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Nestlé has dominated the instant coffee market in Japan for a number of years, however, during the 1960s; canned coffee became more popular in Japan. Nestlé overlooked this chance to gain more of the market share and branded canned coffee as a coffee-flavoured drink, so did not to enter the market. Kirin Beer, Nestlé’s partner at the time, broke off its relationship with Nestlé after they refused to enter the canned coffee market. This increased Coca Cola’s chances and they entered the market with Georgia, especially for this part of the Japanese market. Coca-Cola managed to secure 40% of the canned coffee market in Japan by utilising its existing distribution channel. Nestlé only entered the market in the early 1990s and has only a 4% share, through a partnership with Otsuka Beverage [1, 2]. In 1991, Otsuka Beverage’s “Nescafé Canned Coffee” sold 50 million cases (30 cans per case) from September to October and around 70 million individual cans from September to November. In the beginning, the individual canned coffee product was mostly placed on Japan-Rail kiosks throughout Japan. By entering the canned coffee market Otsuka created much competition between already existing brands; such as Coca-Cola group (Georgia) and beer group (Suntory, Kirin and Asahi) who had already achieved a great deal of market share . However, Table 1 shows that Nestlé’s market share for canned coffee products in 2005 remained at less than 10% .
The Japanese accepted Nestlé instant coffee, which in turn helped them to be the dominant coffee product in Japan. Nevertheless, to compete with soft drinks they launched a new canned coffee that was not accepted by the Japanese like instant coffee, this was because to the Japanese it was just a coffee flavoured drink rather than a can of real coffee.
Nestlé spends approximately 1% of its annual sales revenue on Research and Development (R&D) and in 2006 had 3,100 employees dedicated to this department. Around 70% of the R&D budget is spent on development initiatives that focus on developing products and processes that fulfil market needs .
A report by AgExporter, in October 1992 found that Japan is “the world’s largest market for ready-to-drink (RTD) canned coffee” , which gives foreign firms a good opportunity for investment. In 1991, the Japanese consumed a total of $7.3 billion worth of canned coffee products, this accounted for roughly a quarter of all canned beverage sales . The market reached a value of $16 billion in 2003, having grown with a compound annual growth rate (CAGR) of 2.9% in the years 1999-2003 .
A reason for canned coffee’s popularity is how it is easily adapted to each season’s temperature. Through the colder winter months, consumers favour hot canned coffee to “soft drinks, beer, fruit juices, milk”  and other cooler drinks. In the hotter summer months, cold canned coffee is preferred. A Japanese trade publication showed that sales of canned coffee were roughly evenly split between summer and winter months .
Another reason for the rapid growth in sales of RTD coffee is due to the extensive distribution in vending machines. About 70-80% of total sales of canned coffee are sold via vending machines according to the Japan Soft Drink Bottlers Association. The other 20-30% is sold in convenience stores and supermarkets .
Negotiation of strong product distribution through vending machines is particularly important in the Japanese soft drinks market. Almost three quarters of all canned coffee is sold via vending machines .
Graphs 1 and 2 show sales of RTD coffee have been declining since 2003, however in 2010 for Coca-Cola (Graph 1) the trend begins to rise whilst Nestlé (Graph 2) continues to decline . RTD coffee was not the only soft drink to suffer a loss in 2009; the losses were mainly a result of the recession and a shorter summer, which forced many consumers to cut back on spending on unnecessary goods. Chained coffee shops also reported a significant fall in customer numbers through 2009. This caused many Japanese consumers to use thermal flasks to take coffee to work .
Graph 1 
Graph 2 
Coca-Cola (Japan) Co Ltd remains the leader in RTD coffee, accounting for 24% off-trade volume share (see Table 2) and 27% off-trade value share (see Table 3) in 2009. The company benefits from its strong and well-targeted marketing campaigns. The company’s strong branding also helped to sustain demand, with its Georgia brand enjoying a high profile. Coca-Cola accounted for almost double the off-trade value share of its nearest competitor in RTD coffee in 2009, with Suntory Holdings Ltd lagging behind at 13.8% off-trade value share in 2009 .
Even though there are policies in place that deter foreign companies, they do have some strengths that can be used to get a foothold in the Japanese market, “including lower costs for product ingredients, packaging and labour” .
Even though exporters have advantages, there are factors they should take into account when thinking of investing in the Japanese market. These factors include “potential distributors, importers, retailers, vending machine manufacturers and operators to confirm that product packaging is compatible with equipment specifications, government labelling and sanitation standards, and consumer expectations” . Even though there are standards that need to be met, in recent years, the Japanese government has slackened a number of regulations and structural trade barriers, making it easier for foreign companies to enter into Japan. However, there are legal, business and cultural obstacles that remain. Among these are tariffs, food sanitation and labelling laws and Japan’s complex distribution system. Strict limitations have been placed on the use of certain food colourings, preservatives and additives that have to be avoided in canned coffee products .
