Japan-Food Service - Hotel Restaurant Institutional 2012

An Expert's View about Restaurants in Japan

Posted on: 23 Jan 2013

This is an updated guide to Japan’s $360 billion Hotel, Restaurant and Institutional (HRI) Food Service market.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/28/2012 GAIN Report Number: JA2541 Japan Food Service - Hotel Restaurant Institutional Japan HRI Food Service Sector Report 2013 Approved By: Steve Shnitzler, Director, ATO Japan Prepared By: Masayuki (Alex) Otsuka, Specialist, ATO Tokyo Report Highlights: This is an updated guide to Japan’s $360 billion Hotel, Restaurant and Institutional (HRI) Food Service market. The food service industry suffered greatly from the affects of the March 11 Great Earthquake in 2011 and due to incidences of food poisoning in 2011 and 2012, but the industry has shown a step by step recovery in spite of a series of economic downturns. The industry is increasingly offering international cuisine throughout the market place. Competition remains intense and the sophisticated Japanese consumer continues to demand high quality food products in their meals. U.S. suppliers are well positioned to compete in many products categories provided they are willing to adjust to changing market demands. Post: Tokyo ATO Executive Summary: I. MARKET SUMMARY A. Market Volume and Trend The food service (HRI) sector was valued at ¥28.27 trillion in 2011, down from 29.13 from in 2010, and down from ¥30.08 trillion in 2007. Japan’s food service industry is closely tied to the Japanese economy and has closely tracked general economic conditions, as reflected in chart 1. Chart 1: The value of the Food Service Industry and Japan’s GDP Source: Food Service Industry Research Institute (Value), Japan Statistic Bureau Note: In sections I and II, statistics used in this report are primarily expressed in yen, since year-to-year fluctuations in the exchange rate distort the reading of trends. Chart 2: Annual Average Exchange Rates Year Average 2007 2008 2009 2010 2011 JP¥ per US$ 117.93 104.23 93.52 88.09 79.97 Source: Trade Statistic of Japan Chart 3: Corresponding Value in US$ Using Annual Average Exchange Rates Japan Food Service Market 2007 2008 2009 2010 2011 In Japanese Yen Trillion (¥) 30.35 30.08 29.23 29.31 28.82 In US Dollar Billion ($) 257.36 288.59 312.55 332.73 360.39 Source: Trade Statistic of Japan, Food Service Industry Research Institute The Principal reasons for fluctuations in the value of the food service sector in the last five years are attributed to the following: 1. In 2007, steady GDP growth and the corresponding increase in spending among Japanese consumers. 2. In 2008 and 2009, the economic influence exerted by the economic collapse and subsequent world economic downturn decreased discretionary spending on business meals and receptions. 3. In 2009 and 2010, economic recovery and the corresponding increase in spending both businesses and consumers. 4. The March 2011 earthquake and tsunami deeply impacted the entire economy in Japan and HRI sales dropped dramatically. For several months, Japanese consumers and business refrained from any action or event that could be perceived as celebratory. 5. Industry sales have recovered slowly since June 2010, but two deadly food poisoning incidents slowed down sales and scared consumers away from dining out temporarily in 2011 through 2012. 6. In late 2012, industry sources reported that sales are recovering, especially in the less expensive casual QSR sector and the high-end value restaurant sector. (See Chart 4) Dining out is an important part of the Japanese culture. The sophisticated Japanese consumer demands high quality food products in their meals. As per the Chart 2, recent favorable exchange rate shifts favor to U.S. suppliers, who are well positioned to compete in many product categories provided they are willing to adjust to changing market demands. The food service sector has re-organized in the last 5 years as many traditional mom and pop restaurants have gone out of business and have been replaced by new style family chain restaurants. From 2006 to 2009, the total number of outlets decreased from 786,078 to 721,111, down 8.3 %, and sales also decreased from 29.97 to 29.21 trillion, down only 2.5% indicating a streamlining in the industry. In addition, as deflation continues in the general economy, there has been pressure to reduce menu prices, while at the same time, imported ingredient costs are increasing. Sales volume in the sector registered increases since 2009. However, after the Great Earthquake and Tsunami in March 2011, the sector recorded a biggest month to month drop ever. In 2012, sales in the Japanese food service industry has recovered from 2011. Especially, the sales volume in March 2012 jumped up with more sales than the same month of the year before, and industry sales showed almost stable growth in October in 2011 through October in 2012. Chart 4: Sales change of 212 major restaurant chains as compared to the same month of the year 2011 through 2012 Month Total QSR* FSR* Pub Dining DR* Coffe & Tea Shop Other* Oct 2011 0.5% 1.4% 0.0% -2.4% 1.1% -0.3% 2.2% Nov 1.0% 2.7% -0.1% -2.6% 1.3% -1.2% 0.1% Dec 1.8% 4.0% 0.0% -1.6% 0.3% -0.4% -0.2% Jan 2012 0.0% 0.7% -0.8% -2.0% 0.7% -0.7% 0.9% Feb 1.0% 1.9% 0.7% -4.5% 4.3% 3.5% -2.5% Mar 13.1% 10.1% 13.2% 23.6% 32.3% 11.6% 26.2% Apr 3.4% 2.9% 4.3% 0.4% 8.6% 4.6% 5.2% May -1.5% -3.2% 0.2% -0.8% 2.6% 1.6% 2.0% Jun 2.6% 3.1% 2.8% -0.3% 4.5% -1.0% 6.3% Jul -1.7% -1.1% -1.2% -7.1% -1.7% -1.3% -2.2% Aug 2.3% 2.3% 2.6% 0.0% 6.6% 2.2% 1.8% Sep 3.6% 1.9% 8.4% -1.9% 7.6% 1.8% 2.8% Oct -2.1% 2.3% 1.4% -4.8% -1.9% 1.3% -1.1% QSR: Quick Service Restaurant, FSR* Family Style Restaurant, DR*: Dinner Restaurant Other* including; Institutional, school meal, delivery pizza and other Source: Foodservice Industry Research Institute B. Sectors The Japanese food service industry, as broadly defined, has six major segments. Among the five traditional food service establishments, in 2011, the largest sector was Restaurants (42.3% of the market and valued at $152.6 billion), followed by Drinking Establishments (16.3% valued at $58.9 billion), Institutional Food Service (11.4 % valued at $41 billion), Hotels (9.0% and valued at $32.5 billion), and Transportation Related Food Service (0.8% valued at $2.9 billion). A sixth, separate category that has increasingly grown in importance in Japan is “Prepared Meals Sold at Retail Stores” such as convenience stores, supermarkets and department stores. These foods are ready-to eat, Home Meal Replacement (HMR) type products (obento lunch boxes at the office are one example) and are classified by the Japan Food Service Association within the Food Service Sector. The value of the “Prepared Meals sold at Retail Stores” sector in 2011 was $72.5 billion, accounting for 20.1 % of the total Japanese food service industry. It increased by 1.6 % in sales from the previous year and is estimated that 13 percent of all meals in Japan are prepared meals sold at retail stores. Chart 5: Japan food Service Industry by Sector Source: Foodservice Industry Research Institute The growth in HMR is driven by two demographic sectors: the elderly and young single professionals. Japan’s population is aging faster than any in the world, and many elderly do not have the ability to drive or travel far to grocery shop. As a result, many get their daily meals from the local “conbini” or convenience stores, such as 7-11, Lawsons, or Family Mart. Likewise, young professional who live alone or with roommates often don’t cook and almost exclusively eat outside food. This may explain why according to the OECD, a low proportion of Japanese (46%) participate in cooking and cleaning up afterwards, the second lowest in the OECD and much below the OECD average of 