2.1. Instant coffee
Japan's consumption of instant coffee is estimated at 39,620 mt in 2007, in which domestic production accounts for some 86% share of the total. Last year Japan imported 7,089 mt of instant coffee, holding a 18% share of total consumption. Approximately 84% of instant coffee is consumed for home use. The remaining shares are divided into industrial use and food service.
Table 7. Japan's instant coffee market (product basis)
Major exporting countries for Japan are shown in the following figure 6. Brazil is the largest exporter, accounting for 46% share of the total imports from 2003 to 2007, followed by Colombia (16%), Ecuador (11 %), Germany (9%), and Philippines (8%). These five countries supply some 90% of import quantity.
Figure 6. Japan's instant coffee import by country; 2003-2007
2.2. Coffee extracts and essence
Coffee extracts or essence is extracted and soluble solids from coffee beans. Those are used by food service or grocery manufacturers to produce coffee-based soft drinks, cakes and confectioneries. Coffee extracts and essence are split into two categories, either sugar-added or sugar-free, and by the category, product size varies significantly. Thus, we estimate the quantity by converting to green bean basis as per the following table.
Table 8. Japan's coffee extracts and essence import, export and consumption, excluding domestic production as part of regular coffee (green bean equivalent)
From the above, Japan's consumption of coffee extracts and essence is estimated at 10,331 mt as green bean equivalent in 2007, excluding domestic production. Supplying countries for Japan are fairly limited. Brazil occupied 95% share of sugar-added extracts and essence imports, and Japan's imports of sugar-free extracts and essence are dominated by Brazil, Malaysia, Columbia, Holland and Indonesia. Coffee extracts and essence are imported principally to fulfill shortage of domestic production.
Figure 7. Japan's coffee extracts and essence import by country; 2003-2007
Regarding sugar-added extracts and essence, there is not any import from Indonesia.
2.3. Chain of Distribution
Some 72% share of the imported green beans is distributed to roasters for production of regular coffee. Distribution of roasted regular coffee is split into three destinations: 1) food manufacturers for various applications, 2) food service sector, such as hotels, coffee shops and restaurants, and 3) retail trades for home use. A 26% share of coffee green beans is distributed to manufacturers for production of instant coffee. The remaining 2% share is a distribution as coffee extracts and essence to various food manufacturers. After manufacturers, various final products are distributed to consumers through retail stores or food service operators. The distribution system is complicated and is outlined in the following diagram.
Figure 8. Distribution channel of coffee (green bean basis)
In the regular coffee market, three major roasters supply more than half of demand for food service and home use. Those roasters own farms in major coffee producing countries and import coffee green beans directly form those owned farms. Smaller roasters purchase green beans from importers. Talking about instant coffee market, because instant coffee manufacturing needs large capital expenditure, manufacturers with full operation from processing green beans to the final products are limited to three manufactures, i.e. Nestle, AGF, Takasago Coffee. Other instant coffee manufacturers import instant coffee in bulk for repacking. Products are distributed to retail stores via distributors and wholesalers.
Either way, import share of processed coffee products is small though all green beans are imported. Japan is a country principally importing coffee green beans and producing various coffee products in Japan, and the market is fairly dominated by large roasters as well as instant coffee manufacturers.
2.4. Consumption
The Japanese coffee market has posted an increasing trend of consumption for past years. Such a growth is seen especially in regular coffee market. It is attributed to continuous development of new products as well as consumers' increasing preference for better tastes. In addition, one of the reasons behind steady growth is the changing coffee shop market. We are seeing that many coffee shop chain operators, such as Starbucks or Doutor, are expanding store network and offering gourmet coffee.
In terms of green been basis, Japan is now consuming coffee of some 440,000mt per year. Although it is matured, the market is sill growing with more potential room for future expansion. In fact, although Japan is the fourth largest importing country in quantity basis, Japan's per-capita consumption remains at a low level. According to International Coffee Organization, Japanese coffee consumption in 2006 was 3.4 kg per-capita, being roughly half of European countries. In this respect, there are potentially more rooms for expansion of coffee consumption in Japan.
