Record Number of Confectionery Shops Going Bankrupt Due to Severe Conditions

Marutamachi Kawamichiya (Kyoto City), known for baked treats such as soba-bōro, closed its doors this May to much regret. The simple flavor of the snacks, packaged in distinctive tin containers, had long been loved as gifts and as a familiar treat in many households. Anyone from the Kansai region has likely seen them at least once.

According to the store’s website, while the original plan was to close at the end of May, after many customers came upon hearing of the closure, all our products sold out, and so they ended their long history earlier than planned, on May 20.

A local flavor cherished by the community is now quietly—but surely—disappearing.

Record-high number of bankruptcies, 80% are small businesses

Neighborhood sweets shops are facing unprecedented hardship. According to credit research firm Tokyo Shoko Research (TSR), from January to October this year there were 42 bankruptcies in the confectionery manufacturing and retail sector—an unusually high number. Roughly 80% of these businesses had four or fewer employees. A shortage of successors also appears to be a factor.

Yoshihiro Sakata of TSR’s Information Department said, “This year will likely exceed the previous record of 45 bankruptcies in 2013.” He expresses concern that factors such as the surge in egg prices (egg shock) and rising utility costs toward the end-of-year holiday season—including Christmas sales—will further worsen the situation.

TSR analyzes that about 30% of these 42 bankruptcies were caused by rising prices of raw ingredients and other goods. In addition, decreased sales due to price hikes, intensified competition from convenience-store sweets, and a shortage of workers—including skilled artisans—are also contributing factors.

Fewer collection visits, fewer customers

Voices from the field are desperate. A person involved in the Western confectionery industry says:

“Raw materials and other costs have soared across the board. We’ve had no choice but to raise product prices somewhat, but costs have increased even more than that. Raw material costs, shipping costs, and rising labor expenses are all significant burdens.”

A source in the Japanese confectionery industry also describes the management situation as serious. In particular, gift-giving demand has clearly decreased. More major companies are declining to receive year-end gifts, and fewer business travelers are buying local sweets to bring back as souvenirs.

“In the past, there used to be bill-collection visits, and sometimes we would give sweets to the collector. But now payments are made by bank transfer. Personal interactions are rapidly diminishing,” said the Japanese confectionery industry source.

According to materials from the All Japan Confectionery Association, which studies and analyzes industry trends, rising costs for raw materials, packaging, energy, logistics, and labor continue, and further product price increases are expected. Meanwhile, consumers’ frugal mindset is strengthening, raising concerns about the impact on demand for confectionery, a discretionary item. Securing chocolate ingredients has also become a major concern, and responses such as developing products that use less cacao beans or substituting vegetable oils are underway.

Furthermore, the association points out that wage increases are necessary to secure personnel amid a labor shortage. It states that it will be essential to closely monitor future product price hikes and their impact on consumer demand.

“I can’t force my children to take over.” The reality of the successor shortage

In addition to the struggles these confectionery shops face, there is a unique issue: the shortage of successors. A person in the Western confectionery industry confides, “It’s not as serious as the rising cost problem, but I can’t force my children to take over the shop.” TSR’s Sakata also expresses concern: “For wagashi shops, how much profit can they really make? Unless they’re long-established, it may be very difficult.”

A person from the wagashi industry says, “Shops that continue to meet customer needs do survive,” and believes that valuing the connection with customers is key to endurance. However, without a successor, maintaining the business becomes difficult.

Wagashi has also been drawing increased attention from inbound tourists. Yet the All Japan Confectionery Association notes that although interest in wagashi is evident, it has not translated into consumption, meaning it has not led to increased production volume.

Among all sweets, wagashi in particular features seasonal products that allow one to feel the four seasons (Sakata). While the quality and variety of products made and sold by major manufacturers have improved greatly, the items sold by local, long-loved confectionery shops still possess a nostalgic charm.

According to the Ministry of Agriculture, Forestry and Fisheries, even when the ingredients are the same, wagashi may be made using entirely different processing methods depending on the region. Therefore, the number of wagashi varieties is extremely large, making classification difficult. As unique regional confectioners disappear, we are entering an era in which these charming, one-of-a-kind flavors are fading away.