<figure id="attachment_315342" aria-describedby="caption-attachment-315342" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="15f3636d"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/6b013a105f015ea48f49ea0a6a48d21b.jpg" alt=""></a><figcaption id="caption-attachment-315342" class="wp-caption-text">In 2004, Komeda HD was double-listed on the first section of the Tokyo Stock Exchange and the Nagoya Stock Exchange. Then-President Usui was responsible for laying the foundation for the company&#8217;s rapid expansion.</figcaption></figure>
<p> A full stomach at a café. When this reporter visited the Tokyo branch of the Komeda Coffee Shop chain for the first time around 1:00 p.m. on a weekday afternoon, he was pleasantly surprised to find that he had miscalculated.</p>
<p> The store, with its family-style box seats and counter seats by the window, was almost fully booked. Newspapers and magazines line the racks at the entrance, and each seat is equipped with free Internet access and electrical outlets. The clientele varies from young people teleworking over a cup of coffee to office workers having lunch.</p>
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<p> This reporter ordered a katsupan (pork cutlet sandwich) and the signature sweet, shiro noir, and they were delivered in about 10 minutes. The cutlet bun, with miso-flavored sauce soaked into the cutlet, weighed about 500 grams and was too large to fit in one&#8217;s hand. The table was filled with a 20 cm diameter brioche, shironoir topped with soft-serve ice cream, and iced coffee.</p>
<p> Komeda HD, which has popularized the &#8220;morning&#8221; coffee shop culture in the Tokai region and opened stores in all 47 prefectures of Japan, is doing well. The company expects to post a record profit of 5.42 billion yen for the fiscal year ending February 2011, and also expects to record a record profit for the second consecutive fiscal year. Competition among coffee shop chains is intensifying as the number of privately owned coffee shops declines and the market shrinks.</p>
<p> Whenever a Komeda employee receives an order, he or she always asks the customer to &#8220;take your time. No one is ever kicked out, even if they have been spread out on a computer for a long time or have been talking to each other. Economic journalist Takai Naoyuki explains how Komeda is able to do so even though it has abandoned &#8220;turnover rate,&#8221; the lifeline of a restaurant chain.</p>
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<p><strong> Komeda maintains a high profit margin in the 20% range,&#8221; he says. Most of its stores are franchises, so it is able to keep SG&amp;A expenses, such as labor costs and tenant fees, low. Since the bread is made in our own factory and the coffee is brewed in a dedicated factory and served in the stores, there is little variation in taste at each store.&#8221;</strong></p>
<p> The man behind the rapid growth of Komeda, which had remained a prominent local chain, is &#8220;professional manager&#8221; Okitane Usui (64). After serving as COO (Chief Operating Officer) of McDonald&#8217;s Japan and President and Representative Director of Sega Corporation, he became president of Komeda in 2001. While retaining the atmosphere of an old-fashioned coffee shop, he pushed for nationwide expansion with a thorough franchise strategy.</p>
<p><strong> However, in May of this year, Mr. Usui stepped down as chairman. However, in May of this year, Mr. Usui stepped down from his position as chairman, saying that he had finished laying the foundation for growth. Especially for a company with a large percentage of franchisees, if the brand image declines, growth will stop. How can they overcome that?</strong></p>
<p> Doutor continues to be the leading Japanese-affiliated coffee shop chain. Doutor Niles HD, the parent company, posted a profit of 3.46 billion yen for the fiscal year ended February 2011. At the end of last year, the company raised the price of coffee from 224 yen to 250 yen, but the number of customers does not seem to have slowed down.</p>
<p><strong> Doutor&#8217;s strength lies in its focus on low prices. The availability of Internet access and electrical outlets varies from store to store, but customers do not expect that much from Doutor. On the other hand, new products are developed and released on a regular basis, so there is a sense of novelty. They are successfully responding to the need to make a little time for themselves,&#8221; says food analyst Takao Shigemori.</strong></p>
<div data-friday-nextpage-lead=" No blind spot for Starbucks?"></div>
<h2>No blind spot for Starbucks?</h2>