64% participation. However, those Japanese who cook do a considerable amount of it, cooking for 1 hour 39 minutes per day, the fourth highest in the OECD after Mexico, Turkey and Portugal and well above the OECD average of 1 hour 24 minutes. This HRI industry was overwhelmed twice in last five years. The 1st major influence was the world market melt-down in 2008, and the 2nd impact was the Great Earthquake and Tsunami on March 11, 2011. The office meal delivery sector of institutional and HMR sector of prepared meals were the only two sub-sectors that didn’t decrease in 2011. Chart 6: Japan HRI Market by Sector by Year Change Sector 2007 2008 2009 2010 2011 '10 to '11 Share Unit ¥ Tri. ¥ Tri. ¥ Tri. ¥ Tri. ¥ Tri. $ Bil. % % Restaurants 12.48 12.85 12.61 12.50 12.20 152.56 -2.4% 42.4 Hotels 3.13 3.07 2.76 2.70 2.60 32.51 -3.7% 9.0 Institutional 3.62 3.36 3.28 3.28 3.28 41.02 0.0% 11.4 Drinking Establishments 5.22 4.99 4.76 4.73 4.71 58.90 -0.4% 16.4 Transportation 0.25 0.26 0.25 0.25 0.23 2.88 -8.0% 0.8 Prepared Meals 5.64 5.54 5.57 5.69 5.78 72.26 1.6% 20.1 Total 30.34 30.07 29.2282 29.15 28.80 360.12 -1.2% 100.0 Source: Foodservice Industry Research Institute The March 11, 2011, earthquake and tsunami disaster weakened dining out sales more than the industry expected. QSR sales were particularly affected as convenience stores added to their meal selection. The key factors affecting the food service industry can be summarized as follows; A series of worldwide economic crises have chipped away discretionary spending on both business meals and consumer’s eat out. A strong yen has been slowing down Japanese economy and export business. Many Japanese industries rely heavily on exports. Food service industry rationalization by chain restaurants, hotels and food suppliers. The industry has been pursuing mergers and acquisitions that improved industry structure and reduce operating costs. Increased opening of new outlets by new restaurant chains and up-scale hotels and the creation of an attractive new style food business, high in value and quality. Redevelopment projects have been active in Tokyo metropolitan area. New pub restaurants and sophisticated casual restaurants are being introduced when older buildings are demolished and replaced by newer buildings. These new restaurants are more likely to target women and affluent young people, who are willing and able to pay for higher quality menus. The trend to identify popular restaurants. TV programs target specific restaurants and have introduced tasty and high value restaurants, both five star class restaurants and casual style restaurants in both metropolitan area and local region. At the same time, TV programs promote home-grown agricultural products as high-end food products. A new food trend, B-class gourmet, features regional restaurants serving localized menus. Japanese consumers now tend to show tolerance with imported food including imported food from China after the nuclear accident in Fukushima in 2011. This may be a result of some concerns with domestic foods and radiation. The Japanese food service sector has traditionally been very receptive to the use of imported food products. This is due partly to the fact that; Imported food products are often less expensive than their domestic counterparts. The food service industry does not require unique specifications for food packages as does the retail industry. The food service sector often incorporates new food concepts from abroad, which makes it more receptive to importing items used in the menu. C. Value of Total Imported Food vs. Domestic Products According to the statistics of the Japan’s Ministry of Agriculture, Fishery and Forest (MAFF), domestically produced Agricultural and marine products accounted total of ¥9.6 trillion ($109.1) which is equivalent of 39% in calorie terms and 66% in value terms of all food consumed in Japan in 2010. In 2011, Japan imported $88.02 billion in agricultural and marine products. While it is difficult to say exactly what percentage of imported food vs. domestic food is used for the food service sector as a whole, it is estimated that well over half of all food service menu items involve imported food stuffs in one form or another. Imported items such as beef, pork, shrimp, salmon, wine, cheese, frozen vegetables, frozen potatoes and the like are heavily used by the food service sector. Japan imported a total of $88 billion agricultural and marine products in 2011, increasing 13.3% over the previous year. The total value of food and agricultural imports from the Unites States increased by 21.6% to a 23.5 % share in 2011. This overall growth is somewhat due to the disaster, and demonstrates that Japan has more potential for food imports than previous statistics showed. (See Chart 7) Chart 7: Japan Food and Agricultural Import Total by Country United States Dollars, million % Share % Change Partner Country 2009 2010 2011 2009 2010 2011 2011/2010 World 59,106 65,694 81,057 100.00 100.00 100.00 23.39 United States 14,810 15,640 19,009 25.06 23.81 23.45 21.55 China 7,347 8,570 10,103 12.43 13.04 12.46 17.90 Australia 3,898 4,316 5,025 6.59 6.57 6.20 16.42 Canada 3,500 3,905 4,941 5.92 5.94 6.10 26.51 Thailand 3,365 3,741 4,841 5.69 5.69 5.97 29.40 Brazil 1,996 2,607 3,687 3.38 3.97 4.55 41.43 Netherlands 1,692 1,840 2,803 2.86 2.80 3.46 52.37 Korea South 1,533 1,799 2,241 2.59 2.74 2.77 24.58 Chile 1,547 1,657 2,160 2.62 2.52 2.67 30.38 France 1,512 1,591 1,820 2.56 2.42 2.25 14.39 Source: Global Trade Atlas (HS Code 02 through 24, except 13 and 14) The strong yen exchange rate and increasing domestic food price of the last few years have driven up food imports from foreign countries to Japan. In particular, dairy products from the U.S. to Japan increased by 57 percent in quantity in 2011 from the previous year. Japanese importers have shifted sourcing natural cheese from Oceania countries to the U.S. due to favorable exchange rates, importing shredded cheese mainly used for food service sectors (i.e. pizza and Italian style restaurants). U.S. exports of red meats, chicken, fresh vegetables, and tree nuts to Japan experienced the double digit increases in 2011 over 2010. Certain segments continue to do better than others, in particular, French and Italian style restaurants, U.S. branded restaurants which serve a higher quality food and atmosphere than ordinary quick service restaurants (QSRs). The QSRs which attracted consumers with low menu prices are struggling due to pressure from the high cost of ingredients. Korean and Chinese style restaurants have decreased sales with diminished number of tourists from South Korea and China due to recent territorial disputes between Japan and these two countries. Many industry experts predict the Japanese food service sector will be back on the track to recovery in 2012. QSR and streamlined family style restaurant chains continue to lead the industry. Hotel restaurants, new concept casual dining, and ethnic food restaurants are expanding as a result of consumer demand. Catering, including home meal replacement, and institutional meal businesses are also expected to grow due to a deflationary environment which will cause most individuals to tighten their budget when it comes to dining out. After several years out of the market, “Cinnabon” has just returned to Japan. McDonald’s proves new business style including expansion of delivery service and reopening with snazzy café style atmosphere. D. Advantages and Challenges The industry increasingly offers international cuisines throughout the market place and competition is intense. The sophisticated Japanese consumer generally demands high quality food products in their meals and U.S. suppliers are well positioned to compete in many product categories provided they are willing to adjust to changing market