Relationships key in developing trade deals with Japan

Relationships key in developing trade deals with Japan

By Kathy Kerr

Plant-protein businesses seeking a way into the Japanese market must be prepared to take their time forging relationships with prospective partners, say trade and business experts.

“Japanese companies are changing a little bit. But traditional big Japanese companies have many layers. It takes some time to work with Japanese companies, but usually they are very loyal. They like to have long, good relationships,” says Noboru Shimizu, Canada’s trade commissioner in Japan.

“A lot of emphasis is on trust and relationships and getting to know you,” adds Trevor Lewington, CEO for Economic Development Lethbridge.

“In North America we tend to be more transactional — the sale today — whereas in Japan it tends to be a much longer world view.”

That cultural difference, more about relationships and less about the immediate transaction, will take effort. But as Japan begins to explore the potential of plant protein derived from crops other than soy, the opportunities are great for Alberta producers and ingredient companies getting in on the ground floor.

Market potential

Yellow peasCanadian and Alberta trade officials are optimistic that the Japanese market, already attuned to importing most of its food products, is poised to diversify into protein from sources such as pulses.

“We in the embassy have been focusing on plant protein,” says Shimizu.

He says some Japanese firms attended recent Bridge2Foods plant protein summits in Saskatoon and Calgary, and officials have introduced the Protein Industries Canada initiative to the Japanese market.

“In Japan, we usually eat soy-based protein so we already eat a lot of plant-based products,” says Shimizu.

“Japanese companies are now looking for new plant proteins from other sources. Japanese companies that came for the summit noticed Canada grows fava and other beans. They showed interest in plant-based protein from these other crops.”

Japanese companies are also wondering what to do about meat alternatives, such as Beyond Meat, which are now coming into their market. They know they have to follow those trends, said Shimizu.

And Alberta trade officials are also seeing potential in the changing needs of the Japanese consumers.

“New health research, new demographics, all these things are leading consumers in Japan to make slightly different choices when they’re purchasing food,” says Vlad Oujegov, trade and relations officer, international market development for Alberta Agriculture and Forestry.

“The hope here, and we’ve seen a bit of that confirmed, is that they would go for plant proteins deriving from all pulse crops.”

Trade agreement advantages

Timing in terms of consumer trends is working to the plant-protein sector advantage, as does Canada and Japan’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which provides tariff and trade advantages.

The United States has not signed on to the agreement.

“The CPTPP benefits particularly Canadian SMEs, enhances their market access, their abilities to participate in international trade, creates advantageous conditions and eliminates tariffs on the majority of Canadian exports,” on not just plant protein but other agricultural commodities and agrifoods, says Oujegov.

Lewington adds that now is the window in time on the international trade front. “The U.S. will eventually sign some sort of agreement with Japan but we want to make sure we have a leg up.”

Existing relationships

Canola | Plant Protein Alliance of Alberta PPAAAlberta already does a hefty amount of trade with Japan, with 2018 exports up 11 per cent year over year. Of the $2 billion in goods exported to Japan, $1.27 billion was in food or agricultural products such as canola, pork and wheat.

Lewington says there is a pretty significant financial relationship with Japan in his part of Alberta. Lethbridge-area plants for Maple Leaf pork, McCain potatoes and Sakai Spice all export products to Japan.

“We have many potato farmers and leaders in the community who are of Japanese descent,” he adds.

Need for value-added

The trade officials say the push now should be for Alberta to work on value-added products from its commodities.

“Alberta exports some pulses to Japan in the form of commodities. They’re processed over there,” says Oujegov.

“Trade in plant protein is still developing because of Alberta’s early-stage capacity in fractionation. But that presents an opportunity and an emerging one, which is the export of plant proteins for use in sauces and condiments and food products.

“We’re interested in helping companies do that value-added processing here rather than just exporting commodities,” says Oujegov.

Resources for entrepreneurs

Japan's FoodExBoth provincial and federal government agencies offer services to help the newcomer to the Japanese market. And both governments have personnel stationed in Tokyo.

Oujegov says an excellent venue for a company to make inroads in the market is attendance at the annual Foodex exhibition in Tokyo, which is scheduled for March 10 to 13 in 2020. The event is expected to include exhibitors from 90 countries and attract 85,000 visitors.

“We work with Alberta companies to take advantage of this really good opportunity to network and meet with international buyers and importers,” says Oujegov.

Alberta also has a value-added program of B to B meetings, market-access briefings and presentations to go along with the exhibition.

Although he can’t reveal details, Oujegov says some of the success Alberta agrifood exporters have had recently in the Japanese market have been thanks to the Foodex experience.

The Canadian trade commission is also planning to organize seminars in Japan in mid-March. “We focus on investment. Also, we would like to introduce actual plant-protein suppliers to companies in Japan,”Shimizu says.

The trade commission and Alberta’s Japan trade office work closely together, he adds.

Lewington says there are lots of government services but also, because there is already an export relationship between some companies and Japan, it’s a good idea to talk to companies that have already succeeded in the Japanese market.

Sakai Spice

A Japanese-owned mustard and wasabi plant in Lethbridge illustrates some of the principles of the potential for Japanese investment and partnerships.

Sakai Spice Canada exports mustard powder, used in dressings including mayonnaise, to Japan and co-packs wasabi powder for a Japanese company for export to the U.S.

“The reason we exist is to export to Japan,” says company president Dave Macfarlane.

The company, which employs 40 people, grew from a long business relationship.

Sakai’s president Shiro Sakai met John McDonnell of Canadian mustard company Demeter Agro in the mid-1970s. They became friends and in the early-1990s McDonnell found an old Canada Packers slaughterhouse in Lethbridge and converted it for Sakai Spice’s Canadian branch. The facility began producing in 1995, using mustard grown in Alberta and Saskatchewan.

Macfarlane has experience working with Japanese firms and echoes the advice about the importance of relationships expressed by trade officials.

“They may have contracts, but it’s really that relationship between people and how you negotiate that relationship that determines how things work out, not so much what’s written down.”

 

This story is part of a series exploring the relationships and opportunities with our trading partners:

The Netherlands

Denmark

 

Japan Notes

  • Japan is the world’s third-largest national economy, with a GDP of $6.457 CDN trillion. It is the world’s largest net importer of food.
  • The current population is 126.5 million people. The country’s area is 377,915 sq. km.

Canada and Japan

  • Japan is Canada’s third-largest market for agrifood and seafood products, with agriculture imports averaging $3.98 billion per year.
  • Japan is Canada’s sixth-largest source of foreign direct investment. In the plant-protein realm, Japanese pharmaceutical firm Otsuka bought Canadian plant-protein food company Daiya in 2017, in a deal reported to cost $405 million.
  • Japan is Canada’s second-largest global market for wheat ($598 million) and second-largest market for canola and pork.
  • There are more than 120,000 people of Japanese origin living in Canada; about 14 per cent of that total live in Alberta. About 300,000 Japanese and Canadians travel to each other’s country annually.
  • Japan accounts for 15 per cent of Alberta’s non-U.S. exports.
  • Hokkaido is Alberta’s sister province.

Kathy Kerr, a former deputy and business editor at the Edmonton Journal, is a freelance writer

Posted Dec. 10, 2019

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Allison Ammeter, chair of Plant Protein Alliance of Alberta (PPAA)