<p> Ease of use is vital for low-priced coffee shop chains. Moriva Coffee and Café Veloce, both operated by Zensho HD, offer coffee at the same 200-yen price as Doutor. A former manager of a Veloce coffee shop said, &#8220;There are many coffee shops near major stations in Tokyo.</p>
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<p><strong> When I was working at a store near a major station in Tokyo, we had about 300 customers a day. Even so, daily sales were around 100,000 yen, so it was a very thin profit-multiple-sales business. Lunch time was the best time to make money, and then there was a certain increase in demand from businessmen who smoked cigarettes because the smoking areas in the neighborhood were closed. However, we were not strong enough to attract new customers, and we were trying to maintain our regular customers.&#8221;</strong></p>
<p> Doutor, which has a head start in the budget coffee shop chain, has also experienced sluggish growth in the number of stores in recent years. On the other hand, the same group has been slowly expanding its upscale Hoshino Coffee Shop. In fact, the company and Excelsior Cafe, which is under the same management, form a three-pillar structure to meet a variety of needs.</p>
<p> Starbucks, the absolute king of coffee shops, has surpassed Komeda, which is growing rapidly, and Doutor, which is diversifying its business. Starbucks was one of the first to introduce drink customization and mobile ordering, and even now, on weekends, all of its stores are packed.</p>
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<p> Currently, Starbucks coffee is priced at 350 yen. Mid-priced chains such as Tully&#8217;s Coffee and Café de Criée have set their prices to match Starbucks&#8217;.</p>
<p><strong> Starbucks was probably the first to give the impression that women drinking coffee at a store in town is fashionable. As soon as they enter a store, the aroma of coffee makes them think, &#8216;I&#8217;ve come to Starbucks,&#8217; so they keep coming back even if the price is a little higher. The reason why people are constantly buying drinks that cost more than a beef bowl is because of the comfort of the place,&#8221; said Shigemori.</strong></p>
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<h2>All types of business enter the market</h2>
<p> It is still too early to conclude that the absolute champion has no blind spot. The trend in the coffee shop chain industry is influenced by self-serve coffee from the major convenience store chains. Seven-Eleven&#8217;s Seven Cafe, which began in January 2001, was a hit. FamilyMart and Lawson have since improved their systems, and coffee, which can be purchased for around 100 yen, has taken root.</p>
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<p> Coffee is a &#8220;lucrative business&#8221; for convenience stores, according to a distribution industry insider.</p>
<p><strong> For coffee shop chains, the cost ratio of coffee has to be kept at around 10% to make their business viable, but the cost ratio of convenience store coffee is approximately 50%. Since there is no need to set up new stores or personnel, the profit comes directly from the coffee. If we estimate the profit at 50 yen per cup, Seven sells 1 billion cups per year, leading to an overall increase in sales of 50 billion yen annually.</strong></p>
<p> Convenience store coffee is designed to be taken out and has a high turnover rate. The turnover rate of convenience store coffee is high because of the take-out concept.</p>
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<p><strong> With the convergence of Corona, office commuting is making a comeback, and a high percentage of people are choosing convenience store coffee as a way to buy food. In the past, there were many cases where customers would choose a specialty coffee shop, saying, &#8216;If I want coffee, I&#8217;ll go to a coffee shop,&#8217; but those days are gone. But those days are gone. The diversification of business types is changing consumer psychology.</strong></p>
<p> As even family restaurants and conveyor-belt sushi chains are focusing on coffee, there are no longer any barriers between &#8220;coffee shops. In the roadside coffee shop format, where demand has been increasing in recent years, Musashinomori Coffee, a member of the SUKAIRAKU chain, has been increasing the number of its stores. A visit to a renovated &#8220;Jonathan&#8221; store reveals that the space between seats is wider than that of a family restaurant, and seating for one person has increased. The menu items that stand out were ricotta pancakes (748 yen), which take 20 minutes to bake, and galettes in the 1,000 yen range, both of which are high in unit price and allow customers to enjoy &#8220;alone time&#8221;. These high unit-price &#8220;third forces&#8221; are threatening the existing coffee shop chains.</p>
