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Post-COVID landscape suggests a bleak picture for izakaya and coffee shops

12 Comments

It's hardly surprising at this point in time, but things are looking pretty dismal for izakaya (Japanese-style pubs), reports Nikkan Gendai (Feb 18). Citing the results of a survey released earlier this month by Tokyo Shoko Research, the 14 largest izakaya franchise chains operated 7,200 outlets at the end of December 2019. By the end of last year, their numbers had fallen to 5,844 outlets, a decline of 18.8%.

Even with the lifting of the state of emergency in October 2021, another 114 izakaya had closed by the end of that year, indicating the momentum to shut down the businesses was still building. Nikkan Gendai sees signs that the very culture of white-collar workers socializing in such establishments after work may be in danger.

"Part of the chains have already converted their franchises to different business models," says Tokyo's Shoko Research's Akiyoshi Niki. "A variety of efforts were made to keep the businesses going, but due to the prolonged pandemic there's no denying they've reached a dead end.

"In urban areas, izakaya pay higher rents as well as higher labor costs. Toward the yearend, when there's normally higher demand, customers failed to materialize, and as the drop-off in revenues put many into the red, the trend is for many to decisively call it quits."

Watami, one major chain, announced the closure of an additional 40 outlets, and was quoted in the media as predicting some 70% of the izakaya market could not expect any recovery this year. Watami has closed 180 of its outlets over the past two years.

Yoshihei Nakamura, a journalist covering the food and beverage industry, pointed out that many shops depend on yearend and new year parties for a large portion of their annual revenues. Direct or indirect patronage from corporations' entertainment budgets are estimated to have slashed revenues by as much as 40%.

"Without that business, their sales dropped and as the deadlines approached for settlement of their outstanding debts, some izakaya had no money to pay for foodstuffs and other supplies," he said.

"Over the past two years, the persistent admonitions of 'Don't go drinking' have wreaked considerable psychological damage, and people's lifestyles have undergone major changes," Nakamura added. "The situation is such that restaurants are preying on each other, so there's been quite a shakeout."

Tokyo Shoko Research has also noted that the pandemic has also been hard on the nation's coffee chains. Shukan Jitsuwa (Feb 24) reported that the number of outlet closures last year reached 100 for the first time ever, a year-on-year increase of 26.5%.

"The main factor in their shutting down was the change in lifestyles due to the pandemic," a business consultant was quoted as saying. "All the reasons why people use them -- such as for business discussions, or to while away the time between meetings, to study, or for use by the so-called 'nomads' who perform jobs away from their offices, and so on, have all been adversely affected."

And as if the timing couldn't be worse, the worldwide costs for coffee beans have been soaring.

"In addition to a major drop in production in Brazil, due to lack of rainfall and damage to the plants caused by cold weather, plus recovery of demand in the U.S. and Europe, the price of coffee beans may double or triple this year," predicted a source at a trading firm.

But even without the impact of impending higher costs, medium- and small-sized franchisers have already been hard hit. Tokyo-based Nippon Restaurant System Inc which operates Doutour, reported a 921 million yen deficit in the March-November period of last year. Saint Marc Cafe, a chain based in Okayama, lost 2.79 billion yen in last year's April-November period.

"The business continues in a tailspin, and won't be able to survive by taking a wait-and-see attitude or by improving efficiency," says an industry insider. "Like the Komeda chain, which is doing fairly well, the time has come when it will be necessary for management to develop a new customer base and adopt strategic measures."

© Japan Today

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12 Comments
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Who cares about the tax-dodging, low-paying, low quality chains? It's a chance for independent businesses to move in instead

2 ( +8 / -6 )

Let's have more smoke-free establishments too.

7 ( +11 / -4 )

Or……maybe they could adapt and make more open air establishments. Wider areas. Rooftop settings. Better take out and delivery options………just a thought.

5 ( +7 / -2 )

Also, they should all have wi-fi and proper smoke-free sections. I hate it when going to izakaiya and the minute we get our food, the table next to us lights up. I always need to wash my clothes or spray them like crazy after a night out (pre-pandemic of course). Lastly, the food at Watami isn't that good and is kind of over priced for what you get. I can see why they're struggling.

But, I don't think the culture of going out with co-workers will ever end here, it's just on pause. The customers will return eventually.

8 ( +9 / -1 )

I'm with Wobot.

Time for innovation.

Looking forward to it.

0 ( +3 / -3 )

You won't get indies paying high wages or smoke-free establishments either. If the chains can't make a sustainable profit, nobody can.

The units will be boarded up and people will sit at home alone in their apartments getting drunk.

With fewer places to meet and socialise, more people will make their own coffee, cook for themselves and remain single, the birth rate will decline and the suicide rate will increase.

4 ( +4 / -0 )

Who cares about the tax-dodging, low-paying, low quality chains? It's a chance for independent businesses to move in instead

If you think independent businesses have a better chance to survive than the chains you are going to have a terrible shock in the near future.

1 ( +5 / -4 )

Or……maybe they could adapt and make more open air establishments. Wider areas. Rooftop settings. Better take out and delivery options………just a thought.

Exactly. Also more Koshitsu 個室 (private rooms) might help too..

Over the past two years, the persistent admonitions of 'Don't go drinking' have wreaked considerable psychological damage, and people's lifestyles have undergone major changes,

I can relate to that. Over the last 2 years, I've gotten used to drinking at home, and don't think that I'm going back to izakaya drinking again..

1 ( +3 / -2 )

The main reason for coffee shops not being able to survive in Japan is that most people who go there buy one cup of drink ( mostly the cheapest one ) and sit there for hours using PC, cellphone or just killing time. There are no seats available for others and they walk away without buying anything! It’s about time that coffee shops implemented one drink time limit to around 30 minutes to one hour only! Those who want to stay longer can do so but should purchase the second drink!

3 ( +3 / -0 )

I went to a small izakaya in Tokyo last night with a friend and we were the only customers from 6-8 pm. Can’t make a profit that way.

3 ( +3 / -0 )

I cant wait to go back to izakaya, but I think it will be a while. And it will hopefully be one with the koshitsu as someone above mentioned. Still, I won't be going back nearly as often as I used to. It is much cheaper to drink at home with friends or family.

2 ( +2 / -0 )

That’s simply a downside spiral, caused by money distribution bias or let’s say concentration in a very few and getting fewer big and biggest hands. Even if they would struggle harder and there were no restrictions, people just don’t have the money to go there often. Then they close and fire their staff and then also those former owners and all the staff don’t have money to go to the remaining few restaurants, and so on. Well, that’s only the micro view on one picked branch, but you can generalize it up to the whole economies , in Japan and also anywhere else on the planet.

1 ( +1 / -0 )

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