Food and Restaurant Industry Highlights (January - March, 2015)

Dominant restaurant categories

According to the Japan Foodservice Association, the total revenue of the Japanese restaurant industry fell by 0.2% in 2014, as compared to revenue for the previous year. One of the reasons for this drop may have been the fairly unstable weather the country experienced in 2014, including unusually heavy snow in February and intense rain in the summer, factors which may have contributed to a decrease in customer turnout. On the other hand, the average revenue per customer grew by 2.7% thanks to value-adding strategies applied across the industry.

Looking a little more deeply at subsectors within the industry, family restaurants, diners and coffee shops saw some growth in revenue while fast food restaurants, pubs and bars suffered as a result of criticism of their poor quality control systems.

This article was written by Prepared Slides, LLC - a Japan based advisory firm supporting international clients on market research, international business development, strategic alliance, and investment.

Figure 1: A Comparison of food subsectors: 2013-2014

(Source: The Japan Foodservice Association)

An era of added value

It is clear from looking at the recent strategies of food chains that Japanese customers nowadays seek food that is somewhat more expensive than before, but which brings them a richer dining experience. The reason for this may well be the recent improvement in the nation’s economy.

Premium Sukiyaki

Yoshinoya (a beef bowl chain) has introduced a meal called Gyusukinabe-zen (beef sukiyaki pot set), which consists of rice, pickles, raw egg, and a pot of beef sukiyaki. While a regular bowl of beef costs JPY380, the Gyusukinabe-zen set is sold for JPY630. The price of the set may be high, but customers have found it an enjoyable meal and it has proven very popular. Yoshinoya announced in February 2015 that it had sold more than 10 million of these sets since its introduction at

the end of October 2014. This clearly helped the company raise the average sum spent per customer.

Figure 2: Gyusukinabe-zen (Image from Yoshinoya HD)

By contrast, rival company Sukiya has gone through an uphill battle due to its strategy of maintaining low operational costs. It had adopted an “one person on duty” system for late shifts (from 0:00am to 5:00am) in order to minimize labor costs. On top of this, the company tried to emulate Yoshinoya by adding premium food items to its menu, the preparation of which placed an extra burden on its employees. As a result, Sukiya had to shut down more than 100 locations and abandon its one person staffing policy.

Alcohol coupled with fast food

The fast food chain Hidakaya has shown a strong presence in the market by catering to customers’ demand for alcohol while dining. The company serves Chinese food, and steadily increased its sales between 2011 and 2013 despite a downturn in the economy and an increase in consumption tax. Even as major

family restaurant chains are suffering from declining sales, the company expects to break its sales records during the fiscal year of 2014 (from March 2014 to February 2015). The company targets adult customers eager to drink alcohol with their dinner. In order to meet such demands, Hidakaya offers alcohol that goes well with Chinese food.

Revenue # of Customers Revenue/customer

112.0%

110.0%

108.0%

106.0%

104.0%

102.0%

100.0%

Figure 3: A comparison of Hidakaya’s sales results: 2013-2014

(Source: HIDAY Co.)

New market entrants

We have seen a few interesting announcements on new businesses opening in Japan.

Specialty food by US-based companies continues to gain traction.

• Sazaby LEAGUE, a brand curation company, announced that it had closed an exclusive deal with Shake Shack, a popular hamburger shop which originated in New York, to open locations in Japan. The Japanese locations will offer the same food as those within the US (e.g. hamburgers, hotdogs, frozen custard, wine and beer) in order to communicate Shake Shack’s brand mission. Sazaby LEAGUE is an interesting brand which deals not only in general/fashion goods, but also food. The company used to be a dominant stakeholder in Starbucks Japan until Starbucks US acquired 100% of stakes in that company in September 2014. • JJ Hawaii, the dessert section of the popular restaurant JJ Bistro&Fresh Pastry, opened in Harajuku in Januray. Following this, locations were also opened in Kameari and Shimokitazawa in February. JJ HAWAII proudly promotes beautifully decorated cakes which are not overly sweet, and was awarded Gold Medals in the Hale Aina Awards in 2014 and 2015.

An Italian restaurant for matchmaking

The matrimonial agency LOHAS Ginza has opened an authentic Italian restaurant which gives single diners the opportunity to find a romantic partner. The company hopes the restaurant will provide a lighter and more casual environment for matchmaking than traditional bars. They request that customers attend the restaurant dressed in a suit or jacket and present personal identification upon arrival. Then they are asked to input their profiles, hobbies, and personal interests into a tablet device. The restaurant staff take care of the matchmaking part of the process based on this information. Customers order at least one food item and then are ready to start conversation with the partner chosen for them.

Male customers are charged JPY2500 for 30 minutes (alcohol inclusive), while female customers may participate free of charge. Every food item on the menu costs JPY500.

Sources/References:

Dominant restaurant categories

• Japan Foodservice Association (Japanese)

An era of added values

• Yoshinoya HD (Japanese) • Hidakaya (Japanese)

New trend/opening:

• Sazaby LEAGUE (Japanese) • JJ HAWAII (Japanese) • LOHAS Ginza (Japanese)