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Tea maker Ito En to sip sweet profits as Asia enforces sugar tax

Tea maker Ito En to sip sweet profits as Asia enforces sugar tax

TOKYO: Riding on the success of its newly designed bottles and a growing appetite for Japanese cuisine abroad, tea maker Ito En is rolling toward its second straight record net profit. But the sweet news does not stop there. The Tokyo-based company is about to get an unexpected tail wind from the spread of sugar taxes, especially in Southeast Asia. For the year ending April, group sales are expected to rise 3% on the year to 492.5 billion yen ($4.34 billion), with net profit increasing 2% to 14 billion yen. Sales in Japan are growing thanks to its renewed mainstay green tea product Oi Ocha, while overseas earnings are also rising with a stepped up effort to increase its ITOEN brand recognition. A health-driven boom in Japanese cuisine is sweeping the world. The extent of this popularity has taken Ito En by surprise. Washoku, or traditional Japanese food, was registered as an intangible cultural heritage by UNESCO in 2013. The Japanese government has since been spearheading events to spread the country’s authentic food culture around the globe.

Essential for Japanese food is unsweetened green tea. To ride this wave, Ito En unified its corporate brands overseas into one, ITOEN, two years ago. All the logos of its leaf products such as tea bags have also been changed to ITOEN. The company’s strategy is to make inroads into countries where people do not drink green tea frequently with low-cost leaves, and then introduce drinks from its Oi Ocha line to gain sales momentum. Ito En has been operating in seven countries outside Japan. Leaf product sales by volume jumped 76% on the year in the U.S. and soared 93% in China for the six months through October. At the end of fiscal 2017, the company forecast overseas sales would total 40.8 billion yen, accounting for 8.3% of group sales, and exceeding 10% is becoming a plausible target. In addition to these efforts, a tail wind for unsweetened drinks has given the company extra momentum. So-called “sugar taxes” are starting to spread around the world, not only in the west, but also in Southeast Asia where the rise of obesity is becoming a major concern. These taxes are imposed on the makers and importers of sugary drinks, based on sugar content levels.