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KOBE — It is cheap and safe to drink tap water in Japan. Still, the Nestle group, the world’s top maker and supplier of mineral water, sees great potential for growth in the Japanese market.

For the Switzerland-based food conglomerate, which is best known here for its coffee products, mineral water accounts for only a fraction of its business in Japan.

“The consumption of mineral water in Japan is not large — it’s about 8 liters per head per year,” said Wolfgang Reichenberger, president and representative director of Nestle Japan Ltd. “In Italy, each Italian consumes 175 liters of bottled water, and in France, the number is 123. So, you can see the potential.”

Indeed, the mineral water market here has been expanding rapidly. According to the Japan Mineral Water Association, 1.13 million kiloliters of mineral water — domestic and imported — were sold in Japan in 1999, up from 874,000 kiloliters the previous year.

The Nestle group, which has 67 production sites worldwide, made its first investment in the mineral water business in 1969. In 1992 it became the world’s top producer by acquiring the Perrier brand.

In the Japanese market, Nestle has been marketing six imported brands, including Perrier, Vittel and Contrex. But in 1998, Nestle introduced its first Japanese brand, Kon Kon Yusui, in selected areas of the Chukyo and Hokuriku regions; the product debuted nationwide in March.

Despite Nestle Japan’s modest 5 percent share of the Japanese mineral water market, Reichenberger said all of its marketed brands have been posting satisfactory growth in sales.

Among them, Kon Kon Yusui has been the “fastest growing water” thanks to its newness and local source, said Reichenberger. The rule that consumers prefer local water also applies to Japan, he said.

“In the U.S., where we have the No. 1 (position in the mineral water market), we not only have U.S. water but regional water,” he said. “In this business, we have lots of regional brands.”

Nestle Japan currently has only one spring water source in Japan — at the foot of Mount Fuji — but may acquire more.

“As the business continues to grow, we have to consider a second source,” he said.

Concerning the Nestle group’s overall business in Japan, Reichenberger said he would like to propel its foods operation — including Italian foods and culinary products — to a level comparable to its coffee business. Soluble coffee accounted for almost half of Nestle Japan’s 260.4 billion yen in sales in 1999.

“Nestle is the world’s largest food company, but in Japan, it is a midsize player in the food business,” he said. “We want to become one of the major players.”

Reflecting that determination, Nestle Japan recently entered a tieup with Yayoi Foods Co., a maker of frozen foods, and major trading house Itochu Corp.

Under the basic agreement announced in July, Yayoi Foods will set up a production line for manufacturing Nestle brand products with raw materials procured by Itochu.

Reichenberger stressed how important it is for Nestle Japan to tie up with Japanese partners in areas where it is not yet strong.

After 87 years in Japan, his firm still finds it difficult to enter distribution channels here, he said.

“We need to forge relationships. We need to be trusted by our trade customers and, of course, consumers.”

Reichenberger, who has been with the Nestle group for the past 23 years and served in many countries before coming to Japan last year, said he hopes to maintain the current pace of growth.

“Last year, we grew about 5 percent. We want to at least match that growth again this year,” he said.

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