demands. On the other hand, limited U.S. beef imports continue to affect the food service industry in Japan. The Government of Japan has allowed imports of cattle aged 20 months or less since December 2005. This age restriction is still in place at the time this report was written, and will likely limit the supply to U.S. beef in the food industry as a whole, and particularly in the food service industry. Nonetheless, U.S. beef imports to Japan increased from 105,000 metric tons (MT) in 2010 to 120,600 MT in 2011, an increase of about 32% in quantity. However, 120,600 tons is still less than a half of the total imports in 2002 before BSE was detected in the United States. As a result of U.S. Meat Export Federation and FAS Japan’s marketing efforts, a greater number of major city hotels and family style restaurants are currently serving U.S. beef. When and if U.S. beef export restrictions are relaxed, we expect that U.S. beef exports will quickly approach pre-2002 levels as Japan’s restaurant and institutional industry is the most supportive business community for U.S. beef in the market. Chart 8: Japan Beef Import by Country Rank Quantity (M. ton) % Share % Change Partner Country # 2010 2011 2012 2010 2011 2012 2012/2011 World 491,198 532,708 540,125 100.00 100.00 100.00 1.39 1 Australia 349,385 346,451 336,146 71.13 65.04 62.23 - 2.97 2 United States 82,222 119,569 135,691 16.74 22.45 25.12 13.48 3 New Zealand 31,734 30,470 31,932 6.46 5.72 5.91 4.80 4 Mexico 10,549 18,007 20,007 2.15 3.38 3.70 11.11 5 Canada 11,251 11,744 12,050 2.29 2.20 2.23 2.60 Year Ending: November 2011 – October 2012 Source: Global Trade Atlas (HS Code 020110 through 020230, 020610 through 020629, and 021020) Food service operators are also dealing with the escalating domestic rice prices that thins profit margins. The industry appears to be more accepting of imported rice usage, a situation that expands opportunities for U.S. rice in the market. A brief summary of the advantages and the challenges for U.S. food exporters targeting the Japanese food service sector appears below: Chart 9: Advantages and Challenges Advantages Challenges The success of U.S. fast food and restaurants Many consumers view American food culture chain concepts helps introduce American style as less attractive than European or Japanese food inputs into the general diet. counterparts. U.S. food producers have a positive image for Most imported food products are viewed by safety compared to many Asian competitors, some consumers as less safe than especially among the trade. domestically, except Fukushima region, produced Japanese food products. The U.S. has a reputation and history as The quality and reliability of Asian exporting reliable supplier of food (both availability and countries has been growing as the delivery) at reasonable price. distribution infrastructure and quality assurance (QA) procedures have improved. The United States has a wide variety of food Japanese buyers are sourcing from all over products, including fresh & further processed. the world rather than from only a few countries. High Japanese farming costs and a weak dollar The perception of U.S. price competitiveness make imported food products attractive. and quality has declined vis-à-vis other exporting countries. After the Fukushima nuclear power plant Japanese government policies relating to accident in 2011, the United States is food safety pose increasing impediments to recognized as a source of advanced food trade, such as a strict Maximum Residue processing and food safety assurance Level (Positive List), BSE standards and technology including sustainability and organic stringent labeling requirements. production. II. Road Map for Market Entry A. Entry Strategy There are no magic formulas for new–to-market exporters to enter the Japanese food service market. Strategies will vary depending on the type of food product being introduced and the current competitive environment. However, there are some basic procedures that new-to-market exporters are recommended to follow when considering the Japanese food service market for the first time. 1. Market Access One of the fundamental first steps is to determine the market access for your products. In particular this means: Determine if your product category can currently be imported into Japan. Due to food safety concerns the Japanese government has become increasingly strict in allowing food products into Japan. Determine the import classification and tariff rate for your product. Some product categories such as those containing rice and dairy products are still highly protected by the Japanese government and face either prohibitively high tariff or quota barriers. Its is important to know in advance if this is the case to prevent time and energy being dedicated to products that will not ultimately be price competitive. Freight forwarders and traders can be helpful in determining into what category your product falls. Determine whether your product meets Japanese regulations for food ingredients. If the product contains prohibited ingredients it will have to be reformulated before it can be imported into Japan. In some cases this may be difficult for U.S. exporters due to volume constraints or because the ingredients is a key element of the formulation. By ascertaining this in advance, U.S. exporters can save themselves much frustration later if it is difficult to reformulate. Sources for this information include: http://gain.fas.usda.gov/Pages/Default.aspx, set your search to select “Country: Japan”, and “Categories: FAIRS Freight forwarders can also be helpful in determining ingredient acceptability. 2. Competitive Analysis Once it is established that the product can be physically exported into Japan it is important to establish whether the product will be accepted from a competitive standpoint. This entails doing at least a preliminary analysis of the market to determine: What is the size of the opportunity for the type of product? Who are the key customer targets for the products? What is the current pricing of similar types of products? Can the product be cost effectively introduced? What are the key points of differentiation for the product compared to others? In what form and what kind of packaging is the competitor’s product sold? Will customers expect the same? To do this analysis it is helpful to take some combination of the following steps: Visit Japan to research in person the customers your type of product is sold to and see how the product is marketed. Utilize resources such as U.S. Foreign Agricultural Service and the local U.S. Agricultural Trade Office (ATO), State Regional Trade Groups (SRTG’s) to obtain information about the market relevant to you product. Talk with freight forwarders and Japanese importers that handle your category of products. If possible, meet with potential customers to determine the kinds of needs they have and their current sources for your products. 3. Comparative Advantage of the products To succeed in entering the Japanese market, it will be important to define the comparative advantage of your products versus the competition. Potential customers in Japan will have to perceive merit in using your products. The most common merits are: Offering price savings that will encourage the customer to give your product a trial. Offering a product or form of product that is new to the Japanese market. Every year there are new items that become popular in Japan that newly introduced unique foods. Recent examples include gourmet hamburgers, craft beers, fresh baked pretzel, smoothies, varietal honey, and sparkling wines, to name a few. Offering a more convenient form of the product that makes it easier for food service operators to use. This may include a smaller package and a new technology for packaging that make the product easier to prepare or a new form of the product that offers advantages in terms of labor cost, preparation time or efficiency. Offering a high quality product. Food service operators are always interested in products that offer better quality in one form or another. For example, it may be that your product has a demonstrably better track record than competitors on safety issues. These points of difference are worth promoting. 