"Gift giving is probably more sophisticated and pervades more daily situations in Japan than it does in any other country. Not only are there two lengthy gift giving seasons every year, but numerous ""everyday"" gift occasions are intrinsic to social and business etiquette. (See box article.)

The annual retail gift market in Japan is estimated at $70 billion. The value of imported gifts in 1988 was estimated to be $8.3 billion, a 70-percent increase over the previous year. Of this figure, it is difficult to determine the amount coming from the United States, but the United States commands roughly a 12-percent share of the total market for imported consumer goods.

Significant Opportunities for U.S.

The gift pack is the most prevalent package form for food gifts. For U.S. food manufacturers, there are significant new opportunities for sales through the gift pack market as long as U.S. companies take the time to understand the market in Japan and design their products accordingly.

U.S. food and beverages can be competitive in the high-quality segment of the Japanese gift market, particularly in light of recent changes in Japanese government import regulations and consumer attitudes toward foreign goods. Also, in this segment of the market, competition from domestic Japanese products is less effective and manufacturer profit margins are large enough to support the additional costs associated with international transactions.

U.S. products likely to sell well in the Japanese gift market include: -- wine, whiskey, bourbon and other

liquors -- beer -- ham and sausage -- frozen beef and beef jerky -- frozen, canned and dried seafood -- fancy condiments (sauces, jams, jellies

and relishes) -- seasonings and spices -- cookies, candy and other confections -- fresh fruit and vegetables -- cooking and salad oil -- gourment foods -- coffee -- tea

Getting Into the Market

The first step to entering the Japanese gift pack market is to engineer a high-quality and attractive product. Appropriate levels of quality (including taste), attractiveness and packaging should be determined based on Japanese, not U.S., standards. Written and unwritten standards differ in Japan. Understanding the differences is essential to launching a successful product.

For example, serving sizes and labeling may have to be modified. U.S. manufacturers may want to develop gift packs that are specifically designed for the Japanese market and incorporate ideas and advice from experts on marketing gift products in Japan.

After a strong product has been developed, the next step is to cultivate personal contacts with people in the gift trade in Japan, including importers, wholesalers and retailers.

Care should be taken in selecting upscale retail distribution channels that cater to young professionals and economically secure individuals who are likely to purchase high-quality U.S. goods. U.S. manufacturers also should consider direct sales channels to appropriate retailers as a means of controlling pricing and distribution.

There are opportunities for both complete gift pack products that are shipped as a finished unit and for products that would be components of a pack to be assembled and packaged in Japan.

The ""Location Equation""

When selecting a gift product, the typical Japanese consumer is considerably more interested in quality than quantity. Manufacturer, place of purchase, geographic origin, perceived product quality and status and packaging are all important factors which a conscientious shopper evaluates in selecting a gift.

For this reason, it is important for products to be marketed in retail locations that have an excellent reputation and have established a high-class image with shoppers. Most gift shopping takes place in department stores or general shops that have an upscale market image and are fashionable places to buy gifts. Most department stores in Japan rely heavily on gift sales. For many, this market represents over 25 percent of their total business.

In deciding where to shop for gifts, variety of selection and store reputation are the most important factors for the Japanese consumer. Product originality, customer service and store location are of secondary importance. Pricing is relatively unimportant.

Proof of the Pudding Is in Packaging

Gift packaging and wrapping is extremely important in Japan. In many cases, the package is more significant than the food product inside. The proper packaging can create an image of quality and prestige for a gift food product.

Aware of this fact, Japanese product manufacturers often concentrate more effort on package design than on product contents. Consequently, it is not uncommon to find food gift packs with individually wrapped single servings, with the cost of the packaging exceeding that of the product itself.

For example, salad oil--a relatively common gift for Ochugen and Oseibo (two major gift-giving seasons) is normally packaged in elegantly labeled gift boxes, each containing two or more 400-to 600-gram cans of oil (often of different varieties). In this case, the exquisite packaging expresses the importance of the occasion and the relationship, while the gift contents (salad oil) conforms to the Japanese traditions of simplicity and practicality.

Cookies and cakes are popular food gifts

Cookies and cakes are popular food gifts that are typically packaged in fancy tins, boxes or jars. It is not uncommon for manufacturers of these products to decorate their packages with exotic or brightly colored artwork. The incorporation of such artwork is specifically intended to create a unique and exclusive product identity.

