Dispatch: In Japan, there's water everywhere, some with extra oxygen in the bottle

Posted January 4, 2007 in [Water]

Amy Chozick - The Wall Street Journal Asia

Tokyo (Dec 13, 2006)-- SEEKING RESUSCITATION after some hard shopping, Hirae Nagisa decides she needs some oxygen. So, while sitting on a bench in a crowded corner of Shibuya, a neighborhood that is Japan's epicenter of youth culture, she and her sister take sips from what looks like bottled water. But this isn't your standard H20. It is a new mix containing 12 to 15 times more oxygen than regular water.

"It's totally different. It's delicious!" says Ms. Nagisa, a 23-year-old fashion-design student. "And it will make my skin look good."

Bottled waters with an extra boost of oxygen are the latest craze in Japan's congested beverage industry, and several companies here have launched a stream of products over the past few months. Marketed as an energy and health enhancer that helps hydration better than straight water, oxygen water has become a hit with everyone from stressed-out businessmen to teenagers who need an extra boost while clubbing.

The phenomenon provides an insight into Japan's radically different way of making and selling beverages. In the U.S., soft-drink makers conduct years of consumer research before launching a new product. But Japanese producers do limited research, throw new varieties on the shelves, and see what happens.

The result is about 1,000 new drink products released every year, making Japan's beverage market the most crowded in the world. Hit drinks can sell half a billion cans a year. Losers disappear within weeks. The approach has made Japan into a kind of world-wide beverage-testing ground, says Gary Hemphill, managing director of Beverage Marketing Corp. in New York.

Only about three new drinks a year win the battle for survival in the country's six million vending machines and 40,000-plus convenience stores. Those that do may then make their way to the U.S., Europe and other parts of Asia. Some of these Japanese drinks -- like canned coffee and bottled iced tea -- have become global staples. Unilever PLC's Lipton now offers U.S. consumers a bottled "white tea," a version of a lighter tea popular in Japan and said to have more antioxidants than regular tea. Coca-Cola (Japan) Ltd.'s Qoo, a frothy drink targeted at children that is as sweet as soda but isn't carbonated, became a cult hit in South Korea, Taiwan and China with 20-somethings who think the mascot on the packaging, a pastel-blue character that has a big rounded head and a little body, is cool.

Some Japanese hits don't make it abroad. Ito En Inc.'s iced green teas are huge in Japan, but the company has had a hard time getting American consumers to embrace the bitter flavor, analysts say. Many drinks flop even in Japan. A decade ago, an oolong tea made with mushroom extract designed to cure bad breath was all the rage. It has since vanished from the shelves.

Oxygen waters have sold strongly since they appeared early this summer, their makers say. Asahi Soft Drinks Co. launched its Super H2O water in March, and has since sold nearly 300 million bottles. Suntory Ltd., which bottles and distributes PepsiCo Inc.'s products in Japan, came out with Oxygen New Breath, an oxygen-enriched lemon-sparkling water. Since its June introduction, it has sold more than six million bottles. Suntory's Oxygen Diet, an oxygen-doped carbonated water that also contains a substance designed to burn fat, has sold five million bottles.

The key to this success is consumers such as Yuki Kamioka, a 48-year-old supervisor at a Tokyo advertising agency. She finds oxygen water more refreshing than regular water -- especially when she is swimming laps. "I try to drink it as much as I can," she says.

Ms. Kamioka also says she is always looking for new health drinks. That, says Minoru Matsumoto, a senior officer at Seven & I Holdings Co. -- Japan's biggest convenience-store operator and the owner of 7-Eleven stores world-wide -- is typical for Japanese customers, who are becoming bored with drinks faster than ever.

To keep up with this constant desire for new products, convenience-store chains demand that Japan's dozen or so major beverage makers provide them with unique -- and sometimes exclusive -- products. Advanced in-store technology tracks sales daily, and flops are pulled from the shelves in as few as three weeks. The power of the convenience stores is so great that they sometimes charge drink makers "placement fees" to secure prime real estate in the drinks aisle. Pressure to maintain the right image with consumers and a good standing with retailers pushes beverage makers to launch hundreds of drinks a year.

"It's becoming a self-perpetuating system," says Dave McCaughan, executive vice president at marketing-communications company McCann Erickson Japan, a part of Interpublic Group of Cos. Inc.'s McCann Worldgroup. "The whole industry is just geared towards new products, new products, new products."

New drinks in Japan are therefore risky ventures and often don't generate much return. But failures are built into the business model. Coca-Cola Co. is still feeling the effects of a disappointing 2004 U.S. launch of the low-carbohydrate soda C2. Coke Japan launches an average of 100 drinks a year, and only a handful may stick -- but that isn't seen as much of a problem.

The oxygen-water trend evolved from oxygen bars, which have been popping up in Tokyo and other major cities world-wide over the past five years. "It's a boom. People will pay money to take in more oxygen," says Yumi Takagi, a spokeswoman for Suntory.

Scientists say that drinking oxygen doesn't give the same benefits as breathing it. When oxygen is inhaled, it travels to the lungs, then on to the bloodstream, which then carries it throughout the body. But when oxygen is swallowed, it goes to the intestines, which aren't as effective at transferring gasses to the bloodstream as the lungs are.

Koji Ishida, a health professor at Nagoya University in central Japan, studied the heart rate and endurance of a group of students who drank oxygen water while exercising. He found it had no effect. Naomi Takagi, a Tokyo-based beverage industry analyst at J.P. Morgan, says the price of oxygen water -- about twice that of regular bottled mineral water -- is too high. "Oxygen water is a passing fad," Ms. Takagi says.

There are early signs that the trend may fade. Seven & I Holdings says it sold an average of 20 bottles of its oxygen-water drinks a day at the beginning of the summer in each of its 11,000 stores. The company now sells half that.

Yuta Kusaka, 24, a salesman in Tokyo, picked up a bottle of oxygen water as soon as it came out. "It looked cool," he says. Besides, "it was supposed to be good for you."

He says he won't buy one again: "It just tasted like regular water to me." Then he drops some change into a vending machine -- and selects a bottle of iced tea.