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GYUDON WAR

No sacred cows in Japan’s beef bowl war

by Kazuaki Nagata

Staff Writer

So popular as a fast food is beef on rice that the “gyudon war” waged by its top three vendors — Sukiya, operated by Zensho Holdings Co., Yoshinoya of Yoshinoya Holdings Co. and Matsuya, run by Matsuya Foods Co. — is a frequent media topic.

Following are some questions and answers about the beef bowl battle.

When did the gyudon war start heating up?

Seiichiro Samejima, chief analyst at Ichiyoshi Research Institute, said Japan’s fast-food industry entered a price-cutting phase in 2000.

McDonald’s kicked off the war by halving the price of hamburgers and cheeseburgers on weekdays to just ¥65 and ¥80, respectively, in February that year, launching a marketing campaign focused on reasonable prices.

At that time, the yen had just finished appreciating from 140 to the dollar in July 1998 to 105 at the beginning of 2000.

Matsuya responded in September by cutting the price of a regular bowl of gyudon to ¥290 from ¥400, while Sukiya answered by going from ¥400 to ¥280 in March 2001.

Venerable Yoshinoya was the last to jump on the bandwagon, slashing its price to ¥280 from ¥400 in August 2001.

How did the war unfold and who were the winners?

All three gyudon chains struggled to boost sales and profits after being ambushed by the mad cow scare that began in Europe with tainted feed.

Japan’s first cow infected with bovine spongiform encephalopathy, or BSE, was found in September 2001. The farm ministry’s admission that it ignored a November 2000 EU warning that BSE was likely to hit Japan only worsened the fallout.

The price war continued until BSE spread to the U.S., prompting Japan to ban U.S. beef imports in 2003.

Without access to U.S. beef, gyudon operators were forced to stop selling the dish because many of them relied on it.

Sukiya and Matsuya started selling gyudon again in 2004 by using beef from other countries, but Yoshinoya was particular about using U.S. beef and did not resume gyudon sales until 2006, experimenting with pork.

After cooling down, Samejima said the gyudon war resumed when Matsuya and Sukiya moved to cut prices after the global financial crisis unfolded in 2008.

A regular bowl of gyudon now goes for ¥270 at Sukiya, ¥290 at Matsuya and ¥300 at Yoshinoya.

Who does the balance of power favor?

With 1,984 shops as of March, relative newcomer Sukiya has more outlets than Yoshinoya’s 1,195 and Matsuya’s 1,034.

Founded in 1899, Yoshinoya has the longest history and was once the industry leader.

In 2000, Yoshinoya had more stores than Sukiya and Matsuya. But Sukiya rebounded and expanded rapidly, while Yoshinoya remained hobbled by BSE until 2006.

Sukiya passed Yoshinoya in terms of number of shops in 2008. Then Zensho, Sukiya’s parent company, turned into Japan’s top fast-food firm, logging higher sales than burger giant McDonald’s in fiscal 2010.

How big has the gyudon market become over the years?

Samejima said the size of the gyudon market was estimated at ¥350 billion in fiscal 2012, compared with ¥160 billion in fiscal 2000.

By comparison, the larger markets for hamburgers and family restaurants were estimated at about ¥700 billion and ¥1 trillion, respectively.

What are the characteristics of each brand?

Yoshinoya probably has the strongest brand recognition as Japan’s oldest gyudon chain, while Matsuya was founded in 1966. Yoshinoya is popular with older as well as younger men.

Sukiya, founded in 1982, is known for its toppings, such as grated daikon radish, seasoned cod roe with mayonnaise and grated yam, and frequently comes up with new ones. It also offers tuna and chicken bowls.

Sukiya has tried to broaden gyudon’s historical image as food for men by targeting women and families. Its stores, for example, provide tables where families and women can sit together, instead of the ubiquitous counters. It also offers smaller bowls for women and puts other items on the menu meant to attract them.

Matsuya is known for spicing up its gyudon offerings with combination sets featuring barbecued beef short ribs and hamburger patties. It constantly revises its menu with combos and gyudon toppings to keep things interesting.

How do consumers view the three top chains?

An Internet survey conducted by Softbrain Field Co. in 2013 asked 3,127 people which gyudon chain they liked most. The answers were 39 percent for Sukiya, 38 percent for Yoshinoya and 15 percent for Matsuya.

Among women, Sukiya was most popular with 44 percent, followed by Yoshinoya with 35 percent.

“Sukiya has a variety of menus and many of them are easy for females to eat. Spoons also make it easier to eat,” said a 25-year-old female respondent.

But among men, Yoshinoya tops Sukiya, with 43 percent of those surveyed picking it as their favorite. Yoshinoya is also popular with older customers.

What is the latest trend?

“The price battle has calmed down and the consumers don’t seem to respond well to the price anymore,” said Samejima, adding that product development is more important.

For instance, Yoshinoya has scored a recent hit with a sukiyaki hot pot meal that costs ¥580.

The dish actually runs counter to Yoshinoya’s motto of speedy service at a reasonable price. The sukiyaki is relatively expensive and takes several minutes to prepare. Its popularity, however, suggests that prices have hit bottom and consumers are now looking for added value.

Are others poised to enter the market?

Designing a system that allows an operator to serve gyudon cheaply isn’t easy, so the bar potential entrants must clear is high, Samejima said.

“The ability to serve cheap gyudon is a hurdle. If it was (OK to sell gyudon for) ¥500 or ¥600,” others might enter the market, he said.

One who tried was Sanko Marketing Foods. It launched its Tokyo Chikara Meshi stores in 2011 but has struggled to turn a profit.

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