Market Information
Asia Pacific

Agri-Food Sector Profile
Family-Style Restaurants - Japan

September 2004

Canadian Consulate General in Osaka, Japan
Daisan Shoho Bldg., 2-2-3 Nishi Shinsaibashi,
Chuo-Ku, Osaka 542-0086, Japan
Contact: Toshihisa Seki, Trade Commissioner
Tel.: 81-6-6212-4910
Fax: 81-6-6212-4914
E-Mail: osaka-td@international.gc.ca
Internet: www.infoexport.gc.ca

MARKET OVERVIEW

Japan, with a population of almost 128 million people, is the world's largest net importer of food products. In 2003, Japan imported roughly $62.6 billion worth of food including both agriculture and seafood products. Of this total, $2.83 billion was represented by Canadian food, giving Canada a 4.52% market share.

The Kansai region of Japan is located in the western centre of Japan and includes such world famous cities as Osaka, Kyoto, Kobe and Nara. The Kansai is home to 24 million people and accounts for a regional GDP larger than the countries of Canada or Australia. The Kansai region of Japan also plays a central role in Japanese culinary culture, with its residents enjoying a reputation for the highest taste and food quality in Japan.

Osaka has grown as a commercial and distribution centre for food commodities. Total food imports for the Kansai region in 2003 were $14.5 billion, down just slightly from 2002.

Japanese family-style restaurant chains are important targets for Canadian food exporters looking to promote their products to the Japanese food service industry. Although their demand for price, quality, and delivery is high, Japanese family-style restaurant management practices are often more forward thinking than those of traditional Japanese restaurant businesses. As a result, they are more open to considering imported products, with some chain owners creating their own in-house import operations. This report focuses on Japanese family-style restaurant chain operators, particularly those operators based in the Kansai region of Japan.

The family-style restaurant business in Japan started in 1970 when Skylark Co., Ltd opened its first restaurant in Kunitachi City in Tokyo. The preponderance of such restaurants grew in accordance with the rapid growth of the Japanese economy, particularly in the 1970s and 80s. Skylark Co., Ltd is now the top family-style restaurant chain operator in terms of annual sales (see Table 1.).

Source: Toyo Keizai Inc. "Japan Company Hand Book 2004 Spring," January 26, 2004.

It is estimated that the size of the Japan food service market in 2003, including hotel catering and all dining-out businesses such as restaurants, fast food counters, and cafeterias, was around $296 billion. The top-10 family-style restaurants above account for about 3.5% of this industry.

Japanese family-style restaurant chains offer a wide variety of menu items to their customers at a reasonable cost, including dishes from Japan, Italy, China, and Korea. To lower operation costs, these chains purchase ingredients in large volume and process them in central kitchens. Most of the food preparation occurs in these central kitchens, and the kitchens of individual restaurants are responsible for only the final stage of warming up, frying, or sautéing the semi-processed products for the consumer.

Family-style restaurant chains have modern management systems and tend to be more business-oriented than traditional food service industry players. They are very open-minded to foreign food suppliers that can provide products which meet their requirements. Some chain operators also import food products directly from foreign suppliers in order to reduce the costs of the multi-layered food distribution system in Japan.

OPPORTUNITIES

Canadian companies should target different restaurant chains depending on the product they are trying to sell. Currently, there are strong differences in company strategy among family-style restaurants, particularly in regards to pricing. Family restaurant chains such as Saizeria (operated by Saizeria Co., Ltd.) or Gusto (operated by Skylark Co., Ltd.) offer less expensive menu items, but variety and service are limited. On the other hand, Sato Restaurant Systems (operated by Sato Restaurant Systems Co., Ltd.) and Kagonoya (operated by Kinrei Corporation in Osaka) serve higher-priced menu items, but offer a wider variety of items and use higher quality ingredients. In all cases, restaurant operators are seeking to distinguish their chain based on value, variety, and/or quality.

