By Minami Funakoshi
TOKYO, Aug 18 (Reuters) - Back in 1960, Japan's Kewpie Corp began selling canned baby food, sensing a chance to catch a wave of young families raising kids in an economy roaring back to growth after the devastation of World War Two.
Almost 55 years later, the Tokyo-based company sees a new opportunity opening up in rapidly ageing Japan as parents who brought kids up on Kewpie approach their sunset years - what it calls "nursing care food" for the elderly.
Kewpie says it's on the brink of turning a profit on a range of stewed or pureed ready-to-eat meals called "Gentle Menu", currently sold in specialist sections of drugstores and a small number of supermarkets. Served in plastic pouches, they're aimed at the growing numbers of elderly Japanese who have difficulty chewing and swallowing, but crave the taste of favourites like beef sukiyaki.
Known for its signature baby mascot and mayonnaise, Kewpie estimates it now accounts for roughly 70 percent of sales in a niche food market in Japan worth nearly $30 million. That number is dwarfed by Kewpie's annual revenue of close to $5 billion, but growth is expected to be swift: the market nearly doubled in the last four years, according to market research firm Fuji Keizai, and official government estimates say it's potentially worth tens of billions of dollars.
With limited distribution and money being spent on advertising, "Gentle Menu" is unprofitable for now. But Tsutomu Morota, who heads Kewpie's healthcare food unit, says it will probably become profitable next year.
"What we need to do is to make it easier for consumers to access our goods by securing stores that sell our products. We need to work on direct marketing, which includes home deliveries," Morota told Reuters. "We want to strengthen our brand by introducing it into various places, like nursing homes and restaurants."
With one in four in the country above the age of 65, Kewpie's gambit comes as Japanese consumer goods face growing pressure to find new products to stimulate domestic demand, or boost exports - or both. In 2012, Unicharm Corp, Japan's biggest diaper maker said its sales of diapers for adults topped those for babies for the first time.
Kewpie and other makers of food for the elderly say they're concentrating on boosting the domestic market for now, and that variations in international food preferences make direct exports a limited prospect. But the expertise they're developing is attracting interest from overseas: Thai and South Korean researchers, government officials and food makers have already visited Japan to find out more about the business of food for the elderly.
The company that built its fortune on selling jars of mayonnaise in 1920s Japan has learned from experience over the decades since it started selling baby food that it can take time to turn innovation into a product people will buy.
Kewpie first tried selling food for the elderly to hospitals in the late 1980s, packaging the contents in the same bottles they used to sell baby food. The product flopped.
A decade later, Kewpie came back, this time marketing to consumers for use at home. It has also lowered prices, increased the variety of food on offer and set out to build a more appetising brand, naming the product line "Gentle Menu" and using the slogan "The joy of eating" in its advertising.
Each serving now costs 180 yen ($1.76), a sharp drop from 300 yen in 1999. It also offers more than 60 different products compared with just eight at the outset, although the company admits some have been slow to catch on, like its jellied scrambled eggs.
Japan's Ministry of Agriculture is bullish about prospects for a business it believes could help support the country's beleaguered farm sector. The ministry projects that if everyone in Japan above the age of 65 were to spend on average $13 a day on food - a projection food industry executives take with a hefty dose of salt - the market would be worth $24 billion.
Alongside questions about older people's food budgets, Kewpie is still grappling with problematic distribution. Japanese supermarkets experimented with stocking food for the elderly in their regular food sections more than a decade ago, but pulled the offerings when they failed to sell.
Supermarket chain Ito Yokado, owned by convenience store giant Seven & I Holdings Co Ltd, has seen its sales of food for the elderly rise consistently over the past decade. It attributes that success to a decision to devote a special corner of its stores - and dedicated staff - to selling nursing care products including special foods.
"There are still a lot of people who don't know what food for the elderly is," said Shogo Aoto, head of nursing goods at Seven & I. "We need our staff to be able to explain what it is."
Meanwhile, Japan's bureaucrats are also working to give "nursing care food" a makeover. The Ministry of Agriculture has been leading an effort to come up with a more appealing name for the category: candidates includes "active life support food", "lively, energetic food", "easy food" and "happy food". ($1 = 102.4200 Japanese yen)
(Editing by Kevin Krolicki, Miyoung Kim and Kenneth Maxwell)