Sector Trend Analysis – Food Service in Japan

Market overview and consumption trends

With a population of approximately 127 million and a gross domestic product (GDP) of US$5.2 trillion in 2021, Japan is one of the largest consumer markets in the world, providing opportunities for Canadian exporters, especially for those interested in the foodservice market. In 2021, the Japan foodservice market was valued at US$183.9 billion.

Consumer foodservice

COVID-19 impact on consumer foodservice

The government announced a nationwide state of emergency on 7 April 2020 in response to COVID-19, asking nonessential retailers and foodservice outlets to voluntarily close or to shorten their operating hours to help prevent spread of the virus. This covered not all, but most of the large cities in Japan with large and dense populations. Bars/pubs that mainly only sell alcoholic drinks were asked to close their outlets during the state of emergency. Meanwhile, other foodservice outlets were in general asked to open only between 5 a.m. and 8 p.m., with no alcoholic drinks to be sold after 7 p.m. Home delivery and takeaway services were not prohibited during the state of emergency, and as such many foodservice operators rushed to provide or expand such services. Nevertheless, all channels suffered heavy losses, with those predominantly focused on eat-in sales being the hardest hit.

While the state of emergency was relaxed in late May 2020, COVID-19 remained a significant threat with a second and then a third wave of the virus seen later in 2020. Eating and drinking at bars, pubs, and restaurants was considered one of the most common ways for people to get COVID-19 and, therefore, the government continued to stress to the public to refrain from dining out, and especially to avoid drinking in large parties. As a further measure, the government offered cooperation money to bars and restaurants that shortened their operating hours and closed early.

Eating at home became the most common trend in 2020 with consumers either making home-cooked meals, purchasing ready meals or meal kits, or shifting to takeaway and home delivery. Virtual drinking parties was another notable trend to come out of the state of emergency, with consumers adapting to the restrictions and looking for ways to keep spirits up while stuck at home.

In October 2020, the government announced the launch of its Go To Eat campaign to help provide a boost to the country's foodservice industry. Through the campaign consumers were able to purchase books of discount vouchers that entitled them to receive a discount of 25% on meals at participating foodservice outlets. This followed on the footsteps of the government's Go To Travel campaign which was launched in July 2020 and which subsidized domestic travel expenses by up to 50%. However, as the number of COVID-19 cases started to surge again in November, both campaigns were quickly suspended, with the expiry dates for each campaign extended to the end of 2021. Despite this, there was significant interest in these campaigns due to the generous discounts on offer.

COVID-19 country impact

Due to the outbreak of COVID-19, a state of emergency was imposed in seven major Japanese prefectures from 6 April 2020, and all 47 prefectures from 16 April. People were encouraged to stay at home, avoid group events, avoid stockpiling, and to wash their hands, although there were no penalties or mandatory requirements. Prefecture governments could close schools, public facilities, entertainment centres and shops. From 5 March 2020, border controls were applied to arrivals from areas in China and South Korea, and these controls were expanded to arrivals from other areas and countries as the virus spread globally. With the government advice to refrain from domestic travel, rail companies and airlines also reduced their operations.

The government asked all nonessential retail and foodservice outlets to close or shorten their opening hours from 7 April in most large cities, although this was not mandatory due to constitutional barriers related to civil liberties. Grocery retailers, pharmacies and shopping centres either opened for shorter hours or as usual, whilst many non-grocery retailers closed. Bars and pubs were asked to close, with other outlets asked to operate only from 5 a.m. to 8 p.m., with no alcohol served after 7 p.m. Delivery and takeaway services were permitted. A growing number of employers mandated or recommended staff work from home. Meanwhile, all schools nationwide were asked to close from 2 March to early April 2020. Schools in some areas resumed classes on 6 April 2020.

