The fallout from the Aug. 1 tariff increase on beef has not yet reached the nation’s largest “yakiniku” grilled-beef restaurant chains.
Reins International Inc., a Tokyo-based restaurant-chain operator, has kept the retail price of grilled beef at the same level as before the government’s safeguard measures were introduced.
The government raised the tariff on fresh and chilled beef to 50 percent from 38.5 percent after a surge in beef imports in the April-June period.
Under a law introduced based on WTO rules, Japan can automatically increase its beef tariff to 50 percent if there is a year-on-year increase of more than 17 percent in beef imports on a cumulative quarterly basis.
The almost 34 percent increase in beef imports from the same period a year earlier was actually a return to near normal levels after beef consumption plummeted following the discovery of the nation’s first case of mad cow disease, formally known as bovine spongiform encephalopathy, in September 2001.
“We have no intention of raising the retail prices of our grilled beef,” said Katsuaki Fukui, director of the management planning section of Reins International.
The cost of purchasing beef from countries such as the United States and Australia has meanwhile increased 8 percent, he said.
Imported beef accounts for only 21 percent of all beef used at Reins International’s restaurants, however, so the company can offset the expense through cost-cutting efforts elsewhere, including cuts to the purchasing costs of other beef, Fukui said.
Reins International is well positioned to cope financially with the increased beef tariffs. The company posted a consolidated net profit of 595 million yen for the January-June period, up by a factor of 4.2 times over last year’s lean figures.
Reins International was established in 1987 as a real estate agency. It opened its first grilled-beef restaurant in Tokyo in October 1995 because it saw a market opportunity for reasonably priced yakiniku, according to Fukui.
To increase the frequency of repeat customers, Reins International has set a price model for each customer of less than 3,000 yen, which is cheaper than other grilled-beef restaurants, Fukui said. The company also offers a 300 yen discount to customers that point out any insufficiencies in service. Its restaurants offer better service as a result, he said.
Supported by business consulting firm Venture Link, Reins International has increased the number of grilled-beef restaurants, including franchise stores, under the Gyukaku brand to more than 750 nationwide.
It took McDonald’s Japan and Skylark Co. more than 20 years to create a nationwide network of 1,000 restaurants, Fukui said. “If we counted other types of our restaurants like ‘izakaya,’ we have already surpassed 1,000 restaurants in seven years and nine months,” he said.
Reins International’s strategy is to open a large number of same-brand restaurants in a short period of time because many regular customers switch to different restaurants within five years, Fukui said. Many Gyukaku grilled-beef restaurants are older than five years, so the company has been conducting minor changes such as reviewing menus and considering remodeling some restaurants, he said.
Since July 2001, Reins International has been conducting market tests for grilled-beef restaurants overseas. It currently operates five grilled-beef restaurants in the U.S. and one in Taiwan.
Reins International plans to open between 15 and 20 grilled-beef restaurants in the U.S. within three years beginning in 2004, Fukui said. The company will open up to 50 such restaurants there by the end of 2006, he said.
The restaurants in the U.S. are styled after the Japanese originals, but the restaurants and servings are larger, he said.
“We used to have many Japanese customers at American Gyukaku grilled-beef restaurants,” he said. “However, American customers have outnumbered Japanese and now account for nearly 90 percent of all customers.”
Of the U.S. restaurants, two have achieved a return on sales of more than 20 percent, Fukui said. The U.S. restaurants are more profitable than their counterparts in Japan, which average a return on sales of 14.1 percent.
“We will try to list our stock on the Nasdaq market by the end of 2007,” Fukui said.