Courting Japan's wine market

A nation of beer drinkers who instinctively look to France and Italy for wine but increasingly favour product from the New World – sound familiar?

In some ways, Japan’s wine market looks a lot like New Zealand’s did in the early 1990s, and it is this strong potential coupled with growing knowledge and exports of Kiwi product that make it an attractive destination for exporters.
Wine is still an infant market in Japan, with each adult consuming 2.4 litres per annum (compared to 12.2 litres in New Zealand). The total market for still and sparkling is worth around NZ$5 billion per annum. The majority of wine is imported – 14 million cases annually, including more than NZ$1 billion worth of still wine.

“This is a traditional country and the Japanese buy wines from countries like Italy and France where wine is a tradition,” says Mick Nippard, an importer of New World wines working in Sapporo, Hokkaido. “France and Italy account for two-thirds of all wine imports to Japan.”

Rising demand

But Japan’s taste for the New World is growing and New Zealand exported a record NZ$7 million in wine to Japan in 2008, even though Japanese alcohol and wine consumption has stagnated with falling real incomes in recent years. Part of the reason is that a stronger yen has helped New Zealand wine sales in the price-conscious segment of the market, in the ¥1,500 (NZ$30) retail price range.

However, New Zealand wine also performs well in the mid-to-top end of the market, priced above ¥3,000, and it is here – where Kiwi wineries can target boutique markets and produce enough volume to meet demand – that they are likely to have the most success, says Craig Pettigrew, trade development executive at New Zealand Trade and Enterprise in Tokyo.

“At an average free-on-board price per litre of ¥1,120 (NZ$20), New Zealand wine is the most expensive among wine from the top ten wine-exporting nations to Japan,” says Pettigrew. (Retail prices are generally two to three times higher than free-on-board prices.) “

Building a marketing story is essential

Although cost is now increasingly important to the Japanese, emphasising the quality and unique story of the wine allows buyers to focus on the product rather than the price. Being able to provide the buyers and retailers with a unique pitch will help them to differentiate the wine in a positive way. ”

Key to selling quality wine in Japan is finding the right distributors and offering them strong support as well as building a strong marketing story, say importers working in the market.

“Producers who will succeed in Japan are those who understand the level of support that is needed by demanding Japanese importers and are willing to provide it,” says Carl Robinson, CEO of DIVA New Zealand in Tokyo. Carl has worked in the Japanese wine industry since the mid-1990s and represents 25 Kiwi wineries exporting to Japan.

Robinson recommends surveying the market thoroughly before selecting a distributor, developing connections that enable a personal introduction to the target and being patient, as the initial deal may take more than a year to sign. He also recommends building a story that lets Japanese consumers know why to buy a product – the strength of the brand being a major factor in selling the wine.

Increasingly, marketing stories of New Zealand vineyards play to Japanese consumers’ sensitivity to food quality as part of the marketing story, including emphasising New Zealand’s clean green image and use of organic production techniques. Around 100 New Zealand wineries export to Japan though 60 importers.

Once a relationship with an importer has been established, both Robinson and Pettigrew recommend treating the importer as a member of the sales team, including adopting formal targets and providing marketing support and development plans. “Once established, partners tend to be both honest and loyal in Japan,” says Robinson at DIVA New Zealand. “Business people tend to have a very long-term attitude towards business, and are willing to work hard to establish and build brands.”

Market facts (source: New Zealand Trade and Enterprise)

• 44% of all wine imports sell for less than ¥1,000

• 27% of all wine imports sell for ¥1,000–1,500

• NZ wine prices at retail generally start from ¥1,500

• NZ wines - the largest retail share sells at ¥1500–2,000

• 38% of all imported wine is sold on-premise, almost half selling for less than ¥1,000

• 53% of NZ imported wine is sold on-premise, the largest share for ¥3,000–5,000

• 50% of NZ wine in Japan has a retail price of greater than ¥,3000

New Zealand wine exports to Japan, 2004-2009

Sources: Wine New Zealand; Statistics New Zealand

*Year-ending June 31
†July-December 2008

Resources:

• New Zealand Trade and Enterprise can assist exporters to find distributors in Japan through its International Services portfolio.

• New Zealand Wine holds an annual fair in Tokyo attended by 500 importers, trade and press. The 2009 event will be held on 4 June.

by Matt Roy in Japan

See also

• Wine: Marker of Social Change - read more about the Japan wine market

What are the perceptions of Japanese consumers when it comes to wine? This project investigates the role of wine as a significant marker of societal and market change in societies which are not traditionally wine-drinking. The project is conducted by Tim Beal and Michel Rod of the School of Marketing and International Business at Victoria University Wellington and is funded by one of Asia:NZ’s research grants, the Big Issues Grant 2007. Research has focused on New Zealand wine exports to Singapore and Japan, with fieldwork conducted both in New Zealand and overseas.