Trump Throws
Curveball at Japan Tea Giant's US Expansion Swing
·
The
dilemmas facing Ito En (2593.T), opens new tab can be found across Japan, the
biggest foreign investor in the United States.
·
A
survey of 3,000 Japanese companies by export promotion organisation JETRO late
last year before Trump's tariffs found the level of interest in U.S. markets at
the highest in nearly a decade, with food and beverage companies like Ito En
the most enthusiastic.
·
Founded
in the 1960s by Honjo's father and uncle, Ito En has grown to dominate Japan's
tea market, using around a quarter of the country's total crude tea production.
·
Honjo
said growth has also been aided by a sharp rise in Asian Americans, estimated
at nearly 25 million in 2023, or around 7% of the U.S. population, according to
the Pew Research Center.
·
Japan's
exports of green tea surged 24.6% to 36.4 billion yen ($251 million) last year,
with nearly half destined for the United States.
· Kikkoman's (2801.T), opens new tab soy sauce is probably in every American household now, but it took about 50 years for it to become a part of the culture.
[ABS News Service/14.06.2025]
TOKYO, June 13 (Reuters) - Top Japanese tea brand Ito En's
latest push to win over health-conscious U.S. customers with its traditional
unsweetened brew has hit a new road bump: President Donald Trump's trade
tariffs.
The company, which splashed out on a tie-up with Major
League Baseball star Shohei Ohtani and launched a less bitter tea to capture a
bigger slice of the lucrative growth market, is now debating whether to hike
prices or move some production across the Pacific, executives said in
interviews with Reuters.
The dilemmas facing Ito En (2593.T), opens new
tab can
be found across Japan, the biggest foreign investor in the United States, as Tokyo's trade negotiators return to
Washington this week to try and strike a deal to cushion the blow to
its fragile economy.
Makoto Ogi, Ito En's general manager of international
business development, told Reuters the company may raise prices of its products
in the U.S. to compensate for Trump's 24% levy on Japanese goods set to come
into force next month.
The problem is their retailers and distributors may resist
for fear of losing sales. "We may not be able to ask them to raise our
prices despite what Trump is saying," he said.
The last time Ito En raised prices in the U.S. - by
approximately 10% in 2022 - sales dropped by around 5%. The company said the
decline reflected the price hike as well as factors such as COVID-19 that
affected market conditions.
The company is also considering making tea bags in the
United States, and bottling drinks there rather than in Japan, Taiwan and
Thailand as it does presently, Ogi and other executives explained during
interviews in Tokyo.
These details of the firm's potential plans to counter
tariffs have not been previously reported. The executives did not disclose the
costs of such moves.
In its latest results released this month, Ito En reported
its profit shrank by 8.2% in the year to April, but forecast an 11% jump this
year.
It set a modest 3.7% profit growth target for its U.S. tea
business, versus 20.7% growth achieved last year, an outlook partly related to
tariffs, a company spokesperson said.
Its shares rose to nearly a four-month high in the wake of
the results, with its president later telling investors the forecasts were
"conservative".
Many Japanese firms have set up war rooms to chalk out
plans to restructure supply chains or cut costs to offset tariffs and keep
their U.S. growth plans on track, said Mizuho Bank analyst Asuka Tatebayashi.
"When you talk to companies in Japan, the U.S. comes
first," said Tatebayashi, adding that they face shrinking domestic demand
and are generally cautious about expanding into riskier emerging markets.
GRAND PLANS
For Ito En, the U.S. has long been a market it is eager to
crack.
Five years ago, Joshua Walker, the newly-appointed head of
U.S. non-profit Japan Society, hosted Ito En's North America head Yosuke Honjo
in his New York office.
Honjo gestured to the green-coloured bottles of their
flagship 'Oi Ocha' brand lining the shelves and said
he wanted them to spread around the world like Coca-Cola's red bottle.
"It was refreshing. Japanese companies would not
normally have ambition of that type of grandeur," said Walker, recounting
the executive's previously unreported remarks. Honjo, via a company
spokesperson, confirmed the remarks.
Since expanding into the U.S. in 2001, it has dabbled in
selling sweet and flavoured tea varieties familiar to Americans. But more
recently it has focused on the unsweetened tea popular in its home market,
hoping to tap health-conscious customers and a boom in Japanese food and
cultural exports.
Japan's exports of green tea surged
24.6% to 36.4 billion yen ($251 million) last year, with nearly half destined
for the United States,
official data showed.
Some equity analysts like Jiang Zhu of Tokyo-based rating
agency R&I have highlighted the high marketing cost of Ito En's
international push at a time it faces tough competition at home from tea brands
such as Coca-Cola's (KO.N), opens new tab Ayataka.
The company said it has around a 2% share of the U.S.
market for tea beverages, ranking eighth largest, with Unilever's (ULVR.L), opens new tab Pure Leaf leading the sector.
But it has a long way to catch up with the 3.9 billion
gallons of Coca-Cola's trademark Coke drinks sold in the U.S. last year, at
only 3.1 million gallons by comparison, according to research firm Beverage
Marketing Corporation.
"Kikkoman's (2801.T), opens new
tab soy
sauce is probably in every American household now, but it took about 50 years
for it to become a part of the culture," said Akihiro Murase, Ito En's public relations
manager, referencing the Japanese food manufacturer as a template for success.
"We are not there yet but we would like to make
unsweetened green tea a part of the food culture," he said.