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Business trends

Japanese candy makers ride Southeast Asia convenience store wave

Established distribution networks offer instant access to a vast consumer base

Black Thunder chocolate bars made by Yuraku Confectionery. It and other midsize Japanese candy makers are trying to expand their presence in Southeast Asia.

TOKYO -- The convenience store boom in Southeast Asia is providing midsize Japanese confectioners a new opportunity to enter the growing market. The stores' established distribution networks offer the candy makers instant access to sales channels, which until now has been the biggest challenge smaller players had to face. 

This has encouraged Japanese companies to make an ambitious push into the market, with one company deciding to produce locally.

Yuraku Confectionery will begin production of its flagship Black Thunder chocolate bar in Indonesia. The Tokyo-based company has established a 500 million yen ($4.65 million) joint venture with Singapore confectioner Delfi, with the Japanese company taking a 40% stake.  

The joint venture will use Delfi's existing confectionery plant in Indonesia and add a production line for Black Thunder. The local version of the chocolate will be less sensitive to heat and moisture, with manufacturing set to begin by 2019.

"Delfi's reliable production facilities will allow us to maintain the quality of our product," said an official of Yuraku Confectionery.

To leverage its "Made in Japan" appeal, packaging for the localized bar will be almost the same as the Japanese version. 

Yuraku started exporting Black Thunder in 2011. The product is sold in the U.S., Taiwan and other locations, but overseas sales stand at around $940,000, or just 1% of total sales.

The company wants to expand in Southeast Asia with Indonesia as the springboard, targeting a ten-fold increase in overseas sales within the next five years.

Another Tokyo-based company, Tirol-Choco, will also grow its Southeast Asian presence. Known for its bite-sized chocolates, the company will expand its chocolate offerings from existing markets in China and South Korea to the Southeast Asian nations of Thailand, Vietnam, Indonesia and the Philippines this spring.

Tirol's chocolates are often displayed next to cash registers in convenience stores across Japan and have high brand recognition. 

"We want to enter the market with a competitive pricing and establish a similar brand recognition to that in Japan," said President Yuji Matsuo.

Tirol-Choco's annual sales are around $75 million. Although overseas sales account for 5% or so of the total, the company is expecting an increased presence in Southeast Asia to raise this to 20% in 10 years.

Another Japanese maker, Amehamaseika, has begun exporting candies to Thailand, Vietnam and Malaysia. The company is known for its bonus candies and is already selling in South Korea and the U.S.

Japan's confectionery market is expected to shrink over the medium to long term, due partly to the country's declining birthrate. This compares with other Asian markets, where populations continue to rise, providing a potential for future growth.

The region's love for Japanese sweets is being fed by Southeast Asian visitors to Japan, who often return home loaded with candy. Confectionery makers see this as an opportunity to boost sales by beefing up regional sales strategies.

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