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Sobering domestic results send Japanese pub chains on Asian expansion binge

Colowide, an operator of Japanese-style pubs, this month opened its third location in Vietnam. The outlet, situated in a Ho Chi Minh City suburb, is logging twice the sales the company expected.

TOKYO -- Japan's izakaya pubs have a problem. The nation's young people are imbibing less alcohol than previous generations. What is a watering-hole operator to do? Some are turning to the swelling ranks of middle-income drinkers elsewhere in Asia.

     Colowide, a Japanese-style pub company, this month opened its third establishment in Vietnam. The country's population is growing, as is its middle class. And so far the market has given Colowide plenty to cheer. The company says its third Nijyu-Maru, or double circles, izakaya is raking in twice the anticipated sales.

     The Yokohama-based Colowide first landed in Vietnam in September 2012. It is running the three pubs, housed in shopping and commercial complexes, through a business tie-up with a Vietnamese distribution company. In 10 years, Colowide hopes to have about 200 locations dotted around the country.

     A big part of the pubs' appeal is not the grog but rather the grub. Many customers come for the Japanese food, so Colowide offers a broader menu than it does at its outlets in Japan. Sushi goes for the equivalent of 395 yen ($3.75), while a set of yakitori chicken skewers costs 115 yen and a sashimi assortment is priced at 645 yen. The company says customers spend an average of 1,000 yen each.

     Reins International, another company in the Colowide group, is also branching out overseas. Reins has plans to open a total of 400 gyu-kaku grilled meat restaurants and on-yasai hot-pot eateries around Asia, mainly in Taiwan, Hong Kong and Southeast Asian countries. 

     For Colowide, the aggressive foreign push is a necessity. The company's domestic izakaya business is struggling. In the January-March period of this year, it expects to shutter up to 33 locations. 

Sinking

The Japan Foodservice Association says members that operate izakaya pubs saw 15 straight months of year-on-year sales declines through last November, on an all-store basis. Data from Japan's Foodservice Industry Research Institute shows sales at domestic izakaya pubs and beer halls dropped for six consecutive years from 2007.

     Colowide is clearly not the only one having a hard time -- nor is it the only one exploring foreign pastures.

     Watami, another major izakaya operator, is bracing for a 66% year-on-year drop in net profit for the year through March, to 1.2 billion yen. On the bright side, it projects a 45% on-year increase in sales from its overseas dining business, to 12.8 billion yen. The company currently runs about 100 Japanese-style pubs in mainland China, Hong Kong, Singapore and other countries. It plans to open its first shop in Cambodia in June as it looks to get a firm toehold in Southeast Asia.

     Watami is gunning to raise its overseas shop tally to 230 by fiscal 2017.

     Similarly, midtier izakaya chain operator Tsubohachi opened its first pubs in Thailand last October. It aims to expand there while also breaking into other parts of Asia.

     Monteroza, Japan's largest izakaya operator, has been on an overseas kick for a while. It opened its first foreign shop in Hong Kong in 2004. Now the company behind the Wara-wara and Shirokiya chains has a number of Japanese-style pubs in five countries and regions.

     The domestic outlook looks bleak, but Japanese pubs seem to be finding solace in other Asian countries.

(Nikkei)

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