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Food & Beverage

Sales of Machida and Yamaokaya ramen stay strong despite pandemic

Strategies of online delivery and 24-hour operation pay off as rivals suffer

Gift's Machida Shoten ramen sales remained strong this year, thanks to the introduction of online deliveries. (Photo courtesy of the company)

TOKYO -- Ramen chain store operators Gift and Maruchiyo Yamaokaya have managed to keep 2020 sales at roughly the same level as a year ago, even as the COVID-19 pandemic hammered the industry, by adapting quickly to the deteriorating business environment, company leaders said.

Both credited their success to these strategies: Gift launched a home delivery service ahead of rivals and Yamaokaya continued to operate around the clock while others were cutting business hours.

Gift's success can be seen in the number of Uber Eats deliveries that were leaving its popular 111 Machida Shoten restaurants. Gift said recently that same-store sales were equal to 95% to 97% of 2019 levels in each of the three months from September.

By contrast, other major listed ramen chain operators were reporting sales declines of up to around 30% in the same period. Sales fell to 69% to 76% of 2019 levels at Chikaranomoto Holdings which operates the "Ippudo" chain, while sales were equal to 81% to 87% at Hiday Hidaka. Kourakuen Holdings saw sales drop to 78% to 87%, though it posted a gain in October due to an exceptionally low comparison base because of typhoon damage in 2019.

Research company Teikoku Databank said the number of bankruptcies in the industry in 2020 will be the largest in two decades. This is after 34 ramen restaurants, including well-known chains such as Rokkakuya, went belly up in the January-September period.

As such, Gift and Yamaokaya have done exceptionally well. Against a backdrop of the government's "stay-at-home" advice, 54 of the restaurants under Gift's direct management, or more than half, started delivery services in May. Hiday Hidaka's chain, which is larger than that of Gift, by contrast only introduced that service at about 20% of its outlets.

Another reason for Gift's success is location -- 60% of its restaurants are in residential areas or are roadside outlets. Such locations make it easier to serve customers who are stuck at home or do not want to travel far because of the pandemic.

Machida Shoten outlets, operated by Gift, have benefited from their roadside and residential locations. (Photo courtesy of the company)

Home deliveries contributed 25% of sales from those 54 restaurants in May. Gift President Sho Tagawa said the company's strategy gave it a "monopoly" of the market.

By December, 10% of sales in 73 of its outlets came from online orders. This compares with just 5% at one of Gift's two major rivals and less than 1% at the other. "Gift's sales figures are amazing," said an official at the latter.

Ramen restaurants have not embraced deliveries due to worries about spilling soup and noodles turning soggy by the time of arrival. Gift started in 2019 to test different packaging to alleviate such problems. It finally came up with the solution of packing soup and noodles separately and over-wrapping both. Its chefs also undercook the noodles so they still have bite by the time they are eaten.

Given its success so far, Gift took the bold step of adding 27 restaurants to its network of outlets under direct management in the year ended October.

Its rival, Yamaokaya, also found a way to survive -- by quite simply continuing to do what it has always done. The company's 168 restaurants are located mainly along national roads in the Kita-Kanto region, which includes such prefectures as Ibaraki and Tochigi, and Hokkaido, the northernmost of Japan's main islands.

In the September-November period, Yamaokaya chalked up sales equal to or 5% more than a year earlier on a same-store basis.

Around 10% of its restaurants have parking lots of roughly 3,000 sq. meters, large enough to accommodate more than 10 trucks. Some of them also offer free shower facilities and serve as resting points for long-haul truck drivers.

Yamaokaya's restaurants continued to serve nighttime workers, such as truck drivers, medical staff and police, around the clock during the pandemic, unlike many of its rivals that cut business hours. (Photo courtesy of the company)

While many restaurant operators were cutting back on operating hours during the worst of the first wave of coronavirus infections, Yamaokaya kept up its business except for a brief period under the state of emergency declared by the government in early April.

"We are needed by people indispensable to daily life such as truck drivers, police officers on night duty and medical workers," said Kenichi Araya, a director of the company based in Sapporo, Hokkaido.

Recent sales between 12 a.m. and 9 a.m. contribute to 29% of total sales at Yamaokaya. Despite social-distancing measures that meant fewer tables could now be used, the number of customers in October grew by 4% on a same-store basis from a year ago.

But the overall business environment for restaurant operators in Japan is growing tougher as the country, like many others, faces another wave of COVID-19 infections. The number of diners between Dec. 7 and 13 tumbled to just 49% from that a year ago, falling below 50% for the first time in four months, according to Toreta, which provides customer management services to some 10,000 restaurants.

To combat the fall in diners, many izakaya, pubs that serve food and drink to large groups, are changing their business models to try to capture day time customers. Several have reinvented themselves as yakiniku beef barbecue restaurants. For example, Chimney will have converted around 50 of its "Hana on Mai" pubs to yakiniku or shokudo casual restaurants in fiscal 2020, while Watami plans to change 120 of its 360 izakaya outlets to yakiniku restaurants by March 2022.

Although analysts warned of a price war if restaurant operators all flock to one sector of the business, some restauranteurs said the need to evolve was key to survival. "We are ready for cutthroat competition," said Miki Watanabe, chairman of Watami. "Flexibility to change in line with business conditions is important."

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