GlobalData predicts Japan's on-premise consumption will propel nation's hot drinks market at 4.7% CAGR from US$20.9B in 2021 to US$29.7B in 2026; growth expected to be supported by demand for immunity-boosting drinks, such as black tea and herbal tea

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August 31, 2022 (press release) –

As Japan is set to start lifting the COVID-19 restrictions on inbound tourist entry from September, and refrain from reimposing national restrictions, the on-premise demand for hot drinks is expected to rebound in the country. Consequently, the country’s hot drinks market will expand at a compound annual growth rate (CAGR) of 4.7% from JPY2,290.2 billion ($20.9 billion) in 2021 to JPY2,880.7 billion ($29.7 billion) in 2026, forecasts GlobalData, a leading data and analytics company.

GlobalData’s latest report, “Japan Hot drinks – Market Assessment and Forecasts to 2026,” reveals that the country’s hot drinks market will be primarily driven by the hot tea category with a projected value CAGR of 6.4% over 2021-2026. The growth is expected to be supported by the strong demand for immunity-boosting drinks, such as black tea and herbal tea, amid the ongoing pandemic. The hot coffee and other hot drinks categories will expand by 4% CAGR and 4.3% CAGR through 2026, respectively.

Anush Shaw, Consumer Analyst at GlobalData, comments: “Since easing the national COVID-19 curbs in March 2022, Japan has not reimposed restrictions despite the Omicron waves. As a result, the pent-up demand for out-of-home dining experiences was unleashed, with consumers flocking to restaurants and cafés after a two-year hiatus. Encouraged by the high vaccination coverage, authorities are now reopening the borders to foreign tourists. This will accelerate the shift in hot drinks consumption from ‘home premise’ settings to ‘on-premise’ venues.”

Owing to the consumer demand for authentic experiences, and the COVID-19-induced supply-chain disruptions in 2021, the per capita expenditure (PCE) on hot drinks rose from $47.9 in 2016 to $82.4 in 2021. Japan’s PCE surpassed the global average at $17, and the regional average at $11.1 in 2021.

With the Russia­–Ukraine war leading to an increase in the inflation levels further since Q1 2022 and a recovery in the economy enabling consumers to trade up to premium-quality products, Japan’s PCE on hot drinks is expected to rise to $119.7 in 2026.

According to the report, hypermarkets & supermarkets was the leading distribution channel in the Japanese hot drinks sector in 2021, as consumers preferred to do all their shopping at a single window. Consumers also shopped for daily essentials at convenience stores near their homes to avoid long trips and crowds. In the terms of sales, Nestlé, Ajinomoto Co Inc, and UCC Ueshima Coffee were the top three companies, and Nescafé and Nestlé the leading brands in the Japanese hot drinks sector in 2021.

Shaw concludes: “As consumers cocooned at home during the pandemic, they explored new flavors and brewing styles. Manufacturers are developing innovative products to exploit this trend, and premiumize the sector. Moreover, multinational hot coffee makers, such as Nestlé, are striving to develop a café culture among young adults in Japan.”

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