4. Receptivity of the Distribution Trade It is important for new-to-market exporters to understand how the distribution system works and to identify potential partners or distributors. Such partners or distributors can offer invaluable advice on issues related to the product, its positioning, packaging, labeling, and custom clearance procedures. There are numerous ways to identify these partners. Some suggestions include: Ask the ATO and co-operator groups research market potential for your category of products. Attend trade shows such as Foodex, Super Market Trade Show and Food Service Industry Show to meet potential partners and obtain leads. If visiting Japan, discuss potential importers and distributors with freight forwarders, and if meeting any customers, enquire as to their preferred distribution channel. Many times customers will have their own preferred channels which they use for imported products. It is important to obtain a reliable on-site partner or importer if you expect to do long term business in Japan and you do not plan to have your own in-country office. Some things to look for include: Does the partner/importer represent other imported products? Do they have a favorable reputation and financial background in the marketplace? Do they have the capability of communicating daily with you in English? Do they have an understanding of import procedures for your type of food product? 5. Ability of Willingness to Meet Market Requirements To be successful, it is very important for the new-to-market exporter to be willing to make changes to the product if necessary to meet market expectations in terms of service, quality, and price. This process working with Japanese clients will also polish your products quality and increase marketing competitiveness. Some basic suggestions include: Make sure you are willing to re-formulate the product if necessary to meet relevant Japanese Food Sanitation Laws and Regulations. Be willing to adjust the product or packaging to meet Japanese taste profiles and market expectations. For example, many Japanese operators prefer smaller package sizes due to lack of space to store items. Provide samples on a timely basis, but only upon request of a client/importer. Ensure that all documentation necessary to clear customs and quarantine procedures is provided in proper form. Japanese customs always request clarify food ingredients and processing outline to define import tariff rate. Reply to requests for information in a timely manner, within at least 48 hours, preferably less. Work closely with your partner or importer to prepare sales materials in Japanese. Be patient. Most Japanese food service operators will start with only a small order in order to test the potential supplier. This is especially true for new-to-market suppliers where the risk of something going wrong (clearing customs, wrong documentation, wrong labeling, etc.) is the highest. Japanese food service operators are looking for suppliers who can provide consistent high quality product without defects or foreign materials, and who are reliable partners in terms of both delivery and safety issues. To help cement relations, it is strongly recommended to have face-to-face meetings at least once per year with your customers. B. Market Structure 1. Distribution Most imported food products still pass through trading companies. The large general trading companies such as Mitsubishi, Itochu and Mitsui have many divisions specializing in a wide variety of imported food products, while small importers tend to specialize in a limited line of high value-added items. Trading companies function as legal importers of the products and serve a variety of functions including clearing customs, handling documentation, product testing, warehousing the product, and financing the inventory. In the past, trading companies would normally sell the product to first line wholesalers who in turn would sell to secondary wholesalers and even to third line distributors before the product finally reached the food service operator. This pattern has changed in the past decade, particularly for chain food service customers who have substantial buying power. In order to reduce food costs, most large food service operators now take possession of the product or use designated distribution centers rather than use wholesalers. In addition, more food service operators import product directly, but the majority still use trading companies. One unique aspect of Japanese food distribution, even though food service operators developed import products directly, they contact out supply chain operation including import procedure, inventory and delivery to venders. This is a growing trend toward outsourcing after the venders could streamline their supply chains. The deflationary environment of the past several years has intensified price competition among food service chains, and has accelerated the trend to eliminate middlemen. In order to survive in an increasingly competitive marketplace, wholesalers are being forced to consolidate. Smaller wholesalers are either disappearing or being bought by larger ones. In order to add value, most large wholesalers own their own distribution trucks. Wholesalers now focus on carrying broad product lines that can efficiently service small food service operators or small chains with one- stop service. Some wholesalers are now also beginning to import products directly to reduce costs further. Meanwhile, a written food safety assurance is now the standard in Japan. Food venders, not manufactures, are responsible for food safety even if they just deliver food products. Food suppliers are required to provide affidavit like assurance to chain restaurants. This causes food service operators to use several distributors in Japan to hedge risks. The Cash & Carry trade, including wholesale clubs such as COSTCO and METRO are becoming popular as resource of food products among Japan’s smaller size food service operators in order to reduce food costs. The biggest is Gyomu Super (Business Supermarket), which has a total of 600 outlets throughout Japan. Additionally, regional food wholesalers have formed a strategic purchasing alliance and have opened cash & carry outlets in the region. These local outlets substitute historical food vendors for food service operators. Bulk packed meat, seafood, fresh produce, coffee, seasonings/condiments, wine, cheese, frozen vegetables and frozen bakeries are hot selling food products at these outlets. See Appendix Chart 1: A diagram of the flow of product from the U.S. exporter 2. Segmentation A discussion of some of the key trends in the HRI industry that U.S. exporters should be aware of: i. Price Competition Consumers continued to tighten their belts. Saizeriya, the biggest Italian cuisine-family style restaurant with about 1020 outlets, introduced authentic Italian cuisine at reasonable prices. For instance, a 500 milliliter carafe of wine is sold at ¥370 ($4.50) and a bowl of cheese risotto with meat sauce is sold at ¥299 ($3.60). Saizeriya increased sales by 4.4% in 2011 and has become very popular company in the market. In order to compete in the market, many other fast food and family restaurants took a similar approach by introducing low cost menus. However, the major beef bowl chains Yoshinoya, Zensho (“Sukiya” brand operator) and Matsuya, had competed by