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High quality proves key ingredient to success

Soup Stock Tokyo founder eschews tried-and-true fast-food formulas

by Takahiro Fukada

High-priced but good-quality products will win the hearts of customers every time. This is the belief of Masamichi Toyama, founder of Soup Stock Tokyo, and so far he has proved it.

Contrary to the garish exteriors of most fast-food chains, Toyama opened outlets with simpler designs. They have been popular with women who might otherwise have a difficult time finding a place where they feel comfortable dining alone.

Ten years after its launch, Soup Stock Tokyo now has 53 outlets in central and eastern Japan, the 47-year-old Toyama said.

The chain had annual sales of ¥4.2 billion in the last business year, up from ¥3.9 billion the year before. Sales have increased about 20 times since the 2000 business year, consistently rising on an annual basis.

Toyama declined to disclose the company’s profits.

“Since we believe we have good quality, we have been confident even though our prices are high,” said Toyama, president of Tokyo-based Smiles Co., which operates Soup Stock Tokyo with 130 full-time and 1,000 part-time employees.

“Although we still sometimes receive complaints about our service from customers, we rarely get such complaints about the taste,” Toyama said in a recent interview with The Japan Times.

A regular cup of soup costs ¥610, much higher than the ¥150 or so charged by other fast-food chains and nearly equivalent to the competition’s full hamburger sets.

The company procures lobsters from Canada that are crushed and cooked with VSOP brandy to make its popular deluxe lobster soup.

Toyama said the chain uses no artificial flavoring, coloring, sweeteners or preservatives in its soup products.

“My wife insisted there must be some need for outside food that people can eat with ease,” Toyama said. His daughter had atopy, an allergic disease, and his wife, who breast-fed her, had to be careful not to eat food with unidentified ingredients.

This experience led Toyama to opt for additive-free products.

After graduating from Keio University in Tokyo, Toyama went to work in 1985 at Mitsubishi Corp.

After he was sent to group company Kentucky Fried Chicken Japan in 1997, he got to wondering why so many fast-food outlets had huge electric signs with big lettering and colorful menus.

Even though those chains might claim their exterior designs make it easy for customers to find them, Toyama felt they were only profit-hungry and couldn’t care less if their outlets were eyesores.

Toyama kept Soup Stock Tokyo’s logo and interior design simple. Contrary to the perceived wisdom that black is unacceptable for eateries, he went with a predominantly black logo that uses Times New Roman font. Toyama said he chose black because he wanted the color of the soups to stand out.

Toyama also avoided using excessive color in each outlet’s interior or in leaflets, and he uses white cups adorned with just the black logo.

He said the idea of a soup business came to him suddenly while he was dining with a friend. He had an image, which he described as one from “heaven,” of a woman looking very relaxed sipping a cup of hot, thick white soup.

Toyama compiled a proposal in 1997 for a soup-chain business that he submitted to KFC executives. The president approved it and the project got under way.

The first outlet opened in 1999 in Tokyo’s Odaiba district, and Smiles was established the following year with ¥120 million in capital. Mitsubishi provided most of the funding, but Toyama invested ¥20 million of his own money, a 16.7 percent stake. He said he wanted to make his firm unique by becoming its owner.

Oriental Land Co., operator of Tokyo Disney Resort, later joined in as an investor, but Toyama last year obtained all of Smiles’ shares held by Mitsubishi and Oriental Land, becoming its 100 percent owner.

Apart from the high quality of his soups, Toyama said entrusting the business to his junior colleagues contributed to its success as he had no special knowledge in financial or accounting affairs.

Toyama said his deputy president is taking good care of managing the company and the head of the sales division is working hard. Each employee performs well and this is translating into profits.

It hasn’t all been smooth for Toyama, however. An outlet in Tokyo’s Tameike-sanno district remains one of his nightmares.

The area is home to numerous foreign corporations and embassies, and Toyama had high expectations that health-conscious customers would flock to his new shop.

But a harsh reality soon reared its head. Few people even walked by the shop at night or on weekends, and the shop, which covered three floors, sometimes ran up a monthly deficit of ¥3 million.

“That was the first time I got scared about the money,” Toyama said, noting the experience prompted him to close down the outlet and change his strategy to open smaller shops.

At that time, he remembered the concept of “Light investment and high sensitivity” that he had written in his initial Soup Stock Tokyo prospectus.

The company now has a strategy of opening three to four new shops a year instead of opening numerous shops indiscriminately, and to develop soup products for infants and elderly people who require nursing care.

Toyama’s horizons stretch beyond restaurants.

In September, he plans to open a secondhand shop named PASS THE BATON in Tokyo’s Marunouchi business district and on the Web. The shop will handle antique, vintage secondhand goods as well as new products, including ties.

Whether it has to do with food or not, Toyama’s business principle will be the same: “To enrich the value of life.”

In this occasional series, we interview entrepreneurs whose spirit may hold the key to a more competitive Japan.

Masamichi Toyama career highlights

1985 — Joins Mitsubishi Corp.

1997 — Transfers to its group company, Kentucky Fried Chicken Japan, and compiles a soup business proposal.

1999 — Opens the first Soup Stock Tokyo outlet in the Odaiba waterfront district.

2000 — Establishes Smiles Co. as a startup venture under Mitsubishi.

2008 — Obtains all shares in Smiles held by Mitsubishi and Oriental Land Co., and becomes the company’s sole investor.

September 2009 — Plans to open a secondhand shop, PASS THE BATON, in Tokyo’s Marunouchi district and on the Web.