Large Japanese sushi chains see sales plummet due to COVID-19

The top five kaiten-zushi (rotary or conveyor-belt sushi) type chains in Japan saw big declines in April, when restaurants were asked to close by 8 p.m. and were told to set the last order for alcohol at 7 p.m.

By sales and number of outlets, the top five chains are Akindo Sushiro, Kura Corporation, Hama Zushi, Kappa Zushi, and Genki Zushi.

Suita, Osaka-based Sushiro Global Holdings (SGH), which owns Akindo Sushiro – the largest of the five chains – gave a rough estimate of COVID-19’s impact on its business in its investor relations information. Sushiro Japan stores have seen same-store sales compared to last year decline every month since February. February saw a drop of 5 percent, March dropped 25 percent, and April saw the largest impact so far with a 60 percent drop in sales.

SGH’s new-brand, an izakaya (Japanese-style pub) chain, also saw sales declines. February was similar with a 5 percent drop, March 20 percent, and April a massive 90 percent. Initially, in April, all directly-operated stores closed, and while later some of the stores gradually reopened, a big hit to revenue couldn’t be avoided, the company said. SGH also operates overseas sushi shops in South Korea, Taiwan, Hong Kong, and Singapore, and shops in those four countries also saw declines.

In contrast to the Japanese response to COVID-19, the South Korean economy was quickly placed under restrictions, resulting in a steeper decline in business for Akindo Sushiro. Compared with the same month in 2019, its declines were 30 percent in February, 50 percent in March, and 20 percent in April. As the outbreak in the country slowed, consumer demand gradually recovered. The company has 16 stores in South Korea, but business has been difficult as political tensions between Japan and South Korea have caused some customers to shun Japanese businesses. With the added problem of COVID-19, Sushiro has planned to close some restaurants that have posted big losses, while keeping others.

The company also saw declines in its Taiwanese business, with sales down 15 percent in February, 30 percent in March, and 40 percent in April. Taiwan acted swiftly to implement infection control measures and largely succeeded in containing the disease. The measures were kept in place in April, so the impact on the business was large, but rapid recovery can be expected.

Hong Kong, in contrast, saw relatively minor declines early on, with no real impact in February and March. While the impact on business up to March was minuscule, April results were down 20 percent due to a capacity limit of 50 customers at restaurants that was in effect from 28 March to 23 April.

In Singapore, strict control measures at the start of the outbreak caused immediate declines, with February seeing a 40 percent drop in business, March 25 percent, and April up to 85 percent. Singapore’s early control measures couldn’t contain the spread of infection, so on 7 April stores were forced to either close temporarily or limit operations to take-out only.

In analyzing the overall industry impact of the coronavirus, Sushiro compared year-on-year sales data of various types of restaurants through March, and classified them by size of the impact of COVID-19. Fast food shops such as McDonald’s, KFC, and MOS Burger, actually increased their sales by 3 percent, and beef bowl shops like Yoshinoya, Sukiya, Matsuya saw a decline in sales of only 5 percent, as their meal-types are well-suited to takeout.

Sushiro’s business in Japan declined by 14 percent, less than its competitors Kura Corp, Kappa Create, and Genki Sushi, which suffered an average decline of 19 percent. Sushiro’s posted a 14 percent decline, as opposed to the 25 percent March decline noted earlier, like because the number it reported was total sales, not same-store data.

Sales at restaurants that sell meal-sets and family restaurants fell by 16 percent and 22 percent, respectively. Izakayas (Japanese pubs with a variety of foods served family-style) have been hardest-hit, losing on average 33 percent of their sales through March. For all categories, April will look far worse than March.

Sushiro had introduced cashless payment options, including LINE Pay, PayPay, R Pay, M Pay, au PAY, ALIPAY, and WeChat Pay from the end of 2019. This has been a boon to business, as many customers are wary of touching money handled by others.

Sushiro also launched a mobile application for take-out and delivery orders in 2018 and it now has four million active users. Of Sushiro’s 500-plus stores, 118 offered delivery service (through external providers) by the end of March. Take-out sales were boosted by COVID-19, rising 21 percent from the beginning of the year through March.

In its stores in Japan, diners will now be spaced with an empty seat between them. Single diners will also be allowed to use booths instead of the counter. The touch panels used for special orders will be regularly sanitized. Workers will have their temperature checked, and kitchen workers will additionally submit stool samples regularly. There has been one case of a part-time employee testing positive for COVID-19. The shop was closed, disinfected, and reopened the next day.

To weather the downturn, SGH has sold corporate bonds, which together with its existing credit line, will fund its FY2020 second-half activities.

Sushiro wasn’t alone in its business struggles. Sushiro’s competitor, the Osaka-based Kura Corporation, reported that its same-store sales were just 51.9 percent of those a year earlier.

Hamazushi Co., a subsidiary of Tokyo-based Zensho Holdings, operates the Hama-zushi chain. The parent also operates the popular Sukiya beef bowl chain, as well as some lesser-known brands. As beef bowls are well adapted to take out, the parent company is not as strongly affected as other sushi-shop operating companies.

Another competitor has taken to marketing efforts and bonuses to bring in customers. To increase the number of diners, Kappa-zushi, owned by Kanagawa-based parent Kappa Create Co., Ltd. will double the number of points given to its shareholders, which diners earn through spending and which can be used to pay for meals. In a departure from normal business, the chain will now only put orders on the conveyor belt that customers have ordered through the touch panel at the booths, instead of having sushi constantly running on the belt. A few shops will stock the conveyor belt, but will provide lids over the plates, something not usually done in Japan.

Genki Sushi, headquartered in Utsunomiya, Tochigi Prefecture, will eliminate its second-half fiscal year dividend and cut executive pay – Japanese companies usually only pay dividend twice per year, compared with quarterly dividends typically paid in the U.S.A. Four of the company's shops are temporarily closed, while others are on shortened hours. Genki Sushi’s same-store sales in April 2020 were 51.9 percent of those for April 2019 The number of customers was only 41.7 percent  of that a year earlier, but the spend-per-customer was up 3 percent.

Photo by Chris Loew/SeafoodSource