Business / Economy

Tax hike to heat up battle among Japan's restaurants to keep customers

by Junko Horiuchi

Kyodo

The consumption tax hike has brought the restaurant industry — already grappling with shortages of labor and rising costs of materials — yet another challenge in keeping customers and attracting new ones.

Major restaurant operators have taken various measures out of fear that the tax increase from 8 percent to 10 percent for eat-in food will push customers to choose takeout, which in order to ease the burden on poorer households will still be taxed at 8 percent under the two-tier system that began Tuesday.

They will face tougher competition from supermarkets and delivery services, which see the two-rate system as a tailwind for their sales of prepared food, especially at a time when such products have grown in popularity among working parents and elderly people living alone.

Ootoya Holdings Co., an operator of a Japanese-style restaurant chain, has decided to strengthen the lineup of its takeout lunch boxes and deli food.

“We are taking steps in response to the reduced tax rate (for take-away food). The lifestyles of our customers have also changed, and there is growing demand for takeouts,” Ootoya President Masaya Yamamoto said.

For in-restaurant menus, Ootoya, whose sales have been declining due to intensifying competition, decided to keep the tax-included price of its popular dishes unchanged even after the tax hike.

“Leaving the price the same is not an easy decision given our business situation, but we see a strong need to tune in with the customers’ perspective,” Yamamoto said.

Ootoya booked a loss of ¥105 million ($974,000) for the second quarter from, down a ¥7 million profit the year before, hit by rising costs of labor and materials.

The retail giant Aeon Co., meanwhile, has doubled the variety of meal kits that can be easily prepared at homes. A Frozen Cookit bag of whitefish and vegetables with sweet-and-sour jelly sauce, for example, provides a meal for two at ¥861. The meal can be prepared in about 10 minutes by heating it in a microwave and then stir-frying.

The food delivery site Demae-can says it has seen an annual increase of 16 percent in commercial members to around 20,000 at the end of August, reflecting eateries’ expectations for larger demand for takeouts. New members include major restaurant chain operators such as Ohsho Food Service Corp., Coco’s Japan Co. and Kourakuen Holdings Corp.

Kazuaki Osumi, secretary-general of the Japan Ready-made Meal Association, said, “Demand for delivery services such as Uber Eats is expected to increase” under the two-tier tax system but restaurants will continue to attract people wanting the experience of dining out.

Major fast-food and coffee-chains are divided over the two-rate system, with some keeping in-house and takeout prices the same by adjusting before-tax prices, like Ootoya, while others are presenting two prices for eat-in and take-out food.

McDonald’s Co. (Japan) said that to ensure clarity, it will keep prices the same for around 70 percent of the items on its menu regardless of whether they are eaten on the premises or taken out. Rival hamburger chains Mos Food Services Inc. and Lotteria Co. will set different prices.

Beef bowl chain operator Yoshinoya Holdings Co. and Starbucks Coffee Japan Ltd. will also set separate prices for takeouts and eat-ins. At Kentucky Fried Chicken Japan Ltd. and Yoshinoya rivals Sukiya Co. and Matsuya Foods Co., the prices will remain the same.

In a bid to strengthen its takeout services, Starbucks Coffee Japan has introduced a new system that will allow customers to pre-order food and drinks and pick them up at a store without having to line up. The coffee chain expects the new tax rule to turn more consumers to take-away services, said Hisae Morii, chief marketing officer at Starbucks Coffee Japan.

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