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

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.

                                                        1

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

                                                        2

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.

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

                                                        3

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.

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.

                                                        4

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.

•      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.

                                                        5

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.

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)

                                                        6

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.