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House Foods aiming to use chain to spread Japanese curry culture

TOKYO -- In deciding to acquire the control of Ichibanya, which operates the CoCo Ichibanya chain of curry restaurants, Japan's House Foods Group took a major step toward its ambitious goal of putting Japanese-style curry on the culinary map of the world.

     For House Foods, greater popularity of "curry rice" outside Japan, where it is one of the nation's most beloved dishes, means bigger sales of its curry roux.

     Ichibanya is a famous success story in Japan's restaurant industry. It started as a small cafe operated by a couple and has grown into the world's largest chain of curry restaurants, with some 1,400 locations around the world.

     House Foods wants to expand Ichibanya's overseas operations and boost the popularity of Japanese-style curry among foreign consumers as a way to boost sales of its curry sauce mixes.

     At a Friday press conference to announce House Foods' agreement to make Ichibanya a subsidiary through a tender offer for the company's shares, Ichibanya President Toshiya Hamajima said the company's founders had expressed their desire to sell shares in July.

     Ichibanya's founders, Tokuji Munetsugu and his wife, Naomi, had agreed to sales of the entire 23.17% stake in the company held by the couple and an asset management company through a tender offer. House Foods plans to raise its stake in the curry restaurant operator to 51% from the current 19.55% through the acquisition of these and other shares.

     Ichibanya began as a cafe opened by the couple in 1974 in a Nagoya suburb. They decided to launch a curry restaurant because the dish, Naomi's specialty, was the most popular item on the cafe's menu.

     In 1978, the first Curry House CoCo Ichibanya restaurant opened in the town of Nishi-Biwajima (currently part of the city of Kiyosu), Aichi Prefecture.

     Starting in the 1990s, the couple expanded the business into a franchise chain under a unique program to help employees set up outlets, known as the Bloom System.

     Under the system, Ichibanya employees who have spent at least two years learning the company's policy and store management expertise are allowed to become an independent operator of a CoCo Ichibanya outlet.

     CoCo Ichibanya's main source of competitiveness is the diversity of its menu. Customers can choose from various levels of hotness of the roux and different amounts of rice as well as from a broad array of toppings. The unique franchise system and rich menu options have been powering Ichibanya's steady growth over the years.

     President Hamajima, who began as a part-timer and climbed the corporate ladder to the top post, has been leading the company's overseas expansion. His ambitious growth agenda led to a record profit for the year through May 2015.

     Since its foundation, Ichibanya has maintained a close business relationship with House Foods, which supplies ingredients to the chain.

     In 2002, House Foods became the company's second-largest shareholder, with a stake of about 20%.

     Ichibanya apparently believes that becoming a subsidiary of the food giant is the best way to ensure its long-term viability.

     House Foods will spend some 30 billion yen ($246 million) to own a majority stake in Ichibanya.

     This is clearly a good move for House Foods, which is facing a domestic market that is unlikely to grow significantly in the coming years due to the aging of the population amid low birthrates.

     The deal will expand the partnership between an upstream supplier of the business and the downstream restaurant chain, and widen the scope of operations for both companies, said House Foods President Hiroshi Urakami.

     Both sides will benefit from combining their respective expertise to develop new menu items and launch more effective sales promotion campaigns, according to Urakami's vision.

     The companies also expect substantial cuts in costs from streamlining and combining their production and procurement operations.

     The benefits and synergies from House Foods' acquisition of Ichibanya are expected to be the biggest for their overseas businesses.

Curry traction

Japanese-style curry is gradually gaining traction in other Asian countries.

     The two companies have been jointly operating CoCo Ichibanya outlets in China since 2004. The chain had 46 locations in Beijing, Shanghai and other major cities, mainly in coastal areas, as of the end of September.

     House Foods has been using the chain to popularize Japanese curry in China with an eye to expanding sales of its roux in the vast market. It plans to increase the number of curry restaurants in China to 100 by 2017.

     "The restaurants can first set a foothold for our manufacturing foray into the market," said Urakamai. "Restaurants are a suitable means to make a new culinary culture accepted in a foreign country."

     Ichibanya has also expanded into other countries including Thailand, Singapore and Indonesia on its own. There are already 147 CoCo Ichibanya curry restaurants operating outside Japan.

     House Foods intends to accelerate Ichibanya's international expansion as a step to boost overseas sales of its curry roux and other products.

     The company has been pursuing a target of raising the share of overseas markets in its total sales to 15% in fiscal 2017, up from 10% in fiscal 2014. With the acquisition of Ichibanya, House Foods may raise the target.

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