Japan: A Market of Challenge and Opportunity For U.S. Red Meat Exports

Japan: A Market of Challenge and Opportunity For U.S. Red Meat Exports

Take an area just slightly smaller than the State of Montana.  Squeeze in 127 million people and a highly industrialized and modern economy with one of the highest disposable incomes and standards of living in the world.  That’s Japan.

This mountainous island nation has the world’s second-largest economy in terms of gross domestic product.   Only 13 percent of Japan’s land is arable, and it has an agriculture infrastructure that is aging and gradually falling behind in its ability to feed its own people.

These factors combine to make a nation that is only 51 percent self-sufficient in pork production and 43 percent self-sufficient in beef.   For the U.S. beef and pork industries, that spells opportunity.  For the U.S. Meat Export Federation (USMEF), that makes Japan an area of focus.

U.S. pork exports

Steady growth in both volume and value of exports to Japan has made this nation the key trading partner for the U.S. pork industry.   Following are a few statistics that document the importance of the Japanese market for U.S. pork exports:

• In 2007, Japan was the leading destination for U.S. pork in volume (358,582 metric tons or 790.5 million pounds) and value ($1.153 billion).
• Japan accounted for 27.5 percent of total U.S. pork industry exports by volume in 2007 and 36.5 percent by value.
• Demand in Japan for U.S. pork has continued its exceptional growth in 2008, reaching 259,144 metric tons (571.3 million pounds) – an increase of 24 percent in volume over the first seven months of 2007.  Those exports were valued at $849.7 million, a 27 percent increase in value over January – July exports in 2007.
• In addition to the high volume of pork imports, Japan provides the highest average value per ton of any market.

Although the U.S. pork industry has enjoyed great success and growth in Japan, other nations recognize the export potential in Japan and the competition for sales is fierce.  The United States was the largest pork supplier to Japan in 2007 with 38 percent of the market.  Canada and Denmark were next with 19 and 17 percent, respectively, while China, the world’s largest pork producer, is increasing its exports to Japan and now has a 6 percent market share.  On the horizon are Mexico and Chile, both of which have free trade agreements with Japan and are aggressively working to expand their market shares.

The U.S. pork industry’s sales to Japan are split among the processing sector, retail and food service, although processing takes the lead with 40 percent of U.S. exports there.  To help overcome the perception that U.S. pork – like all imported pork – is a commodity product, USMEF has developed programs to educate processors and importers regarding the quality attributes of U.S. pork as well as its potential for profitability and its availability in a wide range of cuts and value-added products.

At the retail level, USMEF has educated key retail accounts on better merchandising techniques for a wider range of products and cooking styles.  Consumers are the direct target of USMEF’s “Mainichi Oishi” (everyday delicious) theme, which provides unique recipe cards and point-of-sale materials to help communicate key messages about the quality and versatility of U.S. pork.

In the coming year, the fact that U.S. pork is the No. 1 imported pork and readily accepted by consumers will be stressed in a new promotional campaign.

“All of these efforts are helpful in raising the awareness of U.S. pork among targeted audiences,” said Greg Hanes, USMEF director for Japan.  “As the largest pork importer in the world, and especially with the high margins it provides, Japan is a target for many other countries.  Given the competitive nature of this market and the huge potential it offers, we know that we will need to continue to refine our efforts to maintain our customer loyalty and support continued growth.”

U.S. beef exports

The significance of Japan for the U.S. beef market is easy to measure.   In the year 2000, Japan accounted for:

• Nearly 43 percent of U.S. beef exports by volume (546,010 metric tons or 1.2 billion pounds)
• Half of the value of all U.S. beef exports – more than $1.8 billion
• The highest average per ton value of beef exports to any market – both in 2008 as well as pre-BSE, resulting in added value for every animal

After BSE was discovered in the United States nearly five years ago, total U.S. beef exports fell significantly – by nearly 75 percent in 2004.  But exports are steadily regaining lost ground.  In 2007, exports reached 60.5 percent of 2003 volume, while the value has reached nearly 68 percent of 2003 levels.  In the first half of 2008, beef export volume and value recovered to 71 percent and 87 percent of their respective 2003 levels.  Regaining the Japanese market, however, provides unique challenges.

Increased competition from Australia

Since 2003, Australia has increased its share of Japan’s beef import market to 80 percent.  To help counter the strength that Australia has amassed in Japan, USMEF has developed a variety of educational programs for the media, buyers, retailers, restaurants and consumers to help them understand the safety and quality of U.S. beef.  As part of that effort, in mid-2006 USMEF launched the “We Care” campaign designed to help restore their confidence in U.S. beef.  The campaign continues today with very positive feedback, although the Australian beef industry is countering with significant investments of its own in an effort to hold onto its expanded market that it holds today due to continuing restrictions on U.S. beef imports.

