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Japan Foods engineers myriad tastes of home

The group targets growth by constantly introducing new food and beverage brands while reviving old ones

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"Having a stable of strong brands allows us to manage our restaurant portfolio efficiently," says Japan Foods CEO Takahashi Kenichi.

FOR engineer-turned-entrepreneur Takahashi Kenichi, ramen noodles in a piping-hot bowl of rich, creamy bone broth has always evoked memories of home.

For the founder of SGX-listed Japan Foods Holding Ltd, this iconic Japanese dish was what he craved most after arriving in Singapore more than two decades ago.

At the time, Mr Kenichi, who moved to the city-state in the 1990s to assume the role of engineer for Pioneer Asia Group, was dismayed by the dearth of Japanese ramen shops.

"Knowledge of Japanese cuisine in Singapore was limited mostly to expensive restaurants serving sashimi and sushi, and I really missed the taste of home," recalled Mr Kenichi, who hails from the coastal city of Hiratsuka in Kanagawa Prefecture, located in the Tokyo-Yokohama metropolitan area.

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This particular yearning eventually spurred the mechanical & engineering graduate from Japan's Sophia University to embark on his entrepreneurial journey - in November 1997, Mr Kenichi opened his first Ajisen Ramen store in Singapore.

"Because I didn't really know how to cook, securing a good franchise was critical. I chanced upon Ajisen Ramen, and when it opened its first store in Hong Kong in 1996, it attracted very long queues," he said.

"That gave me confidence that the franchise could take off in Singapore."

Ajisen Ramen, which originated in 1968 from Kumamoto, located along the western coast of Kyushu, became Japan Foods' flagship brand. The franchise - where "Ajisen" means "a thousand tastes" in Japanese - is renowned for its aromatic soup base, derived from hours of boiling pork bones.

Mr Kenichi faced an uphill struggle during the early years. "When we started the business, we ran smack into the 1997 Asian financial crisis. I wasn't able to draw a salary for three years, until we finally broke even in 2000."

He also faced challenges educating consumers about ramen. "When Singaporeans wanted noodles, they went for wanton mee and fishball noodles - they didn't really understand ramen. So at one point, in order to get customers into our store, we came up with a bold move - people were invited to try a bowl of ramen, and if they didn't like it, they didn't have to pay for it. And lo and behold, everyone paid!"

From then on, a ramen culture began developing in Singapore. In 2001, Mr Kenichi opened his second Ajisen Ramen outlet, and the rest, as they say, is history.

Today, Japan Foods operates a chain of more than 50 restaurants in Singapore, serving authentic Japanese fare via a range of franchise and proprietary brands.

Apart from Ajisen Ramen, other franchise labels include Kazokutei - one of Osaka's most well-known udon brands, and Osaka Ohsho, which draws health-conscious consumers with its deliciously crispy, grilled Japanese dumplings, or gyoza.

Another notable franchise is Menya Musashi. Named after legendary samurai Miyamoto Musashi, famed for his distinctive "double sword style", it gained cult status among ramen fans in Japan and abroad after its Tokyo debut in 1996.

Proprietary brands include Fruit Paradise, which offers tarts made with lightly sweetened cream and topped with fresh fruits, as well as Dutch Baby Café, known for its pillow-soft yet crispy oven-baked pancakes, served on hot cast-iron pans. Another self-developed concept - Ginza Kushi-Katsu - specialises in a beef cutlet whose light, crispy crust hides a tender, medium-rare fillet within.

In 2015, the group made its first foray into non-Japanese cuisine with the launch of New ManLee Bak Kut Teh, a brand franchised from Malaysia.

Outside the city-state, Japan Foods has one outlet in Malaysia, and another two in Vietnam under the Ajisen Ramen brand, operated by sub-franchisees. It also has one restaurant in Indonesia, seven in Hong Kong, and another 10 in China operated by associates under the Menya Musashi franchise.

Mr Kenichi was appointed executive chairman and chief executive officer of Japan Foods in February 2008. The group, which listed on SGX's Catalist board in February 2009, has a market capitalisation of about S$78 million. The stock generated a total return of 8.1 per cent in calendar year 2018, outperforming the benchmark Straits Times Index's total return of -6.5 per cent and the broader FTSE ST All-Share Index's -6.9 per cent over the same period.

