For decades, Coca-Cola’s business in Japan has stood out as an almost truly unique market. An outsider who visits for the first time sees a place with a seemingly wild array of options across the beverage landscape.
But as Coca-Cola continues to evolve as a total beverage company, something interesting is happening: The rest of the world is starting to look a little more like Japan. The U.S. market now has a dizzying array of beverages and is growing all the time. Products like kombucha and drinking vinegars are gradually going mainstream.
Of course, Japan still has some characteristics all its own. It has a heavy focus on the convenience channel, and vending is bigger there than anywhere else in the world. Some beverage categories that are big in Japan barely exist anywhere else.
To learn more about Japan, we talked to Jorge Garduño, president of Coca-Cola’s Japan business unit. Garduño has been with the company since 1992, working in many areas of the world. He’s been in charge of the Japanese business since July 2017, working in close partnership with the local bottling system.
There are so many new products and programs launching in Japan in any given year. What factors in the market drive the need for constant innovation?
The Japanese market is incredibly dynamic, fiercely competitive and rooted in innovation. Because of this, our team is constantly looking at ways to experiment – both from a product standpoint and finding new ways to do business with our customers. Consumers here look for variety and want to experiment. We also have categories that are much bigger here than in most of the world – like tea, for example. Ready-to-drink coffee is also an enormous business, and we have the leading brand in Georgia coffees. In the fourth quarter of 2017 alone, we ran dozens of new, key initiatives and programs, from launching new bottle designs to testing new products and flavors. This is how it is all the time.
How do you see this approach supporting the company’s overall strategy?
For one thing, it sets a great example for others. We’re always looking for new ways to reach and please consumers, and a big part of that is introducing them to new products that we think they will love. We’re seeing more of this in other parts of the world, too, and it’s encouraging to see our portfolio expanding with new products and successful brands. Some of the learnings here also influence what happens across the Coca-Cola system. For example, Japan is home to a research hub that specializes in tea and coffee, and products developed here are introduced around the world. We also have a concept here called FOSHU, which means Food for Specified Health Uses. This is a government-approved certification for products with health benefits. We’ve been having a lot of success with these products, like Coca-Cola with fiber, which we call Coca-Cola Plus. Japan has an aging population, and these products appeal to those consumers. Coca-Cola Plus might remain only in Japan, but functional beverages are certainly growing in popularity in much of the world.
James Quincey has talked often about the idea of experimenting more and being willing to fail quickly, learn and move on. Do you have any examples of that in Japan?
The Japan business unit launches an average of 100 new products a year, and many times more are put to the test behind the scenes. Experimentation is almost like a day-to-day ritual here. You can’t fall behind the rapid product cycle in Japan, so we’re always seeking innovation opportunities to deliver fun surprises for consumers.
We’re well into 2018 now. What new products do you anticipate coming to the market?
We’re trying to push the boundaries to serve consumers in new ways. Ayataka is a tea brand that has done really well. We’re introducing a flavor this year that creates a new option for consumers who prefer light taste yet still want to enjoy the richness of green tea. In the sparkling category, we’re introducing THE TANSAN, which features the strongest carbonation ever in our products in this country, to reach health conscious adult sparkling lovers. We’re also going to experiment with a product in a category known in Japan as Chu-Hi. This is a canned drink that includes alcohol; traditionally, it is made with a distilled beverage called shōchū and sparkling water, plus some flavoring. We haven’t experimented in the low alcohol category before, but it’s an example of how we continue to explore opportunities outside our core areas.
Has Coke used the same approach before?
No, this is unique in our history. Coca-Cola has always focused entirely on non-alcoholic beverages, and this is a modest experiment for a specific slice of our market. The Chu-Hi category is found almost exclusively in Japan. Globally, it’s not uncommon for non-alcoholic beverages to be sold in the same system as alcoholic beverages. It makes sense to give this a try in our market. But I don’t think people around the world should expect to see this kind of thing from Coca-Cola. While many markets are becoming more like Japan, I think the culture here is still very unique and special, so many products that are born here will stay here.