Maximizing beef resources

Beef exports to Japan since the discovery of BSE in the United States have been limited because of requirements that only age-verified cattle (20 months of age or younger) can be used for beef products.  Despite being limited to a fraction of the U.S. cattle herd, USMEF has worked to expand the volume and selection of beef products that appeal to Japanese consumers.

When Japan was open to U.S. beef from cattle of all ages, only about five main cuts were sufficient to meet most of Japan’s beef demand.  When it became clear that only a much smaller subset of the U.S. cattle herd would be eligible for the Japanese market, providing an adequate supply of beef became much more challenging.  So USMEF devised an innovative strategy and research program to develop 17 unique new beef cuts that would appeal to Japanese consumers and help increase volume sales.

With financial support from the U.S. Department of Agriculture, Nebraska Beef Council, Nebraska Corn Board and Nebraska Department of Agriculture; research support from the University of Nebraska-Lincoln and assistance from Colorado State University, USMEF embarked on a program a few years ago that is now yielding substantial results in Japan and offers promise in other export markets as well.

The cattle age limitation still held U.S. beef exports to Japan in 2007 to just over 12 percent of 2003 levels in volume and 17.5 percent in value.  But a number of factors, including gradual increases in the number of age-verified cattle as well as the 17 cuts initiative, have helped U.S. beef exports to Japan jump 66 percent in volume and 70 percent in value in the first half of 2008 versus 2007.

Even with these challenges, Japan still ranks as the United States’ third-largest beef export market in terms of value behind Mexico and Canada.  In addition to numerous local and regional retailers, all of the top five national retail chains again are selling U.S. beef.

“We are seeing continuous improvements in both the quantity and value of beef products going to our trading partners in Japan, and we’re seeing increased confidence on the part of consumers.   In fact, buyer demand is still outstripping the available supply,” said Philip M. Seng, president and CEO of USMEF.  “As we have seen with the new 17 cuts initiative, there is unrealized potential in Japan.  We eagerly await the time when the U.S. beef industry has unencumbered access to this key trading partner.”

Japan: A Market of Challenge and Opportunity For U.S. Red Meat Exports

Take an area just slightly smaller than the State of Montana.  Squeeze in 127 million people and a highly industrialized and modern economy with one of the highest disposable incomes and standards of living in the world.  That’s Japan.

This mountainous island nation has the world’s second-largest economy in terms of gross domestic product.   Only 13 percent of Japan’s land is arable, and it has an agriculture infrastructure that is aging and gradually falling behind in its ability to feed its own people.

These factors combine to make a nation that is only 51 percent self-sufficient in pork production and 43 percent self-sufficient in beef.   For the U.S. beef and pork industries, that spells opportunity.  For the U.S. Meat Export Federation (USMEF), that makes Japan an area of focus.

U.S. pork exports

Steady growth in both volume and value of exports to Japan has made this nation the key trading partner for the U.S. pork industry.   Following are a few statistics that document the importance of the Japanese market for U.S. pork exports:

• In 2007, Japan was the leading destination for U.S. pork in volume (358,582 metric tons or 790.5 million pounds) and value ($1.153 billion).
• Japan accounted for 27.5 percent of total U.S. pork industry exports by volume in 2007 and 36.5 percent by value.
• Demand in Japan for U.S. pork has continued its exceptional growth in 2008, reaching 259,144 metric tons (571.3 million pounds) – an increase of 24 percent in volume over the first seven months of 2007.  Those exports were valued at $849.7 million, a 27 percent increase in value over January – July exports in 2007.
• In addition to the high volume of pork imports, Japan provides the highest average value per ton of any market.

Although the U.S. pork industry has enjoyed great success and growth in Japan, other nations recognize the export potential in Japan and the competition for sales is fierce.  The United States was the largest pork supplier to Japan in 2007 with 38 percent of the market.  Canada and Denmark were next with 19 and 17 percent, respectively, while China, the world’s largest pork producer, is increasing its exports to Japan and now has a 6 percent market share.  On the horizon are Mexico and Chile, both of which have free trade agreements with Japan and are aggressively working to expand their market shares.