On 4 May 2020, the government extended the state of emergency to the end of May. It then analyzed regions by risk and removed the state of emergency for low-risk prefectures. Mask-wearing was commonplace in Japan already, so compliance is high. Schools are now open and teaching is in-person with social distancing measures in place, and clear plastic screens around desks to protect students. In mid-February 2021, the government started the rollout of COVID-19 vaccines across the country, starting with healthcare workers and the elderly. However, this has been slow, and cases started to rise once again in April, leading to further short-term local restrictions.

Company response

Leading convenience store chains 7-Eleven and Lawson remained the overall leaders in terms of value share in 2020, with most foodservice players registering declines. While the performances of convenience store limited-service restaurants in business district areas were poor, due to the shift to remote working, this was partially offset by increased demand from residential and rural areas. Outlets in these residential and rural areas provided quick and easy access to prepared food options as an alternative to eating out. Frequent new product launches within these outlets also helped to ensure consumers returned.

Investment in home delivery and takeaway services was the main focus of most foodservice players in 2020 as they looked to navigate their way through the COVID-19 crisis, and even bars/pubs branched out into this area to compensate for the loss of eat-in sales.

Independent foodservice operations

Independent foodservice operators are suffering greatly from the effects of COVID-19 with the number of bankruptcies for this industry being among the highest in history. The government has been offering support/cooperation money to compensate for store closures or shorter opening hours, and although it has been beneficial for smaller operations, it has not been enough to supplement the losses experienced by mid-size or larger operations.

In response to the government request to stop serving alcohol after 7 p.m., some independent foodservice operators that previously only opened during the evenings adapted their business models to open at lunchtime or even breakfast to compensate for the loss of business. Furthermore, some independent bars and pubs that mainly served only alcoholic drinks prior to COVID-19 shifted to providing full meals, with some looking to attract consumers who would like to eat dinner and leave quickly. Some players also entered the food truck business during 2020 since it was considered to be a reduced risk of contracting COVID-19. They also have lower maintenance costs and provide an opportunity to reach out to consumers.

What's next for consumer foodservice

The recovery of consumer foodservice in Japan is largely dependent on the successful rollout of the country's vaccination program, the reopening of its borders, and the ability of consumers to return to their pre-COVID-19 activities. Nevertheless, this is not expected to be achieved until 2022 when domestic and international travel resumes and because, in the short term at least, many consumers are expected to continue working from home. Although the timing of the government's Go To Eat and Go To Travel campaigns were not ideal in 2020, the fact these campaigns have now been extended means they could play an important role in kickstarting a recovery. Following the outbreak of COVID-19, many operators opted to use cashless payments as they do not require direct contact.

Full-service restaurants

Restrictions on outlet openings due to COVID-19 put a sizable hole in the sales of full-service restaurants in 2020.

All categories declined in current value terms in 2020 compared with previous years.

Over the forecast period, full-service restaurants projected to see a 3.6% current value CAGR, reaching US$96.4 billion.

Go To Eat campaign a bright spot in a difficult year for full-service restaurants

2020 was a tough year for full-service restaurants with the outbreak of COVID-19 disrupting the ability of outlets to open and even when they did they often saw reduced operating hours and social distancing measures. Furthermore, even when they did open footfall was not as significant as pre-COVID-19 with many people following the government's advice to remain home when possible. This was particularly damaging to full-service restaurants in business districts and city centres, with work-from-home arrangements removing an important consumer base in these areas.

Despite these considerable setbacks, full-service restaurants actually performed better than some other consumer foodservice channels, such as cafés/bars. This was partly due to ongoing demand from families in residential and rural areas. Sales were also boosted by the government's Go To Eat campaign which was launched in October 2020. This campaign allows consumers to buy books of discount vouchers entitling them to a 25% discount at participating restaurants within the consumer's prefecture. Nevertheless, after COVID-19 cases started to rise again in November, the government asked prefectural governors to consider limiting the number of diners in each group using the Go To Eat vouchers to four people.

Full-service restaurants largely rely on eat-in sales for the majority of their business, but with COVID-19 placing restrictions on their ability to open to capacity, many turned their attention to takeaway and home delivery. Some players also offered unique takeaway menus to gain consumers' attention during 2020.

