How to Enter the Japanese Market: The Case of Coca-Cola

Coca-Cola is a truly multinational brand. In America, the company’s presence saturates media and store shelves, seemingly without end. When we look to Japan, the soft drink giant is just as pervasive. Coca-Cola produced brands like Aquarius, Georgia coffee, Dasani, and Fanta are ubiquitous, found anywhere in Japan's renowned convenience stores or one of the company's 880,000 vending machines across the country. How did the company manage to successfully enter the Japanese market?

The Specificities of the Japanese Market

For any company looking to expand into a foreign market, it is imperative to understand the challenges and potential roadblocks of the specific market they are looking at. Japan, despite its many open doors for opportunity, is a prime example of how difficult it can be for a company to enter a market and succeed. Many large companies have struggled to put a foothold in this country for many reasons. Success in Japan requires mastering the intricacies of adapting products and services to local expectations and executing localized marketing strategies. Understanding Japan's unique business landscape is essential. 

Localized marketing in Japan isn't just a strategy—it's a necessity. Companies must tailor their products, services and marketing messages to resonate with the distinct preferences of Japanese consumers to make a lasting impression. The rise of social media adds another layer of complexity, with communication and platform usage styles varying from most other countries. Brands must effectively navigate platforms like Instagram, Twitter, and LINE to connect with their audience and build meaningful relationships. The difficulty lies in adapting to these cultural nuances and leveraging dynamic platforms to achieve brand success, which many large corporate giants have failed to do. So how did Coca-Cola  build its empire in Japan? How did the company achieve what many other companies struggle to do?

Initial Struggles

Coca-Cola’s first presence in Japan can be traced all the way back to 1914, when the company began shipping its iconic glass bottles overseas, specifically targeting tourists, pivoting their product as an “expensive imported delicacy.” The company found success, so much so that by January 1920, an unofficial company in Japan had "pirated" the Coca-Cola name, selling a similar-tasting beverage in look-alike bottles to profit from its rising popularity. Regardless of this counterfeit attempt, Coca-Cola continued to penetrate the Japanese market with remarkable success, some of which can be attributed to the overall intrigue of Western goods that raged in consumerism during this time. On top of that, Japan had also established a vending machine presence in its consumer culture that continued to boom under Coca-Cola’s product success. 

At the time, Coca-Cola’s sophisticated sugary, carbonated drink was a novelty to the Japanese palate. However, such novelty can come with mixed feelings. As documented by Coca-Cola historian Mark Prendergast, the brand faced global pushback during the 1940s and 50s, with various countries attempting to ban it for reasons ranging from health concerns to nationalistic propaganda. In Japan, the drink was sometimes disparaged, with claims ranging from it being a “wartime poison drink” to its “sterilizing women,” accusations often fueled by propaganda and competitors aiming to derail Coca-Cola’s market success.

Despite these challenges, the brand continued to slowly build up its reputation. Especially, during and after the period of World War II, the presence of stationed American soldiers and their association with the drink helped combat the nationalistic rumors. By 1957, Coca-Cola made its official entry into the Japanese market by establishing its first syrup and concentrate plant in Tokyo, under the banner of Nihon Inryo Kogyo– later renamed “Coca-Cola Japan” in 1958.

Coca-Cola’s Strategic Entry and Expansion

The formal establishment of Coca-Cola Japan in 1957 marked the beginning of an aggressive expansion strategy. Japan's strict import quotas posed initial challenges, but Coca-Cola found well-connected local partners, including Mitsubishi, Kirin, Fuji, Sanyo, Kikkoman, and Mitsui, to help navigate the regulatory landscape and distribute its products widely.

One of the key strategies that fueled Coca-Cola’s rise in Japan was its aggressive advertising and marketing campaigns, including numerous advertisements and television commercials. The catchy phrase “sukatto sawayaka,” meaning "very refreshing," became ingrained in the Japanese consciousness, promoting a positive and refreshing image of the brand.

On top of that, a significant aspect of Coca-Cola’s success in Japan was its leveraging of the country’s burgeoning vending machine culture and continued installment of vending machines across the country, a move that significantly boosted its visibility. It is important to note that contrary to popular belief, Coca-Cola did not invent or introduce beverage vending machines to Japan. Japanese vending machines date back to 1912, with the earliest ones distributing sake. However, Coca-Cola adeptly capitalized on the existing infrastructure.