The U.S. pork industry’s sales to Japan are split among the processing sector, retail and food service, although processing takes the lead with 40 percent of U.S. exports there.  To help overcome the perception that U.S. pork – like all imported pork – is a commodity product, USMEF has developed programs to educate processors and importers regarding the quality attributes of U.S. pork as well as its potential for profitability and its availability in a wide range of cuts and value-added products.

At the retail level, USMEF has educated key retail accounts on better merchandising techniques for a wider range of products and cooking styles.  Consumers are the direct target of USMEF’s “Mainichi Oishi” (everyday delicious) theme, which provides unique recipe cards and point-of-sale materials to help communicate key messages about the quality and versatility of U.S. pork.

In the coming year, the fact that U.S. pork is the No. 1 imported pork and readily accepted by consumers will be stressed in a new promotional campaign.

“All of these efforts are helpful in raising the awareness of U.S. pork among targeted audiences,” said Greg Hanes, USMEF director for Japan.  “As the largest pork importer in the world, and especially with the high margins it provides, Japan is a target for many other countries.  Given the competitive nature of this market and the huge potential it offers, we know that we will need to continue to refine our efforts to maintain our customer loyalty and support continued growth.”

U.S. beef exports

The significance of Japan for the U.S. beef market is easy to measure.   In the year 2000, Japan accounted for:

• Nearly 43 percent of U.S. beef exports by volume (546,010 metric tons or 1.2 billion pounds)
• Half of the value of all U.S. beef exports – more than $1.8 billion
• The highest average per ton value of beef exports to any market – both in 2008 as well as pre-BSE, resulting in added value for every animal

After BSE was discovered in the United States nearly five years ago, total U.S. beef exports fell significantly – by nearly 75 percent in 2004.  But exports are steadily regaining lost ground.  In 2007, exports reached 60.5 percent of 2003 volume, while the value has reached nearly 68 percent of 2003 levels.  In the first half of 2008, beef export volume and value recovered to 71 percent and 87 percent of their respective 2003 levels.  Regaining the Japanese market, however, provides unique challenges.

Increased competition from Australia

Since 2003, Australia has increased its share of Japan’s beef import market to 80 percent.  To help counter the strength that Australia has amassed in Japan, USMEF has developed a variety of educational programs for the media, buyers, retailers, restaurants and consumers to help them understand the safety and quality of U.S. beef.  As part of that effort, in mid-2006 USMEF launched the “We Care” campaign designed to help restore their confidence in U.S. beef.  The campaign continues today with very positive feedback, although the Australian beef industry is countering with significant investments of its own in an effort to hold onto its expanded market that it holds today due to continuing restrictions on U.S. beef imports.

Maximizing beef resources

Beef exports to Japan since the discovery of BSE in the United States have been limited because of requirements that only age-verified cattle (20 months of age or younger) can be used for beef products.  Despite being limited to a fraction of the U.S. cattle herd, USMEF has worked to expand the volume and selection of beef products that appeal to Japanese consumers.

When Japan was open to U.S. beef from cattle of all ages, only about five main cuts were sufficient to meet most of Japan’s beef demand.  When it became clear that only a much smaller subset of the U.S. cattle herd would be eligible for the Japanese market, providing an adequate supply of beef became much more challenging.  So USMEF devised an innovative strategy and research program to develop 17 unique new beef cuts that would appeal to Japanese consumers and help increase volume sales.

With financial support from the U.S. Department of Agriculture, Nebraska Beef Council, Nebraska Corn Board and Nebraska Department of Agriculture; research support from the University of Nebraska-Lincoln and assistance from Colorado State University, USMEF embarked on a program a few years ago that is now yielding substantial results in Japan and offers promise in other export markets as well.

The cattle age limitation still held U.S. beef exports to Japan in 2007 to just over 12 percent of 2003 levels in volume and 17.5 percent in value.  But a number of factors, including gradual increases in the number of age-verified cattle as well as the 17 cuts initiative, have helped U.S. beef exports to Japan jump 66 percent in volume and 70 percent in value in the first half of 2008 versus 2007.

Even with these challenges, Japan still ranks as the United States’ third-largest beef export market in terms of value behind Mexico and Canada.  In addition to numerous local and regional retailers, all of the top five national retail chains again are selling U.S. beef.

“We are seeing continuous improvements in both the quantity and value of beef products going to our trading partners in Japan, and we’re seeing increased confidence on the part of consumers.   In fact, buyer demand is still outstripping the available supply,” said Philip M. Seng, president and CEO of USMEF.  “As we have seen with the new 17 cuts initiative, there is unrealized potential in Japan.  We eagerly await the time when the U.S. beef industry has unencumbered access to this key trading partner.”