A Nutraceuticals Update

‘Defining moment’ to come in Japanese market.

By Ron Bailey

At this time last year in the nutraceuticals and functional foods market in Japan, there were hopeful signs that the Japanese economy had “bottomed out” and was beginning to recover. Unfortunately, there has not been much real economic pro­gress since then, in part related to the recent impact of the September 11 events, but equally important the resistance to making major structural changes that is typical in Japan. The coming year is therefore likely to be another “defining moment” for the Japanese economy. It is hoped that major events like the World Cup 2002 soccer championship (hosted by Japan and Korea) will help to stimulate consumer spending and pull Japan out of the recession it has been in and out of for several years. At this time, however, it is too early to tell if that will happen.

Demographics Update

On a more positive note, the primary driving force behind the historic growth of the nutraceuticals and functional foods markets in Japan, the rapid aging of the population, is still in place. The Japanese continue to have the longest life ex­pectancy of any country in the world, for both males and females. The birth rate has declined even further, to the second lowest in the major countries of the world (one behind Italy). Strict immigration policies have not been lessened in any significant way. The combined effect of these trends is that the Japanese population is aging at a rate faster than any other country in the world. In fact, recent data indicate that if current trends continue, the population of Japan will be reduced by one half (from 126 million currently) later in this century.

The concern for maintaining the health of the aging population has not lessened and health care costs are an increasing financial burden on both the government and, more recently, individuals, as less of their healthcare expenses are met by government payments. The need for nutraceuticals and functional foods to help support health maintenance is therefore stronger than ever.

Regulatory Update

The major concern earlier this year that new restrictive food regulations from the Ministry of Health, Labor and Welfare were imminent was unfounded. In fact, there have been some en­couraging changes aimed at opening up the nutra­ceuticals and functional foods markets this year, which is likely to lead to additional growth in the categories. A new category called “Nutritional Supplement Foods” (as translated) allows what are essentially structure/function claims on labels for non-FOSHU (Foods for Specified Health Use) products for the first time. The regulations are somewhat similar to those for the FOSHU products, with detailed requirements for supporting data to allow making on-label claims, although considerably less complex.

The new regulations, which went into effect April 1, also allow for FOSHU approval for the first time of products in tablet and capsule form, as long as all of the other approval criteria are met. Warner-Lambert Japan recently obtained the first such approval for its “Recaldent Tablet” tablet confectionery, which contains CCP-ACP (casein phosphopeptide and amorphous calcium phosphate complex) as the functional component, with claims that the product “…not only suppresses loss of minerals from teeth but also increases remineralization.” Other tablet and capsule products will almost certainly follow in the near future, particularly if the Warner-Lambert product is a commercial success.

The concern that many common herbs were to be prohibited from sale unless formally registered was also unfounded. While the new regulations permit similar “structure/function” claims to be made on-label for approved herbal products, it is still possible to sell products containing most common herbal ingredients without formal registration as long as on-label claims are not used.

FOSHU Category Update

The number of approved FOSHU products as of the end of September of this yearwas 271, up from less than 200 at the same time last year. The breakdown by unofficial product categories is as follows:

Soft drinks 88
Yogurt products66
Table sugars21
Desserts, cereals,
cooking oils18
Chocolates, candies,
gums, cookies 30
Instant noodles, soups22
Meats, sausages9
Other
(tofu, vinegar, natto, etc.)17

The “functional components” used in the 271 approved FOSHU products, with considerable duplication for several of the ingredients, are as follows:

Fiber sources79
Oligosaccharides60
Lactic acid bacteria50
Peptides and proteins46
Diacylglycerols9
Minerals8
Other19


Permitted claims for FOSHU products are continuing to get stronger and less qualified, as additional data are presented to approval authorities. Some of the functional components are now being used for more than one claim, but for different products. The indigestible dextrin from Matsutani Kagaku, for example, is being positioned to either “moderate the absorption of sugar” or to “compensate for the dietary deficiency of fiber and to regulate the intestines.”

Although formal FOSHU retail sales estimates are not published, it is estimated that the retail sales of the 271 ap­proved products is approximately $3 billion. This estimate is the same as last year, even though the number of approved products has increased significantly. In part this flat overall market is related to the decline in sales of the “Supli” FOSHU near-water drink from Kirin Beverage, which tended to offset sales of new approved products. The entire near-water category, not just the Supli brand, has been in serious decline. More importantly, there have been no conversions of successful non-FOSHU products to make FOSHU status during the past year, which had been the primary support for rapid FOSHU market growth in the past.

Distribution Channel Change Impacts

The trend to increasing sales from convenience stores at the expense of supermarkets is continuing in Japan. There are now nearly 40,000 convenience stores and the 7-11 chain, with 8000 stores, has this year passed supermarket chain Daiei to become the largest retailer in Japan. Since most convenience store chains are allowing nutraceuticals and functional foods an increasing amount of refrigerated and non-refrigerated shelf space, it is expected that the growth of the categories through this important distribution channel will continue. Popular lower-priced supplement-based lines such as “Nature Made” (produced in the U.S.) from Ohtsuka and “Fanci” from Fanci Inc. are now readily available in convenience stores as well as drug stores and health food stores in Japan, but there is still interest in value-added new products with proven efficacy.

Expectations For The Future

All of the elements are in place that will support continued growth in the nutra­ceuticals and functional foods markets in Japan. An aging population more committed to health maintenance, a relatively friendly and supportive regulatory agency, distribution channel interest in health-related new product introductions and a (hopefully) improving overall economy all are positive signs for the future. Growth in the popular FOSHU market will come primarily from conversions to FOSHU status as in the past, but there will be continued growth in non-FOSHU functional foods as well.NW