A Famous Store is Behind the Popularity of a 1,000 Yen Ramen Vending Machine — Find Out Who!

Recently, there has been an increase in the number of “ramen vending machines” seen around town. Not only in convenience stores, shopping malls, train stations, and pachinko parlors, but also next to ramen stores.

A look at the lineup shows that in addition to niboshi ramen, Hakata tonkotsu (pork bone broth), jiro-style ramen, and dandanmen, some vending machines offer products from ramen stores all over Japan, including the Kichijoji Musashiya family-style ramen store, Kyoto’s Ai niboshi ramen shop, and Kanazawa’s Shinzen miso ramen shop.

Upon purchase, each packaged noodle, soup, ingredients such as chashu (pork) and menma (bamboo shoots), and finishing sauce come frozen and in a single container. These are then cooked in hot water and placed in a bowl.

The unit price is in the 1000 yen range, which is the same as eating at a ramen restaurant. Considering the time and effort involved, it is rather expensive. Despite this, the number of “ramen vending machines” installed is steadily increasing and gaining popularity.

There is a person who is “behind” this secret boom. It is Ramen Nagi, a dried shrimp ramen chain headquartered in Shinjuku’s Golden Gai district. The strategy of the vending machine “RAMEN STOCK 24” developed by Nagi Spirits Japan, which manages the chain, is making great strides in the Corona disaster. Why are they selling so well? We asked Mr. Ryoichi Nishio, vice president of Nagi Spirits Japan, about the strategy.

Nagi Spirits Japan started its frozen ramen business in the spring of 2008.

Nishio: The trigger was that our stores were hit by the Corona disaster. Before the Corona disaster, there were about 300 to 400 customers every day, but when the state of emergency was declared in April 2008, there were days when only 8 customers a day would come…. So, in order to expand our sales channels, we started selling frozen ramen, initially through our own mail order website and by renting a slot in another company’s vending machine.

The response to the frozen ramen exceeded our expectations, and we sold about 42,000 servings in four months on the mail-order site. We thought, “If that is the case, let’s develop our own vending machine. From the user’s point of view, vending machines offer greater flexibility than mail-order machines, since they can be purchased in single-serving units without incurring shipping costs.

The first vending machine, which we started selling in June 2009, sold 1.28 million yen in June and over 1.2 million yen in July 2009, which were quite good figures. Therefore, around September 2009, we began full-fledged expansion to all parts of Japan.

As of mid-March 2010, there were 67 units installed, with average sales of just under 300,000 yen per unit, or 10 servings per unit sold per day. Although the numbers have slowed down compared to the heyday when we first started installing them, some units still sell 880,000 yen per month.

Ramen vending machines sell 880,000 yen a month, and they can operate 24 hours a day and require almost no labor just to refill the machines. This would be a big help in making up for the dip in sales due to shortened business hours and voluntary curfews. What is the actual profit margin?

Nishio: The total cost, profit, and taxes on our side per meal is just under 700 yen; if we offer the food at 1,000 yen, about 30% of the profit goes to the vending machine operator. If one vending machine sells 300,000 yen per month, the net profit would be about 90,000 to 100,000 yen.

According to Nishio, the initial investment would be about 1.5 million yen to install the vending machines. If all goes well, he calculates that he can recoup his original investment in a year or a few months.

The management rights to the vending machines may be held by Nagi Spirits Japan or by the owner of the land on which they are installed. In any case, if you become the owner of the vending machine, taking care of the initial investment of 1.5 million yen and the subsequent operation and maintenance costs, you can expect to earn nearly 100,000 yen per month from sales of 300,000 yen.

For the owner of the land where the vending machines are installed, if he/she entrusts Nagi Spirits Japan with the management of the vending machines, he/she will receive monthly pocket money for the vending machines with relatively little risk.

Nishio: The price varies depending on the installation location, but the average monthly land cost is 10,000 to 20,000 yen and the average monthly electricity cost is about 5,000 to 6,000 yen. Since there are few fixed costs, the longer you operate the system, the less likely it is to go into the red.

With the Corona Disaster, where prospects are uncertain, it is less risky to develop vending machines than to open a store. Opening a store would require an initial investment of about 20-30 million yen, plus running costs, and now there is also the problem of a shortage of personnel….

Once the initial investment has been paid, simple operations and a small maintenance fee are all that is needed to generate a continuous monthly income. Considering the current situation where there are only 6 actual Ramen Nagi restaurants in Japan, while the number of vending machines has expanded to 67, it can be said that RAMEN STOCK 24 is functioning as a gap business with little burden.

The biggest question, though, is why the company sells an average of 10 servings per machine per day, despite the fact that it is more expensive than eating in the store. Mr. Nishio cites two major factors.

The first is that there are many female users.

Nishio : At first, we expected that the majority of our customers would be students and businessmen, but when we opened the door, we found that about 35% of our customers are women.

Many women who want to eat Jiro- or Ie-style ramen are probably hesitant to do so in stores because the portions are too large, they are embarrassed to wait in line, or they cannot eat slowly in the busy restaurant. With vending machines, they could eat just the right amount at just the right time, so we were able to capture people who were potentially interested in ramen.”

Other common reasons for purchase include: “I can buy it anytime,” “I can buy it without being seen,” “I don’t have to pay for shipping even if I buy it in single-serving units,” and “I can adjust the hardness of the noodles.

The second reason is that they are “particular about where they are installed.

Nishio: To give an example, places with smooth traffic lines, such as bicycle parking lots and parking lots in front of stations, sell well. Users can buy the products on their way home from school or work and put them in their bicycle baskets, making it easy for them to buy.

Also, pachinko parlors are a good match. The main reasons are that when you win, you tend to loosen your purse strings, you have extra change, and if you play until late at night, restaurants are closed during the shortened hours.

Also, if you are near a supermarket, convenience store, or drugstore, you can expect to buy something on the side. Although cup noodles and other products are sold everywhere, we try to differentiate our products by developing products that can only be purchased at RAMEN STOCK 24.

In high-traffic areas, we can simply increase sales, and in the case of commercial facilities, we can expect to see additional purchases. Even if the vending machine is placed near a ramen store, it is not a bad option to install a vending machine that can operate 24 hours a day to make up for the drop in sales due to shortened hours and other factors. In a sense, this is a “three-way” business model, as customers can enjoy ramen in a different environment than in a store.

However, even if the installation is carried out in accordance with relatively easy sales conditions, it may not necessarily be a success.

Nishio: There was an adult video store along a busy highway in Gunma Prefecture that received 200 to 300 customers a day. It had a parking lot set up there, and there was also a thriving ramen shop in the neighborhood, so the location was perfect.

However, it actually did not sell at all and has now moved to another location. From the user’s point of view, they may not have liked the idea of walking into an adult video store, or it may have been a hassle to go all the way off the street to buy.

Even if the surrounding environment and facilities are all there and people are passing by, there are cases where the traffic line is not good, so we always preview the location where we plan to set up the store.

Ramen vending machines are rapidly increasing in number. Behind the scenes, there was such an elaborate business strategy.