Recovery and opportunities

Consumers may need to be persuaded to return to full-service restaurants. The government's Go To Eat campaign proved popular following its launch, although it has been beset with problems due to an increase in COVID-19 cases. Nonetheless, while the vouchers had been due to expire in March 2021, due to the disruption in using them many prefectures have now extended the expiry date to December 2021. This should help support the slow recovery of full-service restaurants, as consumers will likely need to be incentivized to get them to eat out. Given the campaign's success the government may well choose to provide further support to full-service restaurants, with the channel facing further outlet closures in 2021.

Significant challenges remain with focus expected to shift further towards takeaway and home delivery. Rising labour and ingredients costs and unfavourable demographic trends present considerable challenges to full-service restaurants, which could limit the channel's ability to return to pre-COVID-19 sales levels. In addition, the aging population has magnified the impact of the fact that many older consumers tend to prefer eating in the comfort of their homes. Meanwhile, ongoing economic uncertainty is likely to dampen demand, with many consumers keen to minimize spending where possible and, therefore, eating out less frequently.

2020 also saw an acceleration of the trend towards home delivery and takeaway food over dining out. Women in the workforce, prompted by government efforts, stimulate the economy and address the labour shortage. Consequently, many full-service restaurants will likely need to expand their home delivery and takeaway services or risk being left behind.

Full-service restaurants will need to be creative with consumer confidence, which is still under pressure Japan is in the process of rolling out its COVID-19 vaccination program, although at the time of writing there are still no certainties as to how long it will be before life starts to return to relative normality. There are different variants of COVID-19 causing concern. With this in mind, full-service restaurants will need to continue being creative in order to encourage consumers to spend. Special promotions, digital marketing and unique menus could all offer some reward, while digital services such as cashless payments, digital menus and self-service could all help to allay fears around catching COVID-19.

Limited-service restaurants

Most of the sales declined in 2020 compared with previous years except chained burger limited-service restaurants, chained convenience store limited-service restaurant, chained Latin American limited-service stores and chained pizza limited-service restaurants.

Over the forecast period, limited-service restaurants are projected to increase at a CAGR of 2.6%, reaching US$71.3 billion in 2025.

2020 impact

Limited-service restaurants compensate for loss of eat-in sales with increase in delivery and to-go sales In response to the outbreak of COVID-19 Japan introduced a range of measures to help prevent spread of the virus. With regard to consumer foodservice, this meant restrictions on eat-in services. Although this did have a negative impact on sales within limited-service restaurants in 2020, it was not as significant as in most other channels, with eat-in sales accounting for a relatively small share of sales. With consumers unable to eat in restaurants, takeaway, drive-through and home delivery sales increased their share.

Convenience stores focus on new products and services as COVID-19 provides a stern test. Throughout 2020, the government encouraged people to work remotely and promoted staying home when possible. Under these conditions, limited-service restaurants saw reduced business, especially in business districts. In addition, home seclusion provided an incentive and the time for people to cook more at home, with home cooking thus becoming a threat to not just limited-service restaurants but also overall sales of consumer foodservice.

Convenience stores is the dominant category within limited-service restaurants, and despite seeing a decline the channel managed to remain relatively stable in 2020. To maintain sales, convenience stores were active in launching new products and unique collaborations with full-service restaurants to help retain the interest of consumers and to compensate for the loss of foot traffic resulting from home seclusion.

Leading pizza players introduce new services to cater to single-person households Pizza limited-service restaurants was one of the few categories to post growth in 2020 in both current value and transaction terms, albeit with growth coming from a low base. For example, Pizza Hut introduced "MY BOX" which is a set option for a single serving of pizza with a small side of French fries and fried chicken. Meanwhile, Domino's Pizza announced that it would no longer have a minimum order amount for home delivery, meaning consumers were able to order smaller portions or could just order from the side menu. These moves proved popular thanks to their recognition of Japan's increasing number of single-person households.

