spend the money for himself and he’s very active. He doesn’t think that he’s actually old man.

Next one is the non-active seniors so they don’t exactly know what they want to do but they tend to follow what active seniors are doing so they’re the followers. The last one is passive seniors, so they’re the largest, so they’re the ones who are still using the classic [world response]. 

So my question is where do you want to target? So I'd like to talk about Zespri as an example of New Zealand food company approaching senior segment, and they’re successful and I have a function to talk about this. So Zespri was also looking for the right target and they chose the active senior as the right target segment and they did a research, spent a fair amount of money trying to find out what kind of words would turn on the senior segment’s consumption mind-set and they came up with the word, ‘healthy’. 

Actually, health-related market in Japan is $15 billion market, growing by 450 million but the keyword ‘healthy’ was not good enough to lift up their sales. It was actually very common everywhere and people use ‘healthy’ – the word ‘healthy’ is not sharp enough so what they did instead, they narrowed down the target much more deeply, rational approach, so that it could resonate with the target segment and also second one is they came up with the solution story – that’s the emotional approach – for each target segment. 

For example, for the seniors who have high blood pressure their solution was potassium and kiwi which would [blank] the effect of sodium, and for the seniors who have diabetes, their solution was fibre and kiwi, which would slow down the absorption of sugar level into blood, so here again, they narrow the target and came up with solution story. As a result they have an increase in 20 percent in revenue. 

Aging societies have other hidden opportunities. Actually, aging is bringing up women’s buying power. Do you see the relationship? Idea is this: in aging society a lot of people retire and there’s a shortage of labour in Japanese market. That is why Japanese government is seeking to increase a percentage of women working. So you can see blue line is the number of women working in US and red line is the number of women working in Japan, and from 2011 it’s sharply going up. And this is an opportunity because there are more women working and we have more disposable incomes per household but there is also a challenge. Now Japanese women got more busy, busier than ever and they don’t have time so that’s a challenge we’re facing. So how we can turn the challenge into opportunities? 

There is a company called Calbee. Calbee is known as a cereal company in Japan and cereal market has been small and flat for the last [four] years so Calbee was one time thinking about pulling out from the market because they thought cereal market has no future. And also Calbee was targeting everybody. 

2009, things have changed. A new CEO stepped in and he told the marketing staff, let’s narrow the target, and marketing staff got so frightened because marketing people thought if they narrow the target they will lose the customer, but he was very constant in his message. He said let’s narrow the target so they narrowed the target to working women who are busy preparing a meal in the morning. 

That's a pretty narrow target, isn’t it? And they came up with a solution story – emotional approach – and their story was this: time-saving breakfast that is also nutritious. As a result of this their sales have gone up five times in four years, so what happens here is 2011 they changed the name, 2004 they were targeting working women and their message was time-saving and high fibre content because gut health and iron, women needs iron, and 2015 they narrowed the target to senior segment, and senior segment is very conscious about the intake of the salt so their message was reduce salt. Surprisingly, they didn’t spend much money on marketing nor did they change the content of the cereals, and they reached an increase in sales. 

So time is almost up so I’d like to summarise today’s presentation. First of all, Japanese market is growing right now, and second, there are hidden opportunities even apart from the senior opportunities, for example, women’s market. And there are two key approaches: one is rational approach – narrowing the target – and emotional approach – story with solution – and I think at the end of the day we share one common goal; that is to grow bigger, better, faster.