Japan cut-price sushi chains wrestle with scandal and a weaker yen

Shares in certainly one of Japan’s “Massive 4” chains of cut-price sushi collapsed on Monday, as traders digested a scandal involving a jailed chief govt, industrial espionage, the weak yen and the value of fish.

Traders stated the sudden arrest final week and the resignation on Monday of Koki Tanabe, the president of Kappa Sushi operator Kappa Create, might shatter the delicate equilibrium between the nation’s family-friendly conveyor-belt sushi outlets. Amongst Japan’s most extremely aggressive restaurant firms, they promote particular person plates of tuna, squid or prawn for ¥100 ($0.70).

Tanabe, who was a director at arch-rival Hama Sushi, was arrested final week on suspicion of violating Japan’s competitors legislation after his former employer accused him of stealing information referring to fish pricing.

After the market closed on Monday, Kappa stated Tanabe supplied to step down following his arrest and the board accepted his choice. “We want to specific our deepest apologies for any inconvenience and concern this may occasionally have triggered,” the corporate stated.

Competitors between the 4 largest chains, of which Kappa was a pioneer however has since dropped to fourth place, is intense. Income closely depend upon securing the most effective costs for seafood and fish. That battle, stated folks concerned within the business, has intensified spectacularly since March this 12 months because the yen has fallen to a 24-year low and the price of imports has soared.

Kappa and third-largest Hama are the 2 remaining massive sushi chains sustaining the business’s ¥100 plates after the yen and better gas costs pressured rivals to boost costs this month.

Police arrested Tanabe on Friday for allegedly violating the unfair competitors prevention legislation, in accordance with Kappa. He joined Kappa Create from Hama in 2020 and have become the president the next 12 months. Tanabe couldn’t be reached for remark. However he has stated the data he obtained was not “an enormous deal”, in accordance with native media citing police sources.

On Monday, Kappa stated Tokyo police had despatched the case to prosecutors.

In a separate assertion, Hama father or mother Zensho, with out naming Tanabe, stated it came upon that “the previous director of Hama Sushi” had illegally obtained data on product price associated to the group’s purchases of seafood. The corporate had already filed a prison grievance with the Tokyo police in opposition to Tanabe final 12 months, prompting the police to raid the Kappa headquarters in Yokohama, adjoining to Tokyo.

“We are going to proceed to completely co-operate with the investigation by the police and prosecutors, believing that the total particulars of this case ought to be clarified and extreme penalties ought to be utilized to the wrongdoers so as to defend truthful enterprise transactions,” added Zensho. Kappa stated it will additionally absolutely co-operate with the investigation.

Info on rivals’ buying costs for fish and different seafood could possibly be helpful for Kappa to decrease the price of procuring seafood when negotiating with suppliers. However echoing Tanabe’s reported feedback, an investor within the business stated fish costs change incessantly and the info might rapidly change into old-fashioned.

One one who labored intently with the administration of one other of the Massive 4 sushi chains stated that Hama appeared motivated by “a pure want to trigger bother to a rival” as the worth of outdated pricing information was “roughly zero”.

The battle over information follows years of turmoil at Kappa, which has struggled to develop a long-term technique due to frequent modifications in possession and management over the previous eight years.

Since 2011, the low cost sushi market has grown 60 per cent with gross sales of ¥740bn in 2021, boosted by takeaway gross sales through the pandemic, in accordance with a report by analysis agency Teikoku Databank.

However it was inevitable that the business might face “vital price will increase”, stated the report, warning that ¥100 sushi plates might quickly disappear.