Recovery and opportunities

Competition set to intensify as full-service restaurants expand into offering takeaway and home delivery Prior to the outbreak of COVID-19, limited-service restaurants largely focused on takeaway for business, with consumers typically going to full-service restaurants when they wanted to eat in. However, partially driven by necessity, more full-service restaurants started offering takeaway and home delivery during 2020 and it is expected that the competition between the two channels will intensify, while the line between full-service and limited-service restaurants is expected to become increasingly blurred. While full-service restaurants' takeaway menus tend to be more expensive, the variety and unique options they often offer may win over more consumers who are seeking new options or who want to try new things. In order to remain competitive, it will be important that limited-service restaurants provide regular new product launches including interesting and innovative concepts to catch the consumer's eye. Furthermore, with online orders surging in 2020, it is now easier than ever for consumers in Japan to quickly and easily compare the menus of different foodservice providers online and as such players will need to find points of differentiation.

Working from home could influence decisions on new outlet locations

With little expectation of limited-service restaurants seeing significant growth over the forecast period, it is anticipated that there will not be many new outlets opened, with many players focusing on consolidation in the wake of COVID-19. Nonetheless, for any new store openings that do emerge, it is expected that residential and rural areas will be targeted rather than locations near business districts or entertainment sites. Working from home is not well established in Japanese business culture, but it was well received when it became a necessity in 2020. As such, companies are expected to continue being more flexible with their employees' working arrangements even beyond 2021. As more consumers choose to work from home, this in turn could see foodservice demand shift away from business districts and into residential and rural areas.

Third-party delivery companies expected to expand reach over the forecast period

To expand delivery options/areas, a growing number of limited-service restaurants are partnering with delivery services such as Uber Eats and Demaekan, with this being seen as an effective way to increase their delivering capacity. For example, in October 2020, McDonald's announced it had formed a partnership with Demaekan, which is Japan's largest food delivery service. Now, in addition to its own delivery system (in selected areas and stores only), McDonald's will be able to utilize Demaekan's service, which has a large user base and is able to reach a wider delivery area, thereby opening the door to a wider customer base. In addition, McDonald's is also renovating its stores to make them more convenient and appealing. The company's official app also targets convenience-orientated consumers by providing a click and collect option.

Cafés and Bars

Sales plummet in 2020 with the government's COVID-19 measures limiting foot traffic in these outlets.

All categories, except chained café, dropped from 2016 to 2020.

Over the forecast period, cafés/bars is projected to increase at a 4.0%, reaching US$39.6 billion.

COVID-19 measures deal a heavy blow to bars/pubs

The government announced a state of emergency on 7 April, with it requesting that nonessential retail and foodservice outlets close on a voluntary basis or at least reduce their hours, with most establishments complying with this request. As a result, during the state of emergency bars/pubs closed their doors. In a bid to contain the spread of COVID-19, the Japanese government issued a number of other requests, including asking bars/pubs and other foodservice operators to stop serving alcohol after 7 p.m. Even after the state of emergency was lifted, the government continued to recommend that consumers avoid visiting bars/pubs as this was seen as a common place to contract COVID-19. Furthermore, the government also offered payments to those bars/pubs that agreed to close or reduce their opening hours. With bars/pubs hugely reliant on evening drinkers, such as those enjoying a drink with friends after work, these measures had a huge negative impact on the channel, which saw its value sales drop by almost two thirds. Unable to cope with the massive drop in sales, a significant number of bars/pubs also closed their doors permanently in 2020.

Players adjust their business models to manage through the pandemic

Some players within cafés/bars responded better than others to the crisis and looked to create new opportunities to compensate for the loss of sales stemming from COVID-19. For example, many bars/pubs in Japan only open in the evenings, but with operators asked to stop serving alcohol after 7 p.m., some players started to open during the day offering light meals and refreshments, while some even started opening in the morning and offering breakfast. Another way in which cafés/bars looked to compensate for the loss of eat-in sales was through expanding or introducing takeaway, drive-through, and home delivery options.