Figure 9. Per-capita coffee consumption of major countries, 2006
As earlier described in the regular coffee section, a 41 % share of roasted regular coffee is distributed to food manufacturers, in which some 60% quantity is used for production of coffee drinks. Thus coffee drink consumption influences Japan's overall coffee market. In fact, coffee beverages occupy top position in Japan's soft drink market, accounting for 16% of the total production. In Japan, coffee is consumed as popular soft drink besides consumption at home, restaurants, coffee shops, etc.
Figure 10. Japan's soft drink production by product group; 2006
Despite sluggish sales of canned coffee, total coffee drink consumption has continued to increase for a long term. Also consumption of regular coffee and instant coffee has showed a continuous growth for the same period. Although Japanese market is maturing, coffee consumption is growing and is expected to grow further.
Figure 11. Japan's drink consumption index changes
Increasing coffee consumption is also indicated in Japan's household expenditure. The following graph shows that the Japanese coffee consumption per household has increased in the past years, while average purchasing price at retail trade decreased.
Figure 12. Household expenditure for coffee, 2000-2007
2.5. EPA tariff
Japan and Indonesia signed an Economic Pat1nershipAgreement (EPA) on 20th August 2007 that aims to eliminate tariffs on about 92% of the trade between the two countries, and Japan-Indonesia Economic Partnership Agreement (JIEPA) went into effect on July 1, 2008.
As far as coffee imports go, the new tariffs of JIEPA took effect on July I, 2008 as per the following table.
Table 9. JIEPA tariff
Source: Japan Customs (Japan's Tariff Schedule as of April 1 2008).
Notes: GSP=General System of Tariff Preferences; JIEPA= Japan-Indonesia Economic Partnership Agreement. Until the EPA is ratified by both countries, GSP tariff, otherwise WTO tariff, is applicable to Indonesia.
"R": be subject to negotiations provided for in the terms and conditions set out in the note indicated in the each Party's Schedule.
"X": to be excluded from any commitment of reduction or elimination of customs duties and commitment of negotiation.
2.6. Conclusion
• Japan imports coffee in various forms: green bean, regular coffee, instant coffee, and extracts and essence. Total import quantity is estimated at 425,778mt in green bean equivalent for 2007. Japan is the world's fourth largest coffee importer after USA, German and Italy. Coffee is widely consumed in Japan.
• Over 90% of coffee import is coffee green bean. Japan is a country principally importing green bean and producing various coffee products in Japan. Indonesia is the third largest supplier of coffee green bean for Japan.
• Imports of regular coffee and instant coffee are relatively smaller as the market is dominated by domestic roasters or instant coffee Table manufacturers~ Domestic production accounts for 98% of regular coffee consumption and 86% of instant coffee consumption.
• 41 % of roasted regular coffee is distributed to food manufacturers, in which 60% of the quantity is consumed for production of coffee-based drinks. Coffee drinks hold the largest share (16%) in Japan's soft drink market. In Japan, coffee is often consumed as soft drink besides consumption at home, restaurants, coffee shops.
• Although Japan is the world's fourth largest importer, per-capita consumption (3.4 kg) is small, being roughly half of European countries. There are potentially more rooms for expansion of consumption in Japan.
• Indonesia has well established its position in Japan's coffee market. It is the third largest coffee bean exporter for Japan, supplying Robusta mainly for industrial use such as canned coffee and instant coffee.
2.7. Recommendation
Japan's coffee market is more potential to grow because of its smaller per-capita consumption as well as the increasing coffee-based soft drinks. Considering that Indonesian coffee is imported mainly for industrial use in Japan, consistent quality and stable supply shall be essential for expansion. In this regard, Ministry of Agriculture should put more emphasis on quality assurance program, including agrochemical usage, as Japan's positive list system often rejects coffee green bean imports from South America.