offering lower menu prices, have been outflanked by convenience stores’ mixed HMR merchandising. ii. Convenience Store Gain Power as Food Service Operator Convenience stores (CVS) keep evolving on food merchandising and became the biggest rivals for Japan’s beef-bowl chains. Like beef-bowl restaurants, convenience stores used to heavily rely on male customers. But over the years, they have succeeded in appealing to other customer segments, sucha s seniors and women, by offering meals in smaller portions and expanding their dessert lineups which customers can buy with their main meal at same store. A variety of sweets, cakes, puddings and Japanese sweets, at a major convenience store, Seven-Eleven iii. New Tastes from America The variety of menus available in Japan continues to expand. Partly due to the large number of Japanese traveling abroad every year, foods from Europe, Asia, Australia and the Americas are becoming increasingly popular. Japanese consumers are interested in trying new cuisines. Examples of this include Wetzel’s Pretzel, and Bubby’s New York, which have successfully launched new business formats in Japan. Cinnabon also came back to Japan in November 2012 from several year’s absence. The interest in new food ideas opens the door to food exporters to introduce new concepts in to the Japanese market. Ambassador John V. Roos was the guest of honor at the Grand Tokyo The first Wetzel’s Pretzel shop in Tokyo, Opening of Cinnabon in November, 2012. Cinnabon returns to Tokyo Japan after an absence of about four years. iv. Willing to Pay More for Healthy Eating at Breakfast Restaurants Japanese consumers are increasingly interested in foods that are perceived as healthy. This trend takes a variety of forms. For example, family restaurant chains are including nutritional information on the menu, such as allergen content and calories per serving. Fast food restaurants and casual style restaurants strengthen breakfast menus and are introducing small size fruit-rich menus, such as cup salad and pancakes with fruits. MOS Burger offers burgers featuring in-season vegetables. Mos Burger’s Vegetable Burger comes with flied Restaurant Bills and a line of people waiting for breakfast at an vegetables (carrots and gobo/burdock roots) atmosphere with unconventional living, the restaurant is located in and rice buns front of Shonan beach. In addition, breakfast specialized restaurants have gained popularity. The consumers are willing to pay more for a quality breakfast. You often see long queues people waiting in front of refreshing charm restaurants, Bills from Australia, eggs and things from Hawaii, and newly joined Sarabeth’s Kitchen from New York. These are the restaurants recently have opened in Tokyo and adjacent cities where have environments as urban resort, and offer sophisticated authentic western style breakfast featuring their original ingredients from the region. U.S. exporters that have products that fit into the “healthy” category will have opportunities as this sector grows. v. Seniors Hold Key to Spending Growth Japan’s elderly population accounts for an expanding share of total consumer spending. According to Japanese news reports, households headed by people 60 or older spent more than 100 trillion yen in 2011, or about 40% of total consumer outlays. But this is a highly stratified consumer group marked by a small number of wealthy, but frugal, consumers. In an effort to attract customers in this group, many food operators have introduced delivery service. McDonald’s is planning a home-delivery service in order to reach seniors and consumers who eat at home. Many chain restaurants, such as Yoshinoya, Royal Host, and others have renovated their restaurants to include bigger spaces, a number of big sofas or cotton-candy machines which cater to three generation families to enjoy the food and atmosphere. Seniors’ wallets tightly sealed but can be loosen for their grand children. Steak Restaurant Ken, family style restaurant chain, offers events A restaurant offering three generation families to for children come with family to experience working at the make soba noodles together restaurant kitchen. vi. Information Technology (IT) and B-class Gourmet The IT evolution and prevalence of smart phones provide a dynamic to the local food service industry. One new trend is affectionately called “B-kyu-gurume (B-class gourmet)”. Japanese food service operators are striving to introduce new ideas and formats using these local food flavors or combinations. B-Class Gourmet is a new buzzword throughout Japan, meaning cheap, local food, served in local restaurants. Most of menus are everyday home meals, such as fried/soup noodles, deep fried cutlets, and sweets. B-class gourmet establishments have banded together and conduct Japan-wide events that vie with each other for the best B-class gourmet dish. The National B-Kyu Gourmet Contest winner, Fujinomiya Yakisoba (fried noodle) has uniquer texture than other fried noodles vii. Theme Park Restaurants While overall Japanese consumer spening remains weak, the sales into leisure activities have been solid in 2012. Oriental Land Co., the operator of Tokyo Disney Resort saw the number of visitors in the April-September period hit a first-half record of 13.25 million, an increase of about 400,000 due to new attraction openings and special seasonal events. Major theme parks in Japan feature U.S. history and culture including Tokyo Disney Land, Tokyo Disney Sea, and Universal Studios Japan in Osaka). Restaurants located in these theme parks often focus on foods from abroad and offer opportunities for U.S. exporters to test their products. The Disney Resort will celebrate its 30th anniversary in Tokyo in 2013 which may create a good new-to-market opportunity for U.S. food products. Tokyo Sky Tree town is composed of the tallest 634 meter tower, shopping and restaurant complex, an aquarium and office spaces. The town recognized as the city’s new landmark Meantime, Tokyo’s brand-new broadcasting tower “Skytree” is recognized as a new theme park with the “Solamachi” (Sky-town) shopping facility at the bottom of tower. Since its doors open on May 22, 2012, the entire Tokyo Skytree Town complex had hosted about 21 million visitors as of September 30, 2012. The Beer Pub – World Beer Museum, features U.S. craft and thirdf country beers, recordeing the highest sales in the shopping complex in this summer. Food buyers there are always looking for original and unique new products associated with the United States (for example, smoked turkey drumsticks and caramel popcorn are two popular items at Disneyland). viii. HMR Prepared Foods The area of sharpest growth in the food industry has been ready-to-eat products that can be purchased at retail shops. For example, many consumers purchase take-out lunches at convenience stores or similar retail shops that can be eaten quickly at the office or elsewhere. Vendors of these foods have steadily increased the freshness, quality, and variety of the foods they offer, providing a more attractive menu selection to consumers. U.S. exporters that provide the kinds of products that would fit lunchbox-type or HMR items should consider approaching assemblers of these types of foods. Nippon Restaurant Enterprise’s, SeikoMart, Hokkaido based major Ito-Yokado’s mixed lunch box sold beautifully setout lunch boxes. An convenience store chain, with 1146 at JPY 399 ($4.98) good for big idea of authentic Japanese home meal outlets offers “Hot Chef” which cooks appetite consumers. This kind of and good for vegetarian, retail price lunch boxes in its stores and serves at reasonable price lunch boxes at JPY1,155 (US$14.43). This bento fresh/hot temperature. Picture - pork became poplar and attracted box is available at both Train station cutlet and egg on top of rice