Starbucks expands its lead with customers attracted to new products and menu items

Despite seeing a significant decline in sales in 2020 due to COVID-19, Starbucks Coffee Japan nonetheless expanded its lead in cafés/bars with its value share increasing by three percentage points. The company's growing lead is being driven by ongoing expansion of its store network and the frequent introduction of seasonally limited drinks, which have been well received by Japanese consumers. As well as expanding its store network, Starbucks is working to bring its offer into line with the increasingly central role of digital media and devices in consumers' lives, which served it well following the outbreak of COVID-19.

Elsewhere, there were a number of unique and interesting collaborations as players looked to stand out from the competition with eye-catching menus. For example, McDonald's Holdings Co (Japan) Ltd was one of the few players in cafés/bars to register growth in 2020, with this being supported by frequent new product launches.

Recovery and opportunities

Challenges remain for bars/pubs, but this could inspire new innovations

Bars/pubs is expected to return to growth in 2021 although the speed of recovery is largely dependent on the successful rollout of Japan's vaccination program and the containment of COVID-19. With a rapidly aging population, Japan is exercising caution to prevent any significant rise in case numbers. With bars/pubs often being small and crowded locations they are seen as particularly fertile grounds for spreading viruses and, as a result, it may be some time before the number of consumers visiting these outlets returns to pre-COVID-19 levels. Consequently, operators of these establishments may need to take a more creative approach, possibly focusing more on food or extending their takeaway services.

The general decline in alcohol consumption may also force chained bars/pubs to resize their businesses in order to remain profitable. Moreover, these players face growing competition from rival foodservice formats such as fast food chains and full-service restaurant chains, which have been providing small servings of alcoholic drinks in order to target consumers looking for a quick dinner and drink after work. In addition, convenience stores have been providing eat-in space in their outlets, and the food and drink they provide is almost identical to that on offer in izakaya (informal Japanese bars typically associated with after-work drinks).

New smoking ban could detract from the desire to visit cafés/bars

Smoking in foodservice outlets was effectively banned by a law which came into force in April 2020, which had aimed to reduce the risk of the harmful impact of passive smoking ahead of the now rearranged 2020 Tokyo Olympics. While small privately owned restaurants with no employees are exempt, typical chained izakaya will be required to either ban smoking indoors or provide a separate smoking room. Although izakaya may be able to attract female consumers and families by banning smoking, these consumer groups tend to spend less per visit than male businessmen, the core consumers of such outlets, because they consume less alcohol. As such, this could represent a further challenge to the future of bars/pubs, with many consumers already focused on reducing their alcohol intake due to increased health concerns in the wake of COVID-19.

Customer loyalty important in bringing consumers back into outlets

Gaining consumer loyalty will likely become increasingly important heading into the forecast period as competition intensifies, with repeat business being crucial to success. Not only are cafés/bars facing competition from within the channel and from other channels such as limited-service restaurants and full-service restaurants, but they are also likely to face the mounting challenge of consumers who choose to prepare and drink alcoholic and non-alcoholic drinks at home. During the state of emergency, many consumers became more familiar with how to prepare fresh coffee, cocktails and other drinks and it may be hard to persuade some of these consumers to shift back to cafés/bars. To do this, players will likely need to run successful digital marketing and engagement campaigns to bring consumers back into outlets, with new menu options, limited-time products and offers, and special promotions and discounts all likely to prove popular.

Self-service café

Sales plummet in 2020 due to home seclusion and COVID-19 measures.

Over the forecast period, self-service cafeterias is expected to see a 6.3% CAGR, reaching US$2.1 billion.

2020 impact

Home seclusion puts heavy pressure on self-service cafeterias due to their reliance on workers and students

Self-service cafeterias remains a niche within Japan's foodservice industry, accounting for only a small proportion of overall sales. Many consumers continue to associate such outlets with school, college, or work canteens. As such, self-service cafeterias were particularly hard hit by the outbreak of COVID-19 due to the fact that the core customer base of many of these outlets is comprised largely of workers and students. With many people switching to working and studying from home due to COVID-19, there was little demand for self-service cafeterias.