Perhaps one of the most competitive product categories with respect to packaging is alcoholic beverages. Japanese breweries and alcohol distribution companies are constantly introducing new packaging concepts in order to improve their share of the market. Beer, for example, can now be found in over 100 different types of containers. Packaging for whiskey, vodka and other alcoholic beverages is equally competitive.

Fancy labeling and unique bottles or containers are considered primary marketing tools by manufacturers. In the alcoholic beverage market, a product's quality and its perceived status among consumers are more frequently defined by the attributes of its container and labeling than by its taste.

U.S. food product manufacturers should be aware that Japanese consumer tastes in packaging design can differ significantly from those of their U.S. counterparts. For example, bright colors and ""cute"" designs that might only be used for children in the United States are commonly favored by young working women in Japan. Similarly, container shapes and designs that might be considered highly unusual in the United States are often big sellers in Japan.

It is also important to note that in Japan there are customs that govern the way that food gifts should be wrapped. Certain types of product packaging and wrapping should be avoided. For example, gifts that contain four items should be avoided because the number four is considered bad luck in Japan. (The word for four is similar to the word for death.) In addition, black and white wrapping is used strictly for funeral gifts.

Major department stores in Japan can provide U.S. exporters with detailed guidance on gift packaging customs for all types of products.

Mail Order: Posting Gains in Japan

Mail order is a relatively new but rapidly growing segment of the retail gift market. In 1990, mail order sales accounted for approximately $11.3 billion, or 1.3 percent, of total retail sales in Japan. Mail order is becoming increasingly popular as a means of purchasing gifts because it offers convenience, competitive pricing and wide product selection, particularly for imported goods.

For companies that are willing to invest in creating a catalog for this market, it is possible to market gift products directly to the Japanese consumer, bypassing distribution headaches and markups.

Another avenue for U.S. exporters is to become a supplier to one of the existing Japanese mail order companies. Most large department stores publish special catalogs for the Ochugen and Oseibo seasons. These catalogs include high-quality imported gift products. In addition there are several firms that specialize in year-round mail order merchandising. Below is a list of five such companies.

A Word of Caution on Constraints

Despite the potential for U.S. food sales in the Japanese gift pack market, there are constraints exporters need to consider. These include: --Product additive restrictions, labeling requirements and food sanitation laws that apply to all products entering Japan. --Tariffs. These may be significant or insignificant depending on the product. --Heavy domestic competition. Roughly 90 percent of the gift market in Japan is controlled by domestically produced goods. However, a clear segment of the market has developed for imports, and this segment is expanding. Japanese consumers are still interested in foreign products and the gift market is one area where the unique and cosmopolitan image of the ""import"" can be exploited. --Difficulty in finding direct distribution routes to the most influential and high-profile gift retailers. In general, a more complex distribution system will result in higher prices for retail customers and may make it difficult for the manufacturer to control which retail outlets will be at the end of the chain. U.S. manufacturers of gift food products should try to get the simplest avenue of distribution possible in order to preserve price competitiveness and desirability of the retail outlets being used. Judicious development of trading relationships or joint ventures with knowledgeable Japanese partners, department stores, supermarkets and other retailers will help manufacturers retain greater control over distribution, as well as other issues involving product promotion, retail servicing and pricing.

The Role of Trade Shows in Marketing

Trade shows are popular in Japan and provide an excellent forum for introducing products to potential distributors and retailers. These events also offer a chance to gather important information about market conditions and to see products manufactured by Japanese and other foreign companies.

One of the most important trade shows is the International Gift Show, which takes place every February in Tokyo. The show includes exhibits from more than 500 companies and is attended by well over 100,000 people each year. According to some estimates, gift product sales resulting from this event exceed $3.75 billion annually.

Trade Publications

Trade journals and publications are a leading source of industry information. They provide important data on product and market developments. Advertising published in these periodicals can help a product manufacturer locate distribution assistance or other business support services.

The U.S. agricultural trade office in Tokyo has the following lists available for U.S. exporters interested in the Japanese gift pack market: -- Major trade publications for the food

and beverage gift industry. -- Trade shows considered to be the

most useful for manufacturers

interested in the gift pack market. -- Major Japanese department stores

that may be interested in marketing

U.S. gift products. -- Leading food product wholesalers,

importers and processors. -- Leading supermarkets that may be

interested in selling U.S. gift pack

items.

