Exporting lactose free UHT milk from Finland to Japan. Challenges and opportunities

Essay , 2018 , 11 Pages , Grade: 1,0

Business economics - Trade and Distribution

This paper analyses whether it is profitable as well as what challenges and opportunities may arise by exporting a lactose free UHT milk from Finland to Japan. This will be conducted on a basis of political, economic, geo- and demographical, cultural and business habits and circumstances.

In a time of globalization and more intense competition than ever, trading relations between parties have become a common basis to provide goods and services. Especially the agricultural trading sector has increased steadily. For instance, in the EU the export of animal products has grown for about 131 % between 2002 and 2016. When combing this with another global trend, the increasing awareness of a healthy diet, new market opportunities can be detected. Exemplary cases of the trend include the increasing number of vegetarians, vegans or the usage of supplementary food such as lactose free milk.

Table of content

1 Political aspects

2 Economic aspects

3 Geo- and demographical aspects

4 Cultural aspects

5 Business aspects

6 Recommendations

7 Conclusion

8 List of references

In a time of globalization and more intense competition than ever, trading relations between parties have become a common basis to provide goods and services. Especially the agricultural trading sector has increased steadily. For instance, in the EU the export of animal products has grown for about 131% between 2002 and 2016 (Watson, 2017: pp. 452-453; Eurostat, 2016; MacDonald, Brauman, Sun, Carlson, Cassidy, Geber & West, 2015: p.275). When combing this with another global trend, the increasing awareness of a healthy diet, new market opportunities can be detected. Exemplary cases of the trend include the increasing number of vegetarians, vegans or the usage of supplementary food such as lactose free milk (Nielson Company, 2016). Therefore, in this paper it will be analyzed whether it is profitable as well as what challenges and opportunities may arise by exporting a lactose free UHT milk from Finland to Japan. This will be conducted on a basis of political, economic, geo- and demographical, cultural and business habits and circumstances.

1 Political aspects

Generally, Japan is a member of many international agreements such as the UN, WTO or OECD (CEMAT, 2013: pp. 6-7). As it is globally connected, certain standards and policies need to be guaranteed in order to facilitate international trade. Especially, the relationship between the EU and Japan has been strengthened lately, for instance by the Free Trade Agreement which shall be introduced by 2019. This implies the abolishment of customs, the intensification of trade, harmonization and closer communication (BMEL, 2017; EEAS, 2017; Langhammer, 2017: p. 236; European Commission, 2017). Currently, the agricultural sector in Japan is still subsidized and protected and EU customs to Japan amount about 1 Millard Euro per year (ARD, 2017).

2 Economic aspects

In 2016, Japan’s GDP amounted 4.939 billion US-Dollar, which made it the third largest economy in the world. Additionally, a slow, but steady growth of the GDP (1,6% in 2017) and purchasing power has been documented (Statistisches Bundesamt, 2017: pp. 15-199; rtr; 2018). Household income per capita declined insignificantly in 2017 (CEIC, 2018). When it comes to the overall import, about 11% is obtained from the EU, which makes it the fourth most important trading partner for Japan. Additionally, Japan is the largest food importer globally. When combing this with the fact that the EU is the largest milk producer in the world (20%) and is likely to increase its production in the coming years, a positive relationship can be expected (OECD, 2017: pp.15-16; OECD/ Food and Agricultural Organization of the United Nations, 2017: p.2; CEMAT, 2013: p.2; AAFC, 2010: p.3). Due to Japan’s natural hazard in 2016, it might additionally rely on imports, as its milk production has declined but demand has stayed the same (Obara, 2017). Overall, its demand for milk is comparably low to other dairy products or to western countries (BMI, 2017).

The consumption of milk has remained steadily in the past years: Between 2013 and 2017 it has been between 3.911 and 3.992 thousand tons per year, meaning that it only takes up a small portion of the global milk consumption (FAS, 2017). Japan’s general amount of import has also been steady (BMI, 2017).