As mentioned, some family-style restaurant chains have established their own direct import operations with foreign suppliers. Targeting these companies allows Canadian exporters to enter the market without getting involved in Japan's complicated food distribution system. However, suppliers should be aware that restaurant chains demand a high volume of product of consistent quality with as little variation in price as possible. Meeting these requirements is challenging, but companies able to comply with such guidelines will increase their chances of success in the Japanese family-style restaurant market.

The Kansai region is the home of Japanese culinary culture. Historically speaking, the city of Kyoto was the capital of Japan for more than 1000 years. Most traditional Japanese cuisine was developed in Kyoto and passed on to other regions of Japan. The City of Osaka was developed as a commercial and distribution centre for food commodities to support the culinary culture in Kyoto. Even now people in the Kansai region, particularly those in Osaka, are noted for their love of food and their propensity to spend on gourmet and exotic foods.

Presently, there are more than 150 000 restaurants in the Kansai region -- roughly 20% of all of Japan's restaurants -- with over 70 000 in Osaka City alone. To survive fierce competition, family-style restaurant chains in the Kansai must continually improve their operations and services. There are three (see below) well-known family-style restaurant chains operating out of the Kansai region, with all three focussing on the development of "Japanese food" menu items. To avoid any misunderstanding, it must be noted that this is not the highly-priced, formal Japanese food (Japanese haute cuisine) which traditionally consists of several courses of fancy-looking food. Instead, Kansai-based family-style restaurants promote "modern" Japanese cuisine which has developed since Japan was introduced to western culture in the 19th century. Examples of this type of cuisine include deep-fried pork (Tonkatsu), hamburger patties (without the bun), and grilled meat or fish with a soy-based sauce. A wide variety of meat, fish, and western vegetables are used in this type of cuisine, thereby providing opportunity to foreign food suppliers, including those from Canada.

Generally speaking, these family-style restaurant chain operators are very open to foreign products as long as the products meet their standards in terms of quality, safety, and cost. In addition, it must be noted that one company in Osaka imports directly from foreign food suppliers. This gives Canadian companies a potentially easier entry into the Kansai region market. For product sourcing, all family-style restaurant chains feel the need to diversify their supply sources due to the recent incidents of BSE, the breakout of Avian flu, and problems resulting from agricultural chemical residue in Chinese vegetables.

KEY PARTICIPANTS

The Kansai region imported $861 million worth of Canadian food in 2003, giving Canada 4th spot, or 5.92% of Kansai's imported agri-food market share, after that of the United States (30.86%), China (14.49%) and Australia (8.92%). Despite this respectable showing, Canadian market share has decreased compared to its foreign competitors. This is in part due to market restrictions based on food safety issues, but perhaps can also be attributed to Canadian exporters' lack of activity or focus in the regional markets in Japan.

PRIVATE- AND PUBLIC-SECTOR CUSTOMERS

The average spending per guest at family-style restaurants is estimated to be about $11.48. Customers spend, on average, $8.88 - $9.12 per person at Saizaria or Gusto, but more than $14.21 at Sato or Kagonoya. Just as restaurant chains seek to distinguish themselves based on value versus quality and variety, consumers choose different family-style restaurant chains depending on the dining situation. It is important to note these differences and tailor Canadian exporting strategies to the respective chains.

It may also be of interest for Canadian exporters in developing a market strategy to understand how often customers dine at family-style restaurants, and how often family-style restaurants are frequented in the current Japanese economy (see Graph 1.).

Graph 1. Frequency of Family Restaurant Visits by Japanese Customers

Source: Japan Consumer Market Research Institute

More than 66% of Japanese dine at family-style restaurants more than once a month. Interestingly, this same survey revealed that single females, such as students or office workers, are the most frequent users of family-style restaurants. Almost half (46.5%) of single young females replied that they frequent family-style restaurants more than twice a month. Consumers who dine more than once a month at family-style restaurants indicated that they use family-style restaurants for: 1) weekend or holiday lunches, 2) weekend or holiday dinners, and 3) weekday lunches.