Copies of these lists are available from

Virginia Wines Making a Hit In the Japanese Gift Pack Market

One U.S. company taking advantage of the gift pack market in Japan is Prince Michel Vineyards of Leon, Va. The Lungwood Hotel in Tokyo is packaging Prince Michel's wines in gift packs, which traditionally are given by the bride and groom to wedding guests.

Orders for Prince Michel's wines have continued to come in since their first shipment to Japan last October.

However, Japan is only one target in Prince Michel's overall export strategy. Last October, the winery's management set up an office in Paris, and it has since made contacts in Germany, Scandinavia and the United Kingdom. In addition, the winery is trying to gain new business in Quebec and Ontario.

Prince Michel doubled its production in 1991 and expects to expand rapidly into new international markets during the coming year. Gift packs are one way that the winery has been able to introduce its wines to more customers.

Gift Giving Is a Year-Round Tradition in Japan

There are two major seasonal gift giving periods in Japan, Ochugen (mid-year) and Oseibo (year's end). Ochugen gifts are usually given in late June or early July during the two-week period preceding the Obon holidays. (Obon is the traditional summer period when ancestral spirits make an ephemeral revisit to the world of the living, obligating the Japanese to return to their home towns to greet their deceased loved ones.)

In modern Japan, Ochugen gifts are given to business customers, friends, teachers and superiors who have been helpful or influential in one's life. Popular Ochugen gift items include wine, beer and other types of alcoholic beverages, as well as coffee, tea, candy, cookies, cooking oil, fancy condiments and clothing. Nearly all of these items are marketed in the form of a gift pack. Prices for such gifts typically range from $20 to $75, and the average household gives about four per year.

Oseibo gifts are given during the first half of December to parents, relatives, friends, teachers and superiors who have been helpful and provided important guidance during the year. Popular items for Oseibo gifts include alcoholic beverages, special condiments, meat, dried fish and seaweed, coffee, tea, cooking oil, clothing and linens. Like Ochugen gifts, most of the items given for Oseibo are sold in gift packs. Expenditures for these gifts tend to be slightly higher than for Ochugen--normally in the range of $50 to $75--and the average household purchases between four and five per year.

Close on the heels of Oseibo comes Christmas. Similar to Western custom, Christmas in Japan is primarily a time when family members exchange gifts. Popular gift items include electronics, games, toys, sporting goods, clothing, personal accessories and jewelry. High-quality food and beverage gift pack products are becoming more common gift items as the tradition of Christmas grows in Japan, particularly when gifts are exchanged between friends and business acquaintances.

In addition to the two big gift giving seasons, Valentine's Day and White Day are significant gift pack-giving occasions. In contrast to the U.S. tradition, on Valentine's Day women give candy, chocolate or confectionery items to the special men in their lives (family, friends and co-workers are all eligible). The average working woman will spend close to $40 on Valentine's Day chocolate this year. To balance the equation, the card and confectionery industries created White Day (March 14). On this day, Japanese men are supposed to reciprocate with gifts of candy, or other items. The price range for Valentine's Day and White Day gifts is generally $3 to $25.

Personal and Greeting Gifts

Along with seasonal gifts, the average Japanese household annually gives more than 10 gifts for personal occasions (e.g., thank-you, get-well, anniversary, birthday and congratulatory gifts) or as a greeting when visiting friends.

In Japan, greeting gifts are customarily given to hosts when visiting on trips or for social events, such as parties. Food and beverage products, including confections, wine, alcohol and local specialty foods, are popular greeting gifts. Spending on these items normally ranges from $15 to $70, depending on the occasion.

Business Gifts

Roughly 43 percent of gifts sold in Japan are given to business relations, and gift giving plays an important role in basic corporate etiquette. According to a survey by Tokai Bank, Ltd., corporate employees spent an average of $865 during 1990 on condolence or congratulatory gifts. A majority of respondents reported that most of their gift allowance was spent on co-workers or supervisors.

Businesses give gifts for seasonal and social occasions in much the same way as individuals, with gift pack products heavily represented in this segment of the market. In most cases, guidelines for gift purchases are determined by one's rank within the company.

As a rule, the gifts that higher ranking executives exchange with each other are more expensive than the gifts exchanged among the managers below them. In addition to the exchange of presents within each corporate level, it is a common practice for junior employees to give gifts to their immediate supervisors. Premium brands of whiskey, scotch and brandy, as well as gourmet food items, are among the most popular gifts. Brabant is the U.S. agricultural trade officer in Tokyo; Scott is an independent researcher in Tokyo.

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