3 Geo- and demographical aspects

In 2015, Japan had a population of 126.958 people, which made it the tenth most crowded country in the world (Statistisches Bundesamt, 2017: pp. 2-3). Due to its relatively small landscape, its density is high. As a consequence, land is “scarce and thus expensive “(CEMAT, 2013, p. 2). Additionally, caused by its geographic position, it is vulnerable to natural hazards which alters the agricultural sector as well. Also, Japan is affected by climate change and it is forecast that by the end of the century its agricultural goods will have minimized (Johnston, 2016; Statistisches Bundesamt, 2017: p.50). Japan is highly affected by the demographic change, as it is the most rapidly aging country in the world (CEMAT, 2013: p.4). Birth rates have been declining enormously and its population has a high life expectancy rate, with 84 years average (Statistisches Bundesamt, 2017: p. 69). Also, there has been a trend towards urbanization, as many young people move to the cities to seek a better education or job (Kato, 2014: p. 29; Semuels, 2017).

4 Cultural aspects

According to GTAI (2018), Silverjay (2011) and AAFC (2010: pp. 4-14), Japan has the most health-conscious population globally. Consequently, the highest amount of purchases is dedicated to nutrition which is still typically conducted in supermarkets or convenience stores. They are willing to spend more money if the product is of high quality, organic or fair-trade. Also, its freshness and origin is of importance, although this has changed lately: There is a rising trend towards western food, restaurants and consumption behavior, including more processed food. Especially young people become more aware of western diet, such as the usage of dairy products. However, between 1995 and 2007 the expenditure for milk, cheese and eggs has approximately stayed the same (ca. 2.000 billion Yen per year). Reason for that might be the culture, as in the traditional Japanese cuisine milk products are not used. Another point to be considered, is that Japanese are willing to purchase alternative, new, experimental products to combat allergies or as dietary supplements. A majority of its population is lactose-intolerant (97,5%) (Statista, 2012), which increases the demand for alternative solutions.

5 Business aspects

Japan is attractive for foreign companies as “it offers a good environment for business expansion” (TMF Group, 2016). However, its business culture differs from the European ones, as it is characterized by paternalism, personalism and collectivism. In other words, there are strict social structures in companies and networking is an extremely important part. Also, for individuals it is crucial to support the interest of the collective of people. Although, recently there has been a trend towards individualism, these cultural business aspects are still prominent (CEMAT, 2013: p. 3). Japan has been ranked the 34th country (out of 190) (World Bank, 2017) in terms of doing business. Difficulties in that area constitute bureaucratic issues, cost-intensive regulations or language barriers (TMF Group, 2017).

6 Recommendations

After having examined the current Japanese situation, it is questionable whether launching a UHT lactose free milk is recommendable:

On the one hand, there are several opportunities: Due to the establishment of the free market between the EU and Japan, the export of the lactose free milk will be facilitated and will become less cost-intensive. Also, Japan’s economy seems steady, the GDP is growing slightly and the overall standard in Japan is high. As there has been a shortfall of the milk production in Japan lately, farmers are retiring, young people are moving to urban areas and demand has stayed the same, there might be market opportunities for foreign companies. Also, due to globalization and harmonization it would be easier to distribute a product like this to younger people as they are more open-minded to it. Regarding the cultural aspects, meaning the increasing market awareness of the western culture and the willingness to spend money if the quality is right, are promising aspects. This implies that Japanese are increasingly willing to buy processed meals (which is a characteristic of the UHT milk) and there is a high amount of lactose intolerant people who are in need for an alternative and are willing to try something new. Also, doing business in Japan seems to be an attractive factor. For a EU company, it could be seen as a first launch to see whether this product is profitable and if it would be worth it to expand to other Asian countries later on.

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• College: Åbo Akademi University
• Grade: 1,0
• Publication Year: 2018
• Pages: 11
• Catalog Number: V934293
• ISBN (eBook): 9783346287564
• Language: English
• Tags: Finland, Japan, Lactose free milk, UHT milk, export