at consumers away from QSR industry KIOSK and catering JPY550 ($6.88) Seasonable and special lunch box development is common in the industry for special occasions. Frequent menu changes can become both an opportunity and constraint for imported food products. ix. Food Safety The importance of food safety has risen continuously in consumers’ minds over the past decade due to a series of highly visible food scares and scandals. In particular, radioactive cesium exceeding the government-set permissible limit was detected in local dairy cows, beef, rice, and many leafy vegetables in Fukushima prefecture (and adjacent prefectures) after the nuclear accident in Fukushima. In addition, there have been a number of recent cases where domestic food service operators were responsible for food poisoning events. As a result of these incidents, food service operators have become much more stringent in demanding strict procedures and systems for food safety from their suppliers. This includes detailed documentation from suppliers regarding QA systems and procedures at the production site, documentation relating to all ingredients used by the supplier including country of origin, and certification that the products adhere to Japanese regulatory requirements. Many chain operators will not consider buying from a new supplier until all the documentation is provided and an on-site inspection of the production facilities is conducted to verify the standards of the supplier. In addition, food service operators have become much more demanding regarding quick and accurate responses to any product quality complaints to ensure steps are taken to prevent reoccurrence. Suppliers who do not measure up to the expectations of the food service operators for food safety are often replaced. We highly recommend having a quick response procedure in place to address food safety or product quality complaints to ensure a minimized disruption to trade. x. GMO: The first GMO Hawaiian papaya was launched and sold in Japan in December 2011 after a decade-long negotiation between the Japanese government and the U.S. government. This is significant as it is the first direct to consumer GMO product to be sold in Japan. The road to acceptance will be long, but eventually, we believe that GMO foods will enjoy a certain amount of acceptance. However, at this time, most food service operators in Japan normally require GMO free food products from suppliers and most Japanese consumers do not accept the concept of GMO products. See GAIN report JA2520. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/GMO%20Papaya%20Reaches%20Out%20T o%20Japanese%20Consumers_Tokyo%20ATO_Japan_8-15-2012.pdf C. Sub Sector Profiles A detailed discussion of the various sub-sectors of the HRI food service industry follow. 1. Restaurant Sector The restaurant sector is the largest of the HRI food service segments. Restaurant sales in 2010 were ¥12.7 trillion equivalent to $144.2 billion. This represents 43.2% of total food service industry sales. The restaurant sector includes a wide variety of operators, ranging from American-style fast food chains to more traditional family owned single outlet restaurants. The restaurant sector is divided four major sub-segments. A chart diagramming this segmentation follows: Chart 10: Japanese Restaurant Sector - 2011 General Restaurants ¥8.6 Trillion (69.9%) ($106.9 Billion) 1.3 Trillion ($16.1 Re s Sushi Shops (10.5%) ¥ taurant Sector ¥12.2 Billion) Trill. ($153 Bill.) Noodl 13.3 e Shops (8.7%) ¥1.1 Trillion ($ Billion) Other (10.9%) ¥1.1 Trillion ($16.6 Billion) Source: Food Service Industry Research Institution 2. General Restaurants General restaurants used to be categorized by the Ministry of Economy, Trade & Industry (METI) into five categories: non-specialized restaurants, Japanese restaurants, Western Restaurants, Chinese Restaurants, and Meat/Other Asian until 2006. In 2009, the latest available census year, METI combined Western cuisine and other ethnic cuisine together as “other specialized” restaurants. The largest numbers of outlets are non-specialized restaurants, followed by specialized, Chinese and Japanese. Chart 11: Number of Restaurant Outlets by Type of General Restaurant Type of Restaurants 2004 2006 2009* Change '06 to '09 Non-Specialized 73,628 73,298 63,427 -13.5% Specialized: Western, Other Ethnic Cuisine & Meat 57,034 60,394 61,913 2.5% Chinese 60,930 59,552 56,541 -5.1% Japanese 41,963 42,572 50,763 19.2% Total 233,555 235,816 232,644 -1.3% Source: Ministry of Economy, Trade & Industry ATO Japan has pursued newer statistics for this part, and obtained statistics published from a private research company which categorize a restaurant segment to five different categories to 1) Family Style Restaurant, 2) Western Style Restaurants including French, Italian and American, 3) Japanese Style Restaurants including noodle shops, sushi bars and almost of other Japanese foods, 4) Oriental Cuisine Restaurants including, Korean (barbecue), Chinese and Mongolian cuisine, and 5) Ethnic Cuisine Restaurants including, Mexican, Indian and South-East Asian cuisines. According to this statistics, number of outlets also shows decreasing transitions due to deflationary trend and related market rationalization. The trends in number of outlets and sales volume see below. Chart 12: Number of Restaurants Outlets by Type of General Restaurants Type of Restaurants Total Number of Outlets Year 2008 2009 2010 2011 *2012 Family Style Restaurants 11,755 11,416 11,376 11,281 11,365 Western Style Restaurant 10,190 10,105 9,995 9,925 9,890 Japanese Style Restaurant 116,815 116,495 112,335 108,905 107,315 Oriental Restaurant 37,912 37,755 37,615 36,830 36,780 Ethnic Restaurant 1,870 1,855 1,830 1,825 1,825 Total 178,542 177,626 173,151 168,766 167,175 Source: Fuji Keizai – Food Service Industry Marketing Handbook 2012 * 2012: Estimate Chart 13: Sales Amount by Type of General Restaurants Type of Restaurants Sales Amount in JP ¥ Million Year 2008 2009 2010 2011 *2012 Family Style Restaurants 1,497.4 1,405.8 1,382.8 1,360.2 1,369.4 Western Style Restaurant 775.8 757.3 747.3 732.8 726.1 Japanese Style Restaurant 3,016.6 2,917.4 2,791.4 2,713.4 2,666.7 Oriental Restaurant 1,349.0 1,321.8 1,316.9 1,272.8 1,288.4 Ethnic Restaurant 120.4 115.8 111.2 109.4 108.5 Total 6,759.2 6,518.1 6,349.6 6,188.6 6,159.1 Source: Fuji Keizai – Food Service Industry Marketing Handbook 2012 * 2012: Estimate The category with the greatest opportunity for most U.S. food exporters are restaurants. The trend has been driven by diversified Western, Japanese and ethnic fusion cuisines. These restaurants are composed of casual and family style restaurants which serve mainly Western dishes as well as restaurants specializing in specific menus such as steak, Hamburg (meat loaf) and pizza/pasta. As a result the menu relies heavily on imported food products to provide authenticity as well as taste. Large family restaurants chains such as Saizeriya (Italian style), Skylark, Royal Host, Denny’s, Coco’s, Jonathans, and Joyful, are major users of imported U.S. foods including items such as beef, pork, frozen potatoes and vegetables. Up-scale American-style concepts have taken hold in Japanese market in last five years, such as the Oregon Bar & Grill, Ruth’s Chris Steak House, Union Square Cafe, Lawry’s, and Wolfgang Puck pizza. A popular sector are casual steak restaurant chains that offer free salad, side dishes and cooked rice come with all in one main meal, steak and/or hamburg, at reasonable price ($10 to $20). This is an example of authentic American style dishes have been modified and popularized in the industry. These companies use imported foods on their menu extensively. French restaurants have traditionally been popular in Japan and more recently Italian restaurants have also surged in popularity. Mexican restaurants, which are still few in number, are slowly growing in popularity and provide opportunities for U.S. exporters for items such as tortillas, frozen guacamole, and related Tex-Mex foods. Food service chains that come to Japan from the U.S. are perfect targets for U.S. exporters who also sell those food product concepts in the U.S. 3. Sushi Restaurants Japan is famous for sushi, which is increasingly popular around the world. Japan is the world’s largest importer of seafood products and a substantial portion ends up in sushi form. This includes tuna, scallops, sea urchin, salmon, salmon eggs, yellow fin, crab and shrimp. Most seafood imports pass through wholesale markets such as Tsukiji Fish Market in Tokyo before being delivered to sushi shops throughout Japan. The U.S. is a major exporter of salmon, salmon eggs, and sea urchin used by sushi operators. The value of the sushi food service segment was estimated at ¥1.3 trillion in 2011, equal to $16.1 billion. In 2009, the most recent census year, a total of 28,865 sushi restaurants were reported, significantly declined from the prior census (32,327 sushi restaurants in 2006). 