Table 10. Japan's green coffee bean import
Source: Pudjiatmoko. 2009. Determining Japanese Market Today for Indonesian Selected Agricultural Products. pp. 15-24. Agricultural Attaché. Embassy of the Republic of Indonesia. Tokyo.
Table 7. Japan's instant coffee market (product basis)
Major exporting countries for Japan are shown in the following figure 6. Brazil is the largest exporter, accounting for 46% share of the total imports from 2003 to 2007, followed by Colombia (16%), Ecuador (11 %), Germany (9%), and Philippines (8%). These five countries supply some 90% of import quantity.Figure 6. Japan's instant coffee import by country; 2003-2007
2.2. Coffee extracts and essence
Coffee extracts or essence is extracted and soluble solids from coffee beans. Those are used by food service or grocery manufacturers to produce coffee-based soft drinks, cakes and confectioneries. Coffee extracts and essence are split into two categories, either sugar-added or sugar-free, and by the category, product size varies significantly. Thus, we estimate the quantity by converting to green bean basis as per the following table.
Table 8. Japan's coffee extracts and essence import, export and consumption, excluding domestic production as part of regular coffee (green bean equivalent)
From the above, Japan's consumption of coffee extracts and essence is estimated at 10,331 mt as green bean equivalent in 2007, excluding domestic production. Supplying countries for Japan are fairly limited. Brazil occupied 95% share of sugar-added extracts and essence imports, and Japan's imports of sugar-free extracts and essence are dominated by Brazil, Malaysia, Columbia, Holland and Indonesia. Coffee extracts and essence are imported principally to fulfill shortage of domestic production.
Figure 7. Japan's coffee extracts and essence import by country; 2003-2007
Regarding sugar-added extracts and essence, there is not any import from Indonesia.
2.3. Chain of Distribution
Some 72% share of the imported green beans is distributed to roasters for production of regular coffee. Distribution of roasted regular coffee is split into three destinations: 1) food manufacturers for various applications, 2) food service sector, such as hotels, coffee shops and restaurants, and 3) retail trades for home use. A 26% share of coffee green beans is distributed to manufacturers for production of instant coffee. The remaining 2% share is a distribution as coffee extracts and essence to various food manufacturers. After manufacturers, various final products are distributed to consumers through retail stores or food service operators. The distribution system is complicated and is outlined in the following diagram.
Figure 8. Distribution channel of coffee (green bean basis)
In the regular coffee market, three major roasters supply more than half of demand for food service and home use. Those roasters own farms in major coffee producing countries and import coffee green beans directly form those owned farms. Smaller roasters purchase green beans from importers. Talking about instant coffee market, because instant coffee manufacturing needs large capital expenditure, manufacturers with full operation from processing green beans to the final products are limited to three manufactures, i.e. Nestle, AGF, Takasago Coffee. Other instant coffee manufacturers import instant coffee in bulk for repacking. Products are distributed to retail stores via distributors and wholesalers.
Either way, import share of processed coffee products is small though all green beans are imported. Japan is a country principally importing coffee green beans and producing various coffee products in Japan, and the market is fairly dominated by large roasters as well as instant coffee manufacturers.
2.4. Consumption
The Japanese coffee market has posted an increasing trend of consumption for past years. Such a growth is seen especially in regular coffee market. It is attributed to continuous development of new products as well as consumers' increasing preference for better tastes. In addition, one of the reasons behind steady growth is the changing coffee shop market. We are seeing that many coffee shop chain operators, such as Starbucks or Doutor, are expanding store network and offering gourmet coffee.
In terms of green been basis, Japan is now consuming coffee of some 440,000mt per year. Although it is matured, the market is sill growing with more potential room for future expansion. In fact, although Japan is the fourth largest importing country in quantity basis, Japan's per-capita consumption remains at a low level. According to International Coffee Organization, Japanese coffee consumption in 2006 was 3.4 kg per-capita, being roughly half of European countries. In this respect, there are potentially more rooms for expansion of coffee consumption in Japan.
