Japanese sushi market consolidating

Published on
October 17, 2017

The parent company of Utsunomiya, Japan-based conveyor-belt sushi chain Genki Sushi Co., rice wholesaler Shinmei Co., will buy 32.7 percent of Suita-based Sushiro Global Holdings, parent of competing chain Akindo Sushiro, from London-based private equity firm Permira. A large portion of Sushiro Global Holdings was already sold by Permira in an initial public offering in April.

The consolidation will give the combined chains leverage to demand lower pricing from seafood suppliers. Especially, they would like to keep costs down for salmon, trout, tuna, and yellowtail, all of which are currently high. Salmon is the most popular item at conveyor-belt sushi shops in Japan. As both chains offer most plates of two nigiri sushi for fixed price of JPY 100 (USD 0.90 , EUR 0.75), they must control food costs to stay profitable. Ingredients are a larger percentage of costs than for most restaurants, since ordering, delivery, and forming of sushi are all automated.

Despite the popularity of sushi as a fast food, the financial situation of the chains is not so rosy. Sushiro carries debt well in excess of its shareholder equity due to rapid expansion, while Genki has an operating margin of just 3.17 percent.

Sushiro is Japan’s largest sushi chain by market share, while Genki holds fifth place. The combined chains will have 630 locations in Japan and control about a third of the market. Genki has overseas locations in China, Hong Kong, Indonesia, Kuwait, the Philippines, Singapore, Kuwait, the Philippines, and the United States, while Sushiro has restaurants in South Korea and a U.S. joint venture. Genki is strong in the Kanto region, which includes Tokyo, while Sushiro is stronger in the Kansai area, which includes Osaka, Kyoto, and Kobe.

Contributing Editor reporting from Osaka, Japan

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