In the 1950s, vending machines equipped with refrigeration devices became popular in Japan, providing the perfect platform for Coca-Cola to distribute its products widely. By installing tens of thousands of vending machines starting in 1962, Coca-Cola ensured its beverages were easily accessible to the Japanese public. During the 1964 Tokyo Olympics, Coca-Cola’s vending machines, dispensing glass bottles via sliding metal racks, became a familiar sight across Tokyo, significantly boosting sales.

Strengthening the Brand Image

Coca-Cola’s strategic initiatives paid off. By the 1960s, sales were nearly doubling every year. The company’s ability to adapt its marketing and products to local tastes and preferences played a crucial role in its success. For instance, Coca-Cola developed new products like Georgia coffee and Aquarius sports drinks, tailored specifically for the Japanese market. By 1987, Coca-Cola’s profits in Japan exceeded those in the United States, a testament to the brand’s strong foothold in the country. According to Jackson N. Huddleston’s book "Gaijin Kaisha: Running a Foreign Business in Japan," Coca-Cola's success contrasted sharply with its competitor Pepsi, which struggled due to poor management and inconsistent marketing strategies.

Despite its success, Coca-Cola was not without challenges; particularly the subject of health concerns once again arose. In the early 1970s, issues over the artificial flavoring in Fanta grape drink caused a temporary dip in sales. However, Coca-Cola responded quickly by replacing artificial coloring with natural alternatives, demonstrating its commitment to consumer safety and preferences. This proactive approach helped the company recover and maintain its positive image.

Present Status and Continued Dominance

Today, Coca-Cola remains a key player in the Japanese beverage market. The company has continuously evolved, adapting its products and marketing strategies to stay relevant in a fast-changing market. Coca-Cola’s product lineup in Japan includes a wide range of beverages, from traditional soft drinks to innovative offerings like Ayataka green tea and various flavored waters.

The company’s extensive network of vending machines, now numbering around 880,000, ensures that Coca-Cola products are easily accessible to consumers everywhere, from bustling city streets to remote rural areas. Other numbers reported include an annual revenue of 868.6 billion yen, sales volume of 550 million cases every year, and over 600 products being sold in Japan. This pervasive presence has solidified Coca-Cola’s status as a household name in Japan.

Embracing the Digital World

As the internet and social media platforms continue to grow, there has been a noticeable shift in the usage patterns of businesses from 2022 to 2023. As the digital world continues to evolve, it’s become all the more crucial for companies to strategize and deliver their brand image such that it captivates and engages audiences. Coca-Cola is no exception, having adeptly embraced social media to maintain its connection with Japanese consumers. Platforms like Instagram, Twitter, and LINE have become essential tools for the company to engage with its audience and promote its brand. Coca-Cola’s social media campaigns often feature localized content that resonates with Japanese culture and trends, further strengthening its bond with consumers.

Lessons Learned: Why Coca-Cola Succeeded Where Others Failed

Coca-Cola’s success in Japan offers valuable lessons for other companies looking for how to enter foreign markets:

1. Adaptation to Local Preferences: Coca-Cola’s willingness to tailor its products to Japanese tastes, such as introducing Georgia coffee and Aquarius sports drinks, played a critical role in its success.

2. Strategic Partnerships: Partnering with well-connected local companies helped Coca-Cola navigate regulatory challenges and effectively distribute its products.

3. Aggressive Marketing: Coca-Cola’s extensive and localized advertising campaigns and the strategic placement of vending machines significantly boosted its brand visibility and accessibility.

4. Responsive to Consumer Concerns: Addressing health concerns promptly by replacing artificial ingredients with natural ones demonstrated Coca-Cola’s commitment to consumer safety and preferences.

5. Leveraging Technology: Embracing social media and digital platforms has allowed Coca-Cola to stay relevant and maintain a strong connection with its audience in the digital age.

Conclusion

Coca-Cola’s journey in Japan is a remarkable story of strategic adaptation, cultural understanding, and relentless marketing. From its early days as an imported delicacy to its current status as a market leader, Coca-Cola has demonstrated the importance of understanding and embracing local cultures to succeed in foreign markets. Today, Coca-Cola is not just a beverage brand in Japan; it is an integral part of everyday life.

If you are interested in how to enter the Japanese market for your product or service, the above lessons learned from Coca-Cola might lead your strategy in the right direction. For specific advice and support for your business’ expansion into the Japanese market, feel free to contact us at GlobalDeal for a free consultation. GlobalDeal is a global expansion company, specialized in market entry into Japan. Let’s discuss how we can help you!