Virus Crisis Prompting Industry Realignment in Japan

Tokyo, July 10 (Jiji Press)--Retailers and restaurant operators in Japan are accelerating mergers and acquisitions as they face an urgent need to strengthen earnings amid the spread of the new coronavirus. With the coronavirus outbreak triggering changes in people's lifestyles and consumer activities, a sense of crisis is growing among players in the retail and restaurant industries as they think they will not be able to survive with their existing business models, analysts said. Major Japanese restaurant operator Colowide Co. <7616> said Thursday that it will launch a tender offer for Ootoya Holdings Co. <2705>, which runs restaurants offering "teishoku" set menu meals. Although Colowide became the top shareholder of Ootoya last year, its proposals to share food procurement and distribution networks have been rejected by Ootoya. Hoping to change the situation, Colowide aims to acquire a controlling stake in Ootoya. Both Colowide and Ootoya face tough business conditions. In the business year ended in March 2020, Ootoya suffered its first group net loss since it went public in 2001. Colowide has decided to close nearly 200 outlets. As many restaurant operators in Japan have small capital bases, it is difficult for them to survive industry competition. Pepper Food Service Co. <3053> has decided to sell its Pepper Lunch steakhouse chain business to an investment fund. Major convenience store operator FamilyMart Co. <8028>, which suffered same-store sales plunges in April and May, has decided to support a tender offer by major trading house Itochu Corp. <8001>. Outlets in urban areas have continued to face sluggish sales, FamilyMart President Takashi Sawada said. Rival convenience store chains Seven-Eleven Japan Co. and Lawson Inc. <2651> face similar situations, industry sources said. The convenience store industry in Japan is saturated, with the number of outlets turning lower for the first time last year. With FamilyMart also deciding to accept investment from the JA Japanese agricultural cooperatives group, cross-industry alliances aimed at sustaining growth may be promoted in the convenience store industry, analysts said. END