Figure 9. Per-capita coffee consumption of major countries, 2006
As earlier described in the regular coffee section, a 41 % share of roasted regular coffee is distributed to food manufacturers, in which some 60% quantity is used for production of coffee drinks. Thus coffee drink consumption influences Japan's overall coffee market. In fact, coffee beverages occupy top position in Japan's soft drink market, accounting for 16% of the total production. In Japan, coffee is consumed as popular soft drink besides consumption at home, restaurants, coffee shops, etc.
Figure 10. Japan's soft drink production by product group; 2006
Despite sluggish sales of canned coffee, total coffee drink consumption has continued to increase for a long term. Also consumption of regular coffee and instant coffee has showed a continuous growth for the same period. Although Japanese market is maturing, coffee consumption is growing and is expected to grow further.Figure 11. Japan's drink consumption index changes
Increasing coffee consumption is also indicated in Japan's household expenditure. The following graph shows that the Japanese coffee consumption per household has increased in the past years, while average purchasing price at retail trade decreased.Figure 12. Household expenditure for coffee, 2000-2007
2.5. EPA tariffJapan and Indonesia signed an Economic Pat1nershipAgreement (EPA) on 20th August 2007 that aims to eliminate tariffs on about 92% of the trade between the two countries, and Japan-Indonesia Economic Partnership Agreement (JIEPA) went into effect on July 1, 2008.
As far as coffee imports go, the new tariffs of JIEPA took effect on July I, 2008 as per the following table.
Table 9. JIEPA tariff
Source: Japan Customs (Japan's Tariff Schedule as of April 1 2008).
Notes: GSP=General System of Tariff Preferences; JIEPA= Japan-Indonesia Economic Partnership Agreement. Until the EPA is ratified by both countries, GSP tariff, otherwise WTO tariff, is applicable to Indonesia.
"R": be subject to negotiations provided for in the terms and conditions set out in the note indicated in the each Party's Schedule.
"X": to be excluded from any commitment of reduction or elimination of customs duties and commitment of negotiation.
2.6. Conclusion
• Japan imports coffee in various forms: green bean, regular coffee, instant coffee, and extracts and essence. Total import quantity is estimated at 425,778mt in green bean equivalent for 2007. Japan is the world's fourth largest coffee importer after USA, German and Italy. Coffee is widely consumed in Japan.
• Over 90% of coffee import is coffee green bean. Japan is a country principally importing green bean and producing various coffee products in Japan. Indonesia is the third largest supplier of coffee green bean for Japan.
• Imports of regular coffee and instant coffee are relatively smaller as the market is dominated by domestic roasters or instant coffee Table manufacturers~ Domestic production accounts for 98% of regular coffee consumption and 86% of instant coffee consumption.
• 41 % of roasted regular coffee is distributed to food manufacturers, in which 60% of the quantity is consumed for production of coffee-based drinks. Coffee drinks hold the largest share (16%) in Japan's soft drink market. In Japan, coffee is often consumed as soft drink besides consumption at home, restaurants, coffee shops.
• Although Japan is the world's fourth largest importer, per-capita consumption (3.4 kg) is small, being roughly half of European countries. There are potentially more rooms for expansion of consumption in Japan.
• Indonesia has well established its position in Japan's coffee market. It is the third largest coffee bean exporter for Japan, supplying Robusta mainly for industrial use such as canned coffee and instant coffee.
2.7. Recommendation
Japan's coffee market is more potential to grow because of its smaller per-capita consumption as well as the increasing coffee-based soft drinks. Considering that Indonesian coffee is imported mainly for industrial use in Japan, consistent quality and stable supply shall be essential for expansion. In this regard, Ministry of Agriculture should put more emphasis on quality assurance program, including agrochemical usage, as Japan's positive list system often rejects coffee green bean imports from South America.
Table 10. Japan's green coffee bean import
Source: Pudjiatmoko. 2009. Determining Japanese Market Today for Indonesian Selected Agricultural Products. pp. 15-24. Agricultural Attaché. Embassy of the Republic of Indonesia. Tokyo.
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