Market Overview

The farm fresh business in this research refers to the operations of farmers who grow produce under contract, farm stands, providers of home delivery services for agricultural products, and providers of supply and demand matching services (including online farmers’ markets), which distribute agricultural products directly to retailers and consumers, disintermediating the traditional wholesale market. In this study, farm fresh produce refers to domestically produced fruits and vegetables (including rice) distributed by these operators.
Due to the fluctuating wholesale market prices caused by the recent adverse weather conditions and disasters, a growing number of supermarkets, food processing companies, and restaurant chains have expanded direct trade with farmers to purchase in bulk and stabilize the purchasing costs, procure private label products, and improve freshness and product assortment, thus increasing the farm fresh market year by year.
On the other hand, the overall agricultural product market in Japan has been maintained by the market entry of agricultural production corporations and general enterprises, which compensate for the decline in agricultural product production caused by the retirement of many farmers. The agricultural product market (farm fresh products + products distributed through wholesale) in Japan was valued at 9,443.6 billion yen in 2023, 99.9% of the size in the previous year. Of this, the market size of farm fresh products is estimated at 3,424.4 billion yen, 103.2% of the size of the previous year, accounting for 36.3% of the total agricultural products market. 

Noteworthy Topics

Increased Variety and Distribution of Organic Produce, Especially at Major Retailers

In recent years, efforts to realize a sustainable society through environmental protection in the context of the SDGs have been deeply recognized by both consumers and producers.
According to the Ministry of Agriculture, Forestry and Fisheries (MAFF), the arable land for organic products that comply with the Act on Japanese Agricultural Standards has doubled from a decade ago to 18,837 hectares in FY2023. In addition, the variety and assortment of organic vegetables in major supermarkets has increased, as has the volume of distribution of these vegetables among companies.  

Thus, demand for organic products continues to grow, but there are still many challenges at every stage of production, distribution and sales.
In particular, production and distribution issues are considered problematic, such as the need for significant labor for pest and weed control due to the lack of use of agrochemicals and chemical fertilizers. This has been a major obstacle to securing labor. In addition, since organic produce has not yet organized the market distribution base, it inevitably depends on trades outside the wholesale market, which raises the issues of distribution costs and of securing of distribution channels.

With the efforts by producers, distributors, and retailers, the domestic market for the distribution of organic agricultural products in Japan has the potential to grow significantly. These efforts include strengthening the production system, streamlining distribution, and appealing brand values. 

Future Outlook

The aging problem of the agricultural labor force (core farmers) in Japan is quite serious. According to MAFF, the number of self-employed farmers has already halved from 2.4 million in 2000 to 1.16 million in 2023, with the peak age structure reaching 70 and above. As a result, the human infrastructure supporting domestic crop production is rapidly disappearing, and there is an urgent need to change the form of agriculture. Although progress has been made in corporate agriculture, the imbalance in the quality and quantity of supply remains a problem due to the large number of small-scale producers scattered throughout the country.

Based on this situation, it is likely that the current structure of the wholesale market, which plays the central role in the distribution of vegetables, while the off-market distribution fills the gap, will continue.

With the increasing trend of vertical integration of food chains, encompassing local producers, corporate distributors, and corporate buyers, it has been difficult for wholesale distribution alone to cover reproduction prices (all costs of producing agricultural products, including the expenses for seeds, fertilizers, materials, transportation, and labor) and to respond to diversifying demands. Therefore, it is expected to change into a complementary form between wholesale distribution and off-market distribution.

The CAGR of the farm fresh produce market from 2024 to 2030 is expected to be 2.8%, with the market size (based on the gross merchandise value of enterprises) in 2030 to be 4,186.3 billion yen, accounting for 41.9% of the total agricultural products market. This is expected to revitalize the local economies and improve producers' incomes, while organizing the environment for consumers to obtain fresh and safe agricultural products.

Research Outline