<p> And the &#8220;next black ship&#8221; may be on the way. According to an executive of a coffee shop chain, &#8220;Starbucks is the largest chain in China in terms of the number of outlets.</p>
<p><strong> Racking Coffee, which has overtaken Starbucks as the number one coffee shop in China, opened its first store in Singapore this year. It is unique in that it specializes in takeout and only accepts mobile orders. If that happens, the buzz will be huge.&#8221;</strong></p>
<p> Will foreign capital dominate the market, or will the Japanese companies take their revenge? The &#8220;winner-takes-all&#8221; battle is entering a new phase.</p>
<figure id="attachment_315343" aria-describedby="caption-attachment-315343" style="width: 2564px" class="wp-caption alignnone"><a href="#" data-ident_hash="04c9a111"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/cfac21613f50b2e6ed0dc5d17de830ac.jpg" alt=""></a><figcaption id="caption-attachment-315343" class="wp-caption-text"> Shironoir is a specialty that has been sold in the area where Komeda was founded for more than 45 years. A limited time version is offered on an irregular basis.</figcaption></figure>
<figure id="attachment_315338" aria-describedby="caption-attachment-315338" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="ec80edee"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/b2379a77a2e18858c65f8366bc7163cd.jpg" alt=""></a><figcaption id="caption-attachment-315338" class="wp-caption-text"> Starbucks&#8217; expansion is unstoppable. In addition to creating an atmosphere in its stores, the new products released each season lead to a strong appeal.</figcaption></figure>
<figure id="attachment_315344" aria-describedby="caption-attachment-315344" style="width: 2526px" class="wp-caption alignnone"><a href="#" data-ident_hash="802b9b4a"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/03c8f149290e68b0415207ec73701297.jpg" alt=""></a><figcaption id="caption-attachment-315344" class="wp-caption-text"> Doutor maintains a low-priced line and is popular with a wide range of generations. However, it will take a major change to overtake Starbucks.</figcaption></figure>
<figure id="attachment_315339" aria-describedby="caption-attachment-315339" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="219b5984"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/d5b6bcd869c34ca8e60094c1a6302d43.jpg" alt=""></a><figcaption id="caption-attachment-315339" class="wp-caption-text"> Veloce is renewing its Ginza store in Tokyo this March to revamp its image. It also introduced additional outlet seating, etc.</figcaption></figure>
<figure id="attachment_315340" aria-describedby="caption-attachment-315340" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="7921b43b"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/8b2512b704592eeb40540a251a103e8d.jpg" alt=""></a><figcaption id="caption-attachment-315340" class="wp-caption-text"> Renoir expects unique demand with the highest price point in the chain. The &#8220;Showa-era coffee shop&#8221; color will be a hit in the current era</figcaption></figure>
<figure id="attachment_315337" aria-describedby="caption-attachment-315337" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="637c7004"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/498826880ba31ae08b98935450d9a765.jpg" alt=""></a><figcaption id="caption-attachment-315337" class="wp-caption-text"> China&#8217;s Luckin Coffee stalled due to accounting fraud scandal, but has begun to rebuild. It is also looking to land in Japan as a new black ship!</figcaption></figure>
<p><a href="#" data-ident_hash="854e5099"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2023/06/d98de3ccd03a0daf19912b9df60ae955.jpg" alt=""></a></p>
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<p> From the June 16-23, 2023 issue of FRIDAY</p>


 Takeshi Kinugawa, Kyodo News, Jiji Press

 As the number of individually owned coffee shops declines and the market shrinks, competition among coffee shop chains is intensifying! From the rapid growth of Komeda to Starbucks, the absolute champion, and convenience stores' self-serve coffee... The winnerless battle is entering a new phase.

 Doutor, a Japanese-affiliated chain, and fast-growing Komeda Coffee Shop are challenging Starbucks, the most powerful coffee chain. Roadside stores and upscale stores are increasing, and the biggest rival is 100-yen coffee at convenience stores.

Starbucks, Veloce, Doutor…Unlikely Dark Horses in the Unrelenting Coffee Chain War “Shaking Up the Champion

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