All products sold in Japan must have the correct labelling. “Labels for imported beverages must include the following information:
Raw materials used, including additives
Date of manufacture or processing
Name and location of manufacturer or processor” 
Nearly all leading brands use steel cans for their canned coffee, although a number of companies use aluminium cans, steel cans are favoured because they are sturdier and not as expensive. Non-carbonated beverages often come in aluminium cans that are more prone to denting; packaging is an important issue to address when selling via vending machine since Japanese consumers will reject dented cans. “The most common serving sizes for canned coffee products are 150 grams, 190 grams, 250 grams and 350 grams”  with the most popular being the 250 gram can. However, increased costs of production and ingredients have forced many manufacturers to switch to the smaller 190-gram can but still charge the same price. An increase in product quality is usually the main reason for using the smaller can size; this bodes well with the Japanese consumers who often perceive quality over quantity. Pull-tabs are featured on most brands of canned coffee; however, push-tab cans are gaining in popularity because of growing environmental concerns .
Most of the major canned coffee manufacturers own their own vending machine networks. Using this, manufacturers can maintain complete control over vending distribution of their products .
By working with major vending operators, this will provide foreign firms with an understanding of the Japanese vending machine business and provide assistance for things like product design, packaging, test marketing and strategic planning . “The success or failure of a foreign canned coffee product in Japan may well depend on the selection of an appropriate operator” .
In Japan, trade shows are quite frequent and popular; they provide an excellent opportunity for exporters to introduce products to potential distributors and retailers. “These events also offer exporters a chance to gather information about market conditions and products manufactured by Japanese and other foreign companies” .
Other sources of information that are available and will aid foreign companies are trade journals and publications, which are a key source of information on product and market developments. Advertising published in these journals and publications can help product manufacturers find suitable business support services .
In 2004, “Nescafé Santa Marta,” from Nestlé Japan Group was introduced that is made with 100% Santa Marta coffee beans it was produced in 190g cans and cost ¥115. Another two versions for Nescafé Santa Marta were also introduced one was called ‘UP’ and the other ‘BREAK’. ‘UP’ was advertised to retain a just-brewed coffee taste and sharp bitterness and comes in a red can, and ‘BREAK’ was advertised as a perfect way for loosening the tension and is sold in a blue can. Like the original, both come in 190-gram cans and cost ¥120 each [9, 10].
Ways of rebranding Nestlé RTD coffee include retaining the taste and aroma of freshly brewed coffee, making canned coffee healthier, increasing the range of coffee types, and giving canned coffee a more premium image. (See Appendix 1 for PEST analysis and Appendix 2 for SWOT analysis).
By rebranding Nestlé RTD coffee, it will help to give a fresh look, which will aid in attracting new customers potentially from competitors and new possible employees. Another advantage is to differentiate even more from competitors, and because the RTD coffee-market it slowly becoming saturated, rebranding will help boost sales and increase brand image.
Possible rebranding of the two products ‘BREAK’ and ‘UP’ could include renaming the product followed by a slogan but still promoting that one boosts energy and one relaxes you. Renaming and redesigning each one would give the illusion of a brand new product to existing and potential consumers. Examples of rebranding ‘BREAK’ could be ‘Onsen followed by the slogan ‘Relax’, and an example for ‘UP’ could be ‘Boost with the slogan ‘Kick start your day”. Using a variety of Japanese words within the product names across the range would help attract various consumer groups. Words such as ‘Onsen’ would more likely attract the older consumers who after a long day at work just want to relax, but changing the word to ‘Karaoke coffee – Keeping you in tune’ would most likely attract the younger consumers. Another aspect of rebranding RTD coffee is too look and choose the release of the coffee carefully as different seasons can help promote different coffees, especially if the name also includes something relative to a particular season. For instance a RTD coffee named ‘Sakura – Be one with nature’ would probably get the most attention and largest sales during the spring months, when the Sakura are in bloom, another seasonal coffee for the winter months, with the name ‘Mountain Top’ that can promote coffee with cream.
Another key factor in rebranding a product is the dominant colour in the design. For Nescafé their brand colour is red, when combined with white it then portrays the national colours of Japan, this could be another factor in helping attract the consumers’ attention. Another role that colours play in rebranding is, when used correctly then can give products a premium look along with a highly impactful design of youth and vitality. Giving the product a more premium image will help consumers distinguish the product from competitors and make them realise it is not just ‘another’ canned coffee. The product name once again comes into effect, giving the coffee a name of honour and meaning could help in rebranding a product as premium, example names could include ‘Emperor Coffee – Respect the taste’ and ‘Samurai Coffee – A cut above the rest’.