Below are brief profiles of three well-known Kansai-based family-style restaurant chain operators:

Sato Restaurant Systems Co., Ltd.

Sato is the 10th-largest family-style restaurant chain operator in Japan, with 247 outlets as of June 2004. Sato's operation is centred in the Kansai region, but is expanding to other parts of Japan such as Nagoya and Tokyo. This chain has focussed on a modern Japanese-style menu since its inception, and is considered to be a rather high-end family-style restaurant. The average bill per person is currently $14.21, but this figure is increasing. The most unique aspect of this company is that they have their own direct import operations, particularly for items such as seafood and meat. They currently import pork from Canada for a deep-fried pork dish. Considering the recent outbreak of BSE and avian flu, Sato Restaurant Systems would like to diversify their supply source of products from a single country (such as Thailand for chicken) to include other countries.

Friendly Corporation

Ranked 14th or 15th in Japan in terms of sales as of June 2004, Friendly operates 140 restaurants in the Kansai region. They began their business as a western family-style restaurant operator under the restaurant name of "FRIENDLY". However, due to the declining popularity of western-style family dining, Friendly has opened restaurants under the name BONDS, which focuses on Japanese cuisine in a family-style restaurant setting. Currently, half of Friendly's restaurants now operate under the BONDS name, and this percentage is expected to continue growing. The average bill per customer at FRIENDLY is $9.95, but $15.40 for BONDS.

Kinrei Corporation

Kinrei started as a frozen food manufacturer and entered the family-style restaurant business in early 1990. Since then, they have developed into a chain of 55 restaurants as of June 2004. Their restaurant brand, KAGONOYA, is considered to be the most high-end family-style restaurant in the Kansai region. They serve exclusively Japanese-style dishes, and the average bill per customer is more than $17.77. Until the outbreak of BSE in the United States, Kagonoya promoted a beef "Shabu-Shabu" menu item (thinly sliced meat boiled in hot water at the customer's table). They have since shifted to pork Shabu-Shabu and are currently using Canadian pork for this menu item.

For more information on the above restaurant chains, or to inquire about opportunities for your Canadian product, please contact Toshihisa Seki at toshihisa.seki@international.gc.ca.

KEY CONTACTS

Canadian Consulate General in Osaka
2-2-3 Nishi Shinsaibashi
Chuo-ku, Osaka 542-0086 Japan
Toshihisa Seki, Trade Commissioner
Tel.: 81-6-6212-4910
Fax: 81-6-6212-4914
E-mail: toshihisa.seki@international.gc.ca
Internet: www.infoexport.gc.ca/jp

Agriculture and Agri-Food Canada
International Markets Bureau
930 Carling Ave., 10th Floor
Ottawa, ON K1A 0C5
Contact: Amit Dutt, International Market Development Officer
Tel.: (613) 759 7523
Fax: (613) 759-7506
E-mail: dutta@agr.gc.ca
Internet: www.ats.agr.ca

International Trade Canada (ITCan)
125 Sussex Dr.
Ottawa, ON K1A 0G2
Internet: www.infoexport.gc.ca

Market Research Centre (TMR)
Contact: Sean McLean, Senior International Market Analyst
Tel.: (613) 996-0688
Fax: (613) 943-1103
E-mail: sean.mclean@international.gc.ca

Market Support Division (TMM)
Contact: Clément Côte, Trade Commissioner
Tel.: (613) 995-1773
Fax: (613) 943-1103
E-mail: clement.cote@international.gc.ca

Japanese Contacts
Embassy of Japan in Canada
255 Sussex Dr.
Ottawa, ON K1N 9E6
Tel: (613) 241-8541
Fax: (613) 241-2232
E-mail: consul@embjapan.ca
Internet: www.ca.emb-japan.go.jp