Ikea opens new urban store and launches takeaway/lunchbox

It was a tough year for all players within self-service cafeterias in 2020, with the channel not being ideally suited to the COVID-19 environment. Nonetheless, the leading players looked to respond to the restrictions and lack of interest in eat-in services by focusing on takeaway and home delivery services. In June 2020, Ikea also opened its first small urban concept store in Harajuku, Tokyo. While it succeeded in expanding Ikea's presence into urban areas, Harajuku is one of Japan's most heavily crowded areas and so suffered due to people avoiding such areas due to COVID-19.

Udon specialists look for new ways to drive sales

Udon noodle soup specialist Marugame Seimen managed to increase its lead in 2020 despite still recording heavy losses. The company performed better than some of its rivals thanks to its combination of a takeaway service along with running regular menu discounts to attract consumers. This offer could be used as many times as the customer wished during the specified period and it was designed to encourage repeat visits/orders. Overall, however, the loss of business to workers and students was too much for most players, with all of the leading players suffering heavy losses in current value terms in 2020.

Recovery and opportunities

As employees return to the workplace, sales should bounce back

Due to the nature of many self-service cafeterias, the channel stands to bounce back quicker than many other consumer foodservice channels. With limited interaction with staff and a relatively fast turnover of customers, there are fewer concerns about being exposed to COVID-19. Key to the channel's recovery will, however, likely be heavily dependent on consumers returning to the workplace, with busy workers and students being a key consumer base for these outlets that provide quick and convenient meal options.

Udon noodle soup at the heart of self-service cafeterias in Japan

Udon noodle soup specialists were one of the more successful areas of self-service cafeterias during the review period and although they suffered a setback in 2020 due to COVID-19 restrictions, they stand to bounce back over the forecast period. These outlets have relatively few competitors in expanding areas such as third-party online ordering services or convenience stores limited-service restaurants, as consumers do not generally consider these channels to be suited to udon noodle soup.

Typical customers include busy workers looking for lunch and university students looking for a light meal or snack, though the flexibility of the offer allows for an extremely diverse consumer base. Two of the top three self-service cafeteria brands by value

Economic uncertainty expected to drive demand for value-for-money meals

Price discounting and new menu developments are likely to be key to driving sales within self-service cafeterias over the forecast period, with the line between limited-service restaurants and self-service cafeterias becoming increasingly blurred. This blurring of the lines is being partially driven by some self-service cafeterias turning their attention to takeaway and home delivery in response to the COVID-19 crisis.

Street stalls/kiosks

With street stalls/kiosks typically located in high-traffic areas, this put these outlets at a distinct disadvantage given the home seclusion seen in 2020

Sales decline by 5.2% from 2016 to 2020.

The channel remains highly fragmented being dominated by independents in 2020.

Over the forecast period, street stalls/kiosks is projected to see a 2.6% current value CAGR from 2021 to 2025, reaching US$195.3 million.

2020 impact

Foot traffic fell in typically busy and vibrant areas as the government encouraged consumers to stay home

In order to secure a significant audience, street stalls/kiosks are typically located in high-traffic areas such as business districts or near entertainment venues. Given this, the measures taken to control COVID-19 served as a heavy blow to many operators. With many consumers switching to working and studying from home, and with social and entertainment events put on hold, foot traffic in many typically busy urban areas dropped significantly. As a result, street stalls/kiosks also saw a steep drop in sales, with these outlets losing a key part of their target audience. Although not as significant, the loss of tourism due to COVID-19 was another factor behind the poor performance of street stalls/kiosks in 2020. The younger generation was, however, more active during COVID-19 as it was widely believed that younger people had a lower risk of facing any serious health problems from the virus. This was problematic for the government in trying to convince the younger generations to stay home, but at the same time it also benefited some foodservice operators, including those offering on-trend products such as bubble tea and Korean street food.