Over the past decade - between financial years ended March 31, 2009 and 2018 - Japan Foods grew its net profit and revenues by a compound annual growth rate (CAGR) of 8.5 per cent and 8.2 per cent, respectively.

Revamp and revive

Looking ahead, the group targets growth by constantly introducing new food and beverage (F&B) brands while reviving old ones, Mr Kenichi said.

Last year, it added two well-received franchise brands to its portfolio - Konjiki Hototogisu, famous for its ramen broth made with Hamaguri clams, and awarded one Michelin Star status in the Tokyo Michelin Guide 2019, as well as popular Tokyo traditional dessert house Kagurazaka Saryo. Both brands began operations in June and July, respectively.

The group also revamped its older Ajisen Ramen brand by relaunching three stores as Den by Ajisen Ramen, which offers a wider menu and more broth options. Such brand rejuvenation and extension efforts have resulted in higher same-store sales, Mr Kenichi noted.

"Having a stable of strong brands allows us to manage our restaurant portfolio efficiently, as we're able to quickly swap underperforming brands with other more successful ones, in order to maximise our earnings per store," he added.

"This also boosts our attractiveness as a tenant to prospective landlords as we can maintain or raise footfall in their malls."

On average, Japan Foods opens five new stores and closes one to two outlets each year. It aims to have 100 stores across the region in the future. "We're not in a hurry to achieve this target, and plan to do this in a prudent and sustainable manner, as we are more interested in quality, rather than quantity growth," he said.

Japan Foods announced last month it had partnered Minor Singapore, an indirect subsidiary of Thailand's Minor International, to run each other's brands in Japan, Thailand and China.

This agreement marks the group's first foray into Thailand and Japan, and a significant milestone in its strategy to expand into new markets via collaborations with operators who have established reputations and strong market know-how.

And while opportunities in the region abound, the outlook for Singapore's F&B sector remains challenging, due to intense competition, a tight labour supply, and rising operating costs, Mr Kenichi said.

"While competition is a problem, it is also a key growth driver, because healthy competition will push all industry players to innovate and create interesting concepts that add to the vibrancy of the market."

To contain costs, the group regularly reviews its raw material cost management and operating efficiencies by streamlining work processes and boosting automation.

"The system in our restaurants that allows customers to input their orders via iPads has cut our manpower needs by 10 per cent to 15 per cent, while our central kitchen has enabled us to carry out bulk purchases, and reduce reliance on the number of chefs in each outlet," he noted.

Given the fickleness of consumer palates and an increasing number of new entrants into the F&B industry every year, Japan Foods cannot afford to sit still.

"Thankfully, keeping up-to-date with the latest trends and understanding the changing needs of consumers have become easier through social media," said Mr Kenichi.

"We're able to see what appeals to customers - especially millennials - as many have the habit of posting food pictures on their social media accounts. Based on these posts, we come up with concepts or franchise brands that we think may be compelling to them."

The 62-year-old also travels back to Japan regularly to assess market developments and hunt for new ideas. "The rule of thumb is always to do our research before we decide what brands to launch, both locally and regionally," he added.

"Our R&D chefs also spend a lot of time and effort taste-testing before rolling out a new dish, and even after it has been launched, there will still be several rounds of menu-tweaking to ensure it appeals to our target audience."

From "I can't cook" more than a decade ago when Mr Kenichi began his journey with Japan Foods, the father of an 18-year-old daughter can now whip up a scrumptious plate of fried rice.

"Thanks to all those hours spent in the kitchen at Ajisen Ramen, especially in the early years, I can now cook fried rice very well, and with many variations, by adding toppings like chashu, unagi or other seasonal ingredients," he said with a laugh.

For this self-confessed workaholic, the job is all-consuming. "I spend every waking hour thinking about what else I can do to improve our brands, and what concepts we can bring in from Japan or develop ourselves. I also love exploring the malls - both locally and overseas - to discover what people are eating," he said. "It looks like food is really in my blood."

  • This is an excerpt from SGX's Kopi-C: The Company Brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX's website www.sgx.com/research.