PRIVATE LABEL GAINS IN JAPAN'S RECESSION

KOJI HIRANO

TOKYO (FNS) -- Branded product manufacturers in recessionary Japan are facing a marketing challenge from store brands that is all too familiar to their counterparts in Europe and North America.

With supermarket chains here adding more private-label products to help maintain profits in a time of low economic growth, some manufacturers are busy re-evaluating the consumer value equation.

"There are various advantages for national brands," said an official of Lion Corp., one of Japan's major laundry detergent makers.

"It is sold everywhere, it has high quality, it can be used with any water all over Japan and consumers know our products through TV commercials."

Lion is facing a significant challenge from Ito-Yokado Co., which in April introduced Shoot, a store-brand laundry detergent, in its 3,746 supermarkets and convenience stores. The retailer projects sales of $14.3 million, or four million 1.5-kilogram packages a year.

"The retail price is $3.55, while same-size national-brand detergents are about $5.10," said Kazuko Itakura, an Ito-Yokado spokeswoman. "We sold 350,000 packages of Shoot in the first month," she added.

Although Lion's price is about 40% higher than Shoot's, the manufacturer insisted, "sales volume has not changed even after the private-label detergents appeared in the market."

Ito-Yokado's store-brand thrust is mirrored by other Japanese supermarket chains. Daiei, with 370 stores, reported sales of $403 million for its Saving store brand during fiscal 1993, up 94.1% from a year earlier.

For fiscal 1994, the company expects sales of Saving products to reach $715.3 million from 411 items, up 77.5% from fiscal 1993. Total store-brand sales at Daiei, including Saving, were $1.97 billion, or about 12% of the entire sales for fiscal 1993, according to the company.

Jun Nakauchi, Daiei vice president, predicted that sales of private brands will become 20% of Daiei's entire sales "in a medium-range plan."

At Jusco, which operates about 160 supermarkets in Japan, sales from private labels were $745 million, or 10% of total sales, for fiscal 1993. And a spokesman at Seiyu said its sales from private labels for fiscal 1993 made up 3% of total sales, but "we expect the ratio of private labels to grow up to 10%." "Consumer preferences have changed," said Kunihiro Ohishi, an analyst at the Research Institute on the National Economy. "People are more conscious of price and value in this recessionary time."

With food producer costs high in Japan, some retailers are sourcing store-brand products off-shore. An example is Ito-Yokado's 474-milliliter package of vanilla ice cream.

Said Itakura, "In Japan, milk is 61 cents per one kilogram, while it is 20 cents in New Zealand. We make vanilla ice cream there at lower cost and import it." Snow Brand Milk Products, which has 13% of the nation's ice cream market, said it doesn't intend to reduce the retail price of its ice cream to compete.

Although Snow Brand's suggested price of $5.61 for a 470-milliliter package of ice cream is almost twice as much as Saving, "sales increased from April to June this year compared with the same period of last year," the company said.

Konica Corp., a film manufacturer that has about 20% of the disposable camera market in Japan, began producing disposable cameras for Daiei's private label on June 30. The camera sells for $10, about 30% lower than other national brands.

However, Fuji Film Corp., which controls about 80% of the disposable camera market, doesn't offer private labels.

"It is minor manufacturers that will lose share of market to growing private brands. Major brands will retain share, and minor ones try to survive by offering private labels for retailers," said an executive in the photo film industry.