4. Noodle Shops Noodles, served either hot or cold, are one of the most popular foods eaten outside of the home in Japan. Japanese noodles come in two forms. Soba, which are noodles made from buckwheat, and Udon, noodles made from wheat. In 2011, the value of the soba/udon food service segment was estimated at ¥1.1 trillion or $13.5 billion. There were estimated 33,005 soba/udon shops in 2009, many of them were use to be single proprietorship shops but chain operators have increased their number of outlets, typically at shopping malls and roadside that have replaced from regional business to chain operation. Noodles consumed outside of the home are frequently ranked as the most popular lunch item by consumers because they are both quick to serve and eat, and quite inexpensive. A typical soba set will cost only ¥300 - ¥500. It is common for the Japanese ‘salaryman’ to down a bowl of noodles within minutes during lunch. Opportunities for U.S. exporters are principally the ingredients used as toppings for noodles. This includes items such as chicken products, seasoned pork slices and sweet corn kernels. Since many noodle shops are individual outlets rather than large chains, U.S. exporters’ strategy for selling toppings must rely on major food service wholesalers who supply the shops. 5. Other Restaurant Types The Food Service Research Center categorizes a number of special food service concepts into its “All Other” category. These include: Hamburger Chains Fried Chicken Restaurants Pizza Shops Donuts and Ice Cream Shops Beef bowl Curry & Rice Okonomiyaki A brief description of those that are of particular interest to the U.S. exporter follows: i. Hamburger Chains The number one food service operator in Japan is McDonalds Japan, which opened in 1972 and now has about 3,300 units nationwide. The hamburger fast food concept has been one of the most visible and successful segments over the past 40 years. However, McDonald’s fell in its seven-year sales growth streak, down 1.4 % to ¥535.1 billion in 2011 as the company closed number of loss making stores. Meantime, McDonald Japan succeeded in attracting customers by increasing the number of new type outlets that have up-scale eat-in counters, and kept continuous growth on a same store basis in sales in 2011. A list of the top five hamburger chains includes: Chart 14: Major Hamburger Chains Humburger Chains Number of Outlets Name of Company 2011 2012 % Change from 2011 McDonald’s Japan 3,302 3,298 -0.1 Mos Foods 1,391 1,411 1.4 Lotteria 465 453 -2.6 Freshness Burger 178 168 -5.6 First Kitchen 130 130 0.0 Source: Fuji Keizai – Food Service Industry Marketing Handbook 2012 By providing reasonably priced, fast and clean service, the hamburger chain concept has captured a significant share of the youth and family dining out budget. Because the hamburger chain menu uses concepts originating in the U.S., they are ideal targets for U.S. exporters. For example, McDonald’s Japan has long imported many of its food items from the U.S. including frozen potatoes, pork patties, fresh tomato, and cut lettuce. Hamburger chain sales declined in 2003 as a result of BSE concerns in Japan but are steadily returning to better than previous levels. ii. Pizza Chains The pizza industry has been lead by delivery service companies and has been a bright spot of growth in Japan over the past decade. Fuelled by the launch of Domino’s Pizza in the late 1980’s, pizza delivery chains have successfully carved out a niche in the food service market in Japan with their promise of rapid delivery. A partial list of some of the top pizza chains includes: Chart 15: Major Pizza Chains Pizza Restaurants (delivery) Number of Outlets Name of Company 2011 2012 % Increase from 2011 Pizza La (Four Seeds Corp.) 542 544 0.4 Pizza Hut (Kentucky Fried Chicken Japan) 359 365 1.7 Dominos 205 225 9.8 Strawberry Cones 203 210 3.4 Chicago Pizza Factory 108 112 3.7 Pizza California (PCS Inc.) 99 100 1.0 Source: Fuji Keizai – Food Service Industry Marketing Handbook 2012 Pizza shops offer a wide variety of choices, many tailored specifically to Japan. In addition to traditional toppings such as pepperoni and sausage, pizzas in Japan feature toppings such as shrimp, squid, scallop, prosciutto, corn, garlic, potatoes and pineapple. Pizza industry has driven a shift of shredded cheese supply from Oceania region to the U.S. due to better value of U.S. products. In addition to sourcing toppings from abroad, pizza chains also source tomato sauce either in chunked and/or pasted from abroad. iii. Fried Chicken Chains KFC Japan dominates the fried chicken restaurant market with over 1,520 units nationwide. KFC Japan’s has changed policy from promoting domestic Japanese chicken to diversify food products resource abroad a few years ago, the opportunities for U.S. exporters were increased as non-chicken menu items such as fried potatoes and corn kernels for salad have expanded. 6. Drinking Establishments The drinking establishment sector had sales worth ¥4.7 trillion in 2011, equivalent to $58.9 billion. This represented 16.3% of the total food service industry sales. The sector is comprised of four segments: pub dining (Izakaya)/beer pub, coffee/tea house, high end Japanese restaurants (Ryotei) and bar/nightclub food service. Chart 16: Japan’s Drinking Establishments Sector Sector 2007 2008 2009 2010 2012 Change '10 to '11 Unit ¥ Bil. ¥ Bil. ¥ Bil. ¥ Bil. ¥ Bil. $ Bil. % Total 5,216 4,988 4,756 4,666 4,707 58.9 0.88% Pub Dining 1,101 1,061 1,012 995 994 12.4 -0.14% Coffee/Tea Shop 1,057 1,036 1,005 1,011 1,018 12.7 0.71% Roytei 366 346 328 318 322 4.0 1.32% Night Club 2,692 2,546 2,412 2,343 2,373 29.7 1.28% Source: Food Service Industry Research Institute i. Pub Dining Pub dining restaurants (Izakaya) are Japan’s unique drinking pubs where a variety of home-style meals are served with various kinds of alcohol beverages including beer, sake, Shochu (Japanese white sprits), wine and cocktails. The market share of chain operations have increased more than individually-owned businesses since 2008. The industry has rationalized its procurement and distribution system due to competition within the sector. Most of chain restaurants use imported food products and beverages in moderation while using regional food products that are popular among consumers. At pub dining restaurants, consumers order various cooked meals and side dishes together at the same table and share these dishes with colleagues, friends and family. Chain operations are popular because of their reasonable menu pricing and range in food items. Pub dining chain restaurants usually have central buying systems and are looking for new menu