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100-Yen Conveyer-Belt Sushi Chain Suffers Skyrocketing Material Costs

October 16, 2013

A conveyer-belt sushi chain well known for its all 100-yen sushi business concept is facing quite a challenging situation due to skyrocketing sushi fish prices triggered by the devalued yen. Kappa Create Holdings, one of the leading sushi boat chains that runs Kappa Sushi, significantly revised downward its second quarter forecast (March-Aug 2013). Underperforming 50 restaurants will be closed during the third quarter. The operating profit of the second quarter plunged from JPY 2.1 billion (€15.6 million/$21.4 million) to JPY 200 million (€1.5 million/$2 million). Net loss of JPY 2.9 billion (€21.6 million/$29.5 million) was posted.

According to the Holdings, in addition to a lengthy process of operation improvement and settlement, increases in sales rations in the areas of sales cost, distribution cost, and administrative cost pressured the operating earnings. A marked number of institutions will have to close their doors as a measure against the poor business performance.

Direct Hit of Boiling Sushi Topping Costs

The total number of existing operations was 386 as of late August. Four new chain stores were opened and nine were closed during the second quarter. Sales smoothly grew; however, raw material costs, mainly of tuna and shrimp, exhibited steep rises, resulting in profits much lower than the forecast. Some stakeholders in the sushi industry maintain that “a business strategy that offers two pieces of sushi for JPY 100 is hitting its wall” in the face of relentlessly rising material costs.

Kappa Sushi operates all 100-yen sushi restaurants throughout Japan. At one point, the Company ranked number one in Japan for the number of stores as well as sales, known as a synonym for a sushi boat business. Lately, the first place has been taken by Akindo Sushiro Co., Ltd.

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