Food trucks benefit from their mobility as consumers stay home

Despite a challenging year, street stalls/kiosks still performed better than some other consumer foodservice channels such as full-service restaurants and cafés/bars. This was in part thanks to the efforts of food trucks, some of which managed to see strong performances in 2020 despite COVID-19. The expansion of food trucks continues to offer opportunities in street stalls/kiosks, especially as health-conscious consumers increasingly demand access to fresh, healthy food in the midst of hectic modern lifestyles. A broad and unusual product variety, including international cuisine that it is often difficult to find in Japan such as Egyptian, Greek and Israeli, is another potential advantage of food trucks. Prior to COVID-19 food trucks primarily targeted areas around offices but following the outbreak of COVID-19, this business model evolved.

Due to their mobility, food trucks were also able to shift from business districts to residential areas in line with the shift to home working and studying. This enabled the company to connect full-service restaurants with consumers who chose to stay home and who were reluctant to visit physical stores and foodservice outlets as a result of COVID-19.

Beyond the potential of food trucks in urban areas, opportunities are still largely limited to usually short-lived and unpredictable trends such as the rise of bubble tea, though street stalls/kiosks does, at least, offer the flexibility to adapt quickly to such trends. Some of the more notable trends in 2020 included banana juice, which came to the attention of consumers after its health benefits were promoted on TV, and Korean street food. Japan has been going through somewhat of a Korean craze, with Korean culture influencing various areas of consumers' lives in Japan from beauty and fashion, music, TV and film, and now food.

Even before the negative impact of COVID-19, street stalls/kiosks were seeing growth constrained by consumer concerns about product quality and hygiene. In addition, the trend towards eating at home, underpinned by busy consumer lifestyles and the aging population, was also impacting street stalls/kiosks sales, with growing numbers of consumers opting for home-cooked food, home delivery, takeaway or home dinner kits. These factors also continued to have an adverse effect on the channel's development in 2020.

Recovery and opportunities

Due to low overheads, food trucks could become the testing ground for new food concepts

Following the success of the food trucks model, platform providers (such as food truck rentals) and intermediary services (such as searching locations, renting food trucks, seed funding, etc.) like Mello Inc are expected to be a key component for the growth of street stalls/kiosks. With prevailing economic uncertainty in the wake of COVID-19, many entrepreneurs are also likely to lack the funds/budget to open full-service restaurants and so may instead turn to food trucks as a way to gauge the receptiveness of consumers to their menu ideas or food concepts. Furthermore, due to the mobility of food trucks, players can test their products in different locations, as well as taking them to events such as festivals and sports events.

Consumer confidence key to recovery

Key to the recovery of street stalls/kiosks will be the successful containment of COVID-19 and the completion of Japan's vaccination program. Once consumers are confident about returning to the workplace and social engagements resume, foot traffic should return to urban centres, which are the key locations for most street stalls/kiosks. Additionally, the return of tourism will be another boost. In the short term, street stalls/kiosks are better placed to recover than channels with a heavier reliance on eat-in sales in small, enclosed spaces. Given the limited close interaction and quick transactions, there is perceived to be a lower risk of passing on COVID-19 at street stalls/kiosks compared to other channels such as full-service restaurants and bars/pubs; therefore, consumers are likely to feel more confident about buying food and drinks from them.

Japan's youth key to the success of street stalls/kiosks

The younger generation in Japan is key to creating new trends in Japan. For example, bubble tea and sweets using tapioca benefited from the rising demand for products considered insta-bae (products which are considered photogenic on social media site Instagram) among younger female consumers, in particular. Recent trends such as bubble tea, banana juice, and Korean street food were all generated by the younger generation. Therefore, it will be important to monitor the interests of younger consumers. Additionally, operators will need to invest in social media marketing to help build engagement and attract consumers to their outlets.

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Resources

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Sector Trend Analysis – Food Service in Japan
Global Analysis Report

Prepared by: Hongli Wang, Senior Market Analyst

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