Japan External Trade Organization (JETRO)
JETRO Headquarters
2-5 Toranomon 2-chome
Minato-ku, Tokyo 105-8466
Tel: (81-3) 3582-5511
Fax: (81-3) 3587-0219
Internet: www.jetro.go.jp/

Japanese Ministry of Agriculture, Forestry and Fisheries
1-2-1 Kasumigaseki, Chiyoda-ku
Tokyo, Japan 100-8950
Tel: (81-3) 3591-2874
Fax: (81-3) 3501-3720
Internet: www.maff.go.jp

Ministry of Health, Labour and Welfare
1-2-2 Kasumigaseki Chiyoda-ku
Tokyo, 100-8916 Japan
Tel: (81-3) 5253-1111
E-mail: www-admin@mhlw.go.jp
Internet: www.mhlw.go.jp

BIBLIOGRAPHY

International Trade Canada. "Agri-Food Sector Profile - The Kansai Region of Japan," April, 2004.
Downloaded from infoexport.gc.ca/ie-en/DisplayDocument.jsp?did=42403 on June 18, 2004.

Japan Consumers Market Research Institute. "Family restaurant business overview," April 2004.
Downloaded from www.jmrlsi.co.jp/ on June 16, 2004.

Japan Food Service Association. "Market Size of the Japanese food service industry," April 2004.
Downloaded from www.jfnet.or.jp/ on June 18, 2004.

Nihon Keizai Shinbun, Morning Edition. "Survey on consumers spending," July 19, 2004.

Nihon Shokuryo Shimbunsha. "Shokuhin Kaisha Soran (Food company directory) 2003," November 2, 2002.

Toyo Keizai Inc. "Japan Company Hand Book 2004 Spring," January 26, 2004. ---.

USEFUL INTERNET SITES

Agriculture and Agri-Food On-line: www.ats.agr.gc.ca/

Agri-Food Trade Service: www.ats.agr.ca/

Agri-Food Trade Service Links: www.ats.agr.ca/general/link-e.htm

Consulate General of Canada in Osaka: www.infoexport.gc.ca/ie-en/Office.jsp?oid=308

ExportSource - Team Canada Inc.: exportsource.ca/

Food Industry Japan: www.foodindustryjapan.com/

InfoExport: www.infoexport.gc.ca/

Japan External Trade Organization (JETRO): www.jetro.go.jp/

Japan Information Network Statistics: www.jinjapan.org/stat/

Japan Ministry of Foreign Affairs: www.mofa.go.jp/

JETRO Standards and Regulations in Japan: www.jetro.go.jp/se/e/standards_regulation/index.html

Ministry of Economy, Trade and Industry: www.meti.go.jp/

Organic Food Links: www.infoexport.gc.ca/ie-en/DisplayDocument.jsp?did=7525

Processed Food Links: www.infoexport.gc.ca/ie-en/DisplayDocument.jsp?did=7524

Sectoral Information - Agriculture, Food and Beverages: www.infoexport.gc.ca/ie-en/MarketProspect.jsp?cid=515&oid=308#592

Strategis: www.strategis.gc.ca/

1. The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.

2. All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate from Japanese yen to Canadian dollars is based on the Bank of Canada exchange rate for July 29, 2004 [0.011845].

3. There is no clear definition of the term "Family-Style Restaurant Chain", even within the Japanese food service industry. This report will follow the most commonly used industry definition: "A restaurant chain with large-scale outlets located mainly in suburban areas". Most restaurants that fall into this category are equipped with large parking lots, child-friendly decor, and offer a wide variety of menu items that appeal to customers of all ages.

4. All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate from Japanese yen to Canadian dollars is based on the Bank of Canada exchange rate for July 29, 2004 [0.011845].

5. The result of an Internet survey done by the Japan Consumer Market Research Institute from March 25 - 26, 2004 (Results are based on a total of 1,000 respondents between the ages of 15 and 59 (493: female, 507: male)