Even though rebranding can make the can look more prominent, another aspect is to go back to the roots of Nescafé and make the coffee can simple yet effective. By replicating the instant coffee colour scheme and design onto the can, it would help the consumer to see that the same coffee goes into both the instant and into the canned coffee products. With Nestlé dominating the instant coffee market, this strategy could help boost sales of the canned coffee. Using a name like ‘Nescafé Simple – Anywhere, Anytime’ and the brand colour of red would be one way of promoting this strategy.
By researching things that are, Japanese and things that the Japanese respect can aid in a successful rebrand of RTD coffee. The Japanese are very passionate about luck from good luck charms to New Year good luck predictions. Using the category of luck RTD coffee can help gain consumer loyalty and additional consumers. One way of promoting luck and RTD coffee is to change the name to ‘Lucky’ and incorporating the kanji symbol ‘hachi’ into the design. Using these two factors another can be added, the use of ‘lucky ring pulls’ with this different items can be ‘won’ such as a free can of ‘Lucky’ if a ring pull is red, or by collecting a certain number of green ring pulls this would allow the consumer to trade them in for a unique mug. The mug’s design can promote an upcoming film/anime or perhaps to look ‘kawaii’, which is highly popular in Japan. In order to keep consumers and bring in potential new ones from such areas as business people and teenagers canned coffee with the name ‘Inspire’ may help, as this name has the possibility to motivate people after drinking it.
By making canned coffee healthier, it may help attract consumers away from other healthy soft drinks such as green tea; ways of achieving a healthier coffee is decreasing caffeine content or making a caffeine-free version. This method can attract consumers who want to achieve or maintain a healthy lifestyle; this form of rebranding will most likely be successful especially in today’s more health-conscious society. One possible problem with zero/low caffeine coffee which needs to be addressed is that the coffee must still maintain the real coffee taste which is present from freshly brewed coffee, however if this problem can be overcome then the firm will stand a good chance of gaining a higher market share. Another method that is being adopted to create a healthier RTD coffee is the use of polyphenol coffee, which contains caffeic acid, which aids the body by acting as an anti-oxidant . If Nestlé were to incorporate the Nescafé Green Blend into a canned coffee version, this is would maximises the anti-oxidants thus creating a more healthy canned coffee variety, this would allow Nestlé to tap into the healthy RTD coffee market .
Nestlé Japan Ltd increased its focus on health positioning in its advertising in early 2010, showing the entry into new area for a product type that traditionally has not been associated with health and wellness.
In November 1994, a report was published which showed that only 20% of the sales of canned coffee was bought by women; they often favour unsweetened coffee so often visit coffee shops for black coffee, this is due to a majority of women being calorie-conscious so black coffee is preferred .
In 2006 infoPLANT carried out a survey about canned coffee, which looked at consumerism and packaging. “Over a week at the start of October 6,480 successfully completed the survey, with 65.7% of the respondents being female.” Graph 3 shows how often the respondents purchased canned coffee .
Graph 3 
Regardless of Japan’s economic position, coffee has not gone out of fashion; in fact, it retains the same importance as ever. Coffee is regarded as a healthier alternative to caffeine-based energy drinks; and continues to have a broad appeal across a wide range of the population who work long and increasingly anti-social hours. Canned coffee’s diversity and popularity allows enjoyment by a wide range of consumers from high school students through to the elderly .
Although there is potential to rebrand Nestlé RTD coffee to draw in the additional consumers; the majority of RTD coffee drinkers’ remains with business people. Therefore, it is very important to rebrand not only a product to attract other areas of the population such as younger and older generation, but also rebrand a product to attract the masses. This would enable Nestlé to increase its consumer base but remain focused on RTD coffee’s main consumer.
Word count (excluding tables): 2750
Word count (including tables): 2931
 HILL, C. W. L. 2010. Part V Case: Nestle: Global Strategy International Business. 8 ed.: McGraw-Hill.
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 NESTLÉ. Q&A [Online]. Available: http://nestle.jp/faq/polyphenol/index.html [Accessed 11th December 2010].
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 SILVERMAN, I. 1994. Women are newest target for canned coffee in Japan. Advertising Age, 65, 60.
 KEN, Y. N. 2006. What Japan Thinks [Online]. Available: http://whatjapanthinks.com/2006/10/26/almost-half-of-japanese-men-start-their-workday-with-a-canned-coffee/ [Accessed 11th December 2010].
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