ideas. Pub dining operators also modify overseas recipes for their own style and taste. The industry uses fresh oyster, frozen vegetables, canned tomato sauce, canned olive oil, and further processed foods, such as frozen soups, and frozen seasoned pork and beef that are imported from the United States. A list of major pub dining chains and Coffee/Tea Room Chains in Japan appears below: Chart 17: Major Pub Dining chains Rank Sales ($ Company d Name, # of Outlets Location Purchasing Agents 2011 Mil.) Bran 1 Monteroza 1,844.8 Sirokiya, Uotami, Wa Nation ra-wara, 1,890 w Wholesalers ide Watami Food Nation Trade firms, 2 964.7 Watami, 636 Serivce wide wholesalers Eastern 3 Daisho 919.2 Shoya, 795 Wholesalers Japan Colowaide East Eastern Trade firms, 4 749.6 Amata-ro, Hokkaido, Hiikiya, 529 Japan Japan wholesalers Hananomai/Sakanaya-dojo, Eastern 5 Chimney 663.9 Trade firms, wholeslers Kodawariyama, 566 Japan Eastern Trade firms, 6 Dynac 408.6 Hibiki/Toridori, Sakura, Unoya, 247 Japan wholesalers N Trade firms, ation 7 Yoro-no-taki 386.1 Yoro-no-taki, 726 w wholeslers, Direct ide import 8 Marche 304.5 Suikoden/H Nation Trade firms, akkenden, 627 wide wholesalers Sanko Toho Kenbunroku, Tsuki no Eastern Trade firms, 9 Ma 303.9 rketing Food shizuku, Kin no Kura, 172 Japan wholesalers Ginza Lion, Kakoiya, Agura, Ten, Eastern Trade firms, 10 Sapporo Lion 302.6 193 Japan wholesalers Source: Nikkei Marketing Journal, May 2012 ii. Coffee/Tea Shops The coffee/tea shop sector is very popular throughout Japan. The sector is grouped into two subsectors, one is a new style self-service coffee/tea shops that are mainly located in major cities and another is conventional style full service coffee/tea rooms that tend to be regional. Total coffee/tea shop sales have shown a downward trend. However, the category of new style coffee shops has increased in sales and number of outlets from ¥294,9 billion and 3,860 outlets in 2007 to ¥320.3 billion and 4,270 outlets (estimates) in 2012. Most of these American style self-service coffee shops serve western style side dishes and finger foods, such as wrap sandwich, cookies, muffins and bagels that have been imported from the United States and other foreign countries. Meanwhile, the traditional coffee/tea shops have decreased in both sales and number of outlets from ¥1,049.5 billion and 72,000 outlets in 2007 to ¥958.5 billion and 66,950 outlets (estimates) in 2012. Most of them do not have a central buying system and buy food products including coffee beans from wholesalers and/or cash & carry stores. A list of major new style coffee/tea shop chains in Japan in 2011 appears below: Chart 18: Major Coffee/Tea Room Chains Rank Sales ($ # Company Name (Brand) Location Purchasing Agents 2012 mil.) Units e firms, Wholeslers, Direct 1 Starbucks Coffee Japan, Ltd. 1,348 970 Nation wide Trad Import 2 Doutor Coffee Co., Ltd. 1,100 1,280 Nation wide Same as above 3 Tully's Coffee Japan 384 405 Nation wide Same as above Central 4 Komeda Coffee 374 460 Same as above Japan 5 Saint Marc Café Holdings 269 300 Nation wide Same as above 6 Pront Corporation 226 220 Nation wide Same as above Eastern 7 Italian Tomato Café Jr. 163 189 Same as above Japan UCC Foodservice Systems Wester 8 166 383 Same as above Inc. Japan Wester 9 Chat Noir (Veloce) 141 183 Same as above Japan Wester 10 Pokka Create (Café de Crie) 91 160 Same as above Japan Source: Nikkei Marketing Journal, May 2012 7. Hotel Food Service Sector The Hotel/Inn sector had food sales worth ¥2.6 trillion in 2011, equivalent to US$32.5 billion. This represents 9.0% of the total food service industry sales. Even though new hotel openings by upscale hotel groups such as Conrad, Peninsula, Grand Hyatt and Ritz-Carlton boosted industry sales in 2007, the hotel food business has shown a downward trend in last decade. Most recent statistics in 2012 showed slight sales recovery of the hotel food business in banquet and reception business from the previous year. First class hotels have a large variety of on-site restaurants to choose from including Western, Chinese and Japanese restaurants. Hotels are major users of almost all kinds of foods, particularly imported products. Because they have a large professional chef staff, hotels tend to create many dishes from scratch rather than relying on prepared or further processed foods. Decision making on what kinds of items to put on the menu is usually made by the executive chefs of each hotel. Because they cater to international travelers, many major hotels regularly feature promotions of different country’s cuisines. For the same reason, they are historically more receptive to imported food. A list of major hotel chains in Japan in 2012 appears below: Chart 19: Major Hotel Chains in 2012 Company (Name of Hotel) Sales $ Million # of Outlets Seibu HD (Prince Hotel) 854.1 45 JAL Hotels (Nikko) 397.6 35 Hankyu Hanshin Dai-ichi Hotel Group 378.9 49 Hotel Okura & Resourts 371.4 16 New Otani Group 350.1 17 Rihga Royal Hotel Group 360.1 12 Tokyu Hotels 340.1 48 Marriotto International (Ritz-Carlton) 312.6 8 Imperial Hotel 308.9 3 Resort Trust (Xiv, Sun Resort) 312.6 41 Nihon Hotel 237.6 44 Source: Fuji Keizai – Food Service Industry Marketing Handbook 2012 Japan also has many small Ryokan or Traditional Japanese style inns, which primarily serve holiday travelers. The menu tends to be limited and features traditional Japanese dishes. Ryokans are a less inviting target for U.S. exporters due to their focus on traditional Japanese foods. 8. Institutional Food Service The institutional food service sector had sales worth ¥3.28 trillion in 2011, equivalent to $41.1 billion. This represented 11.4% of the total food service industry sales. Institutional food sales slightly decreased in 2011 from the previous year. The institutional food service sector was one of the very few sectors that showed upward trend until 2010. The institutional food service sector is comprised of four segments: business/office cafeterias, school lunch programs, hospitals, and welfare facilities. This might be one segment to see growth as Japan’s aging demographic intensifies. Many food service companies are gearing up to service what is called the “silver” market. A new trend is food to promote health. Tanita is a manufacturer of bathroom scales that can measure stored body fat. The company runs a famous employee cafeteria which has reduced most of the employees’ weight. Tanita has published a series of well known recipe books that featured restricted total calorie and tasty menus which have become very popular among consumers. In response to the readers who want to taste those menus at the cafeteria, Tanita opened a restaurant, Tanita Shokudo, in the center of Tokyo in January 2012. The restaurant has an image of an employee cafeteria and is serving same menus that the company cooks for their employees. Sales by segment in 2011 were as follows: Chart 20: Institutional Food Service Sales by Sub-Sectors 2011 Sales ¥ billion $ billion Share Business/Office Cafeterias 1,713.9 19.5 7.2% School Lunch 496.7 5.6 2.1% Hospitals 798.0 9.1 3.4% Welfare Facilities 267.8 3.0 1.2% Total: 3,276.4 37.2 13.9% Source: Food Service Industry Research Center Chart 21: Ranking Institutional Food Service Chains Sales Rank 2011 Company Name ($ mil.) # Units Location Principal Purchasing Agents 1 Nissin Healthcare Food Service Co., 2,211 4,639 Tokyo Wholesalers 2 AIM Service 1,268 1,324 Tokyo Wholesalers 3 Green House 1,045 1,672 Tokyo Wholesalers 4 Seiyo Food-Compass Group, Inc. 928 *1,750 Tokyo Wholesalers 5 Fuji-Sangyo Co., Ltd. 817 1973 Tokyo Wholesalers 6 Uokuni Sohonsha 750 2,550 Osaka Wholesalers 7 Leoc Co., Ltd. 681 *1,859 Tokyo Wholesalers 8 MEFOSU Inc. 576 2,219 Tokyo Wholesalers 9 Nikkoku Trus
Posted: 23 January 2013

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