Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<ul>
<li>Major wholesalers in food, pharmaceuticals and books continue to prosper due to their role in both serving and protecting fragmented distribution channels.</li>
<li>Profits returned last year as clients picked themselves up after Covid, but as inflation sets in, these middlemen are being squeezed by both manufacturers and retailers and profits may slump.</li>
<li>They now need to offer an ever increasing array of value-added services to continue to grow and not all have the capability. More M&amp;A may be on the cards.</li>
</ul>


Major wholesalers in food, pharmaceuticals and books continue to prosper due to their role in both serving and protecting fragmented distribution channels.
Profits returned last year as clients picked themselves up after Covid, but as inflation sets in, these middlemen are being squeezed by both manufacturers and retailers and profits may slump.
They now need to offer an ever increasing array of value-added services to continue to grow and not all have the capability. More M&amp;A may be on the cards.


Major Japan Wholesalers up 2.8% in 2021, but Problems Looming

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Daiwa House Logistics Trust / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/daiwa-house-logistics-trust" target="_blank" data-smartkarma-citation="entities:35020:1" rel="noopener">Daiwa House Logistics Trust (DHLT SP)</a> has launched an SGX IPO to raise gross proceeds of S$464 million ($343 million) at an IPO price of S$0.80 per unit. </li>
<li>DHLT offers an attractive value proposition consisting of a blue-chip tenant base, a staggered lease expiry profile, manageable tenant concentration risk, a growth pipeline and low capex.</li>
<li>DHLT offers exposure to the only Japan pure-play REIT listed in Singapore.</li>
</ul>



Daiwa House Logistics Trust (DHLT SP) has launched an SGX IPO to raise gross proceeds of S$464 million ($343 million) at an IPO price of S$0.80 per unit. 
DHLT offers an attractive value proposition consisting of a blue-chip tenant base, a staggered lease expiry profile, manageable tenant concentration risk, a growth pipeline and low capex.
DHLT offers exposure to the only Japan pure-play REIT listed in Singapore.


Daiwa House Logistics Trust IPO: The Flow of Things

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

In my previous article, "Parent-Subsidiary Listing and Investment Strategy," I pointed out that the parent company is likely to adopt such a management strategy because it can use its excess cash reserves to boost its profitability by making a highly profitable subsidiary a wholly owned subsidiary. In fact, in a previous article, "NTT Docomo TOB and Aftermath," it was thought that the aforementioned management strategy would be effective for the parent company, NTT, but given the company's history as a public company and the legal environment, there seemed hurdles that must be overcome to make NTT Docomo a wholly owned subsidiary, and it is not likely to be easy. However, the TOB was successful. In the unique Japanese practice of parent-subsidiary listings, there have been a number of moves to eliminate this practice. As I mentioned above, the conditions for a parent company to make a subsidiary its wholly owned subsidiary are (1) the subsidiary's profitability is higher (than that of the parent company), and (2) the parent company has a very large amount of excess cash reserves (there are no effective investment opportunities to use the cash). In this article, I would like to consider the opposite of these management strategies.

In my previous article, "Parent-Subsidiary Listing and Investment Strategy," I pointed out that the parent company is likely to adopt such a management strategy because it can use its excess cash reserves to boost its profitability by making a highly profitable subsidiary a wholly owned subsidiary. In fact, in a previous article, "NTT Docomo TOB and Aftermath," it was thought that the aforementioned management strategy would be effective for the parent company, NTT, but given the company's history as a public company and the legal environment, there seemed hurdles that must be overcome to make NTT Docomo a wholly owned subsidiary, and it is not likely to be easy. However, the TOB was successful. In the unique Japanese practice of parent-subsidiary listings, there have been a number of moves to eliminate this practice. As I mentioned above, the conditions for a parent company to make a subsidiary its wholly owned subsidiary are (1) the subsidiary's profitability is higher (than that of the parent company), and (2) the parent company has a very large amount of excess cash reserves (there are no effective investment opportunities to use the cash). In this article, I would like to consider the opposite of these management strategies.

Event-Driven

<div>
<a href="https://www.smartkarma.com/entities/wal-mart-stores-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Wal Mart Stores (WMT US)</a> will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP). </a>
This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.
The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. We previously suggested <a href="https://www.smartkarma.com/insights/walmart-will-relist-japan-unit-soon-and-at-last-has-potential-to-grow-but-only-online" target="_blank" rel="noopener">in this Insight</a> that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.
</div><div>
As described before <a href="https://www.smartkarma.com/insights/online-food-demand-brings-new-ideas-and-innovations" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/online-food-boom-rakuten-walmart-alliance-goes-live" target="_blank" rel="noopener">here</a>, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> in a joint venture with <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1" rel="noopener">Life Corp (8194 JP).</a> 
If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.
</div>


Wal Mart Stores (WMT US) will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to KKR &amp; Co Inc (KKR US) and Rakuten Inc (4755 JP). 
This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.
The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. We previously suggested in this Insight that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.

As described before here and here, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by Amazon.com Inc (AMZN US) in a joint venture with Life Corp (8194 JP). 
If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.


The Walmart Japan Sell Off: A Huge Gain for Rakuten

<a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a> has completed its buyout of Familymart (see <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy's</a> insights <a href="https://www.smartkarma.com/insights/itochu-gets-the-famima-hunnypot-and-now-things-get-funky" target="_blank" rel="noopener">here</a>, <a href="https://www.smartkarma.com/insights/itochu-haz-opinionz-about-familymart" target="_blank" rel="noopener">here</a>, <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/the-amended-familymart-document-is-a-must-read-for-investor-stewards" target="_blank" rel="noopener">here</a>). Itochu has clearly taken full advantage of a depressed Familymart share price and an opportunity for the trading house to begin more adventurous diversification of the convenience store business.
This will include moving into more types of food format, including its nascent hybrid store collaborations with supermarkets and drugstores and an upcoming push into e-commerce, but will also mean more integration with Itochu's food wholesale business – which when combined is bigger than that of its arch rival, <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP).</a>
Mitsubishi and Itochu have been playing catch-up with each other for the last two decades in a race to build Japan's first integrated food wholesale-retail businesses.
Now that Itochu has succeeded in its bid, the question remains whether Mitsubishi will now look to consolidate its own food retail assets like <a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson Inc (2651 JP)</a> and <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1" rel="noopener">Life Corp (8194 JP).</a>

Itochu Corp (8001 JP) has completed its buyout of Familymart (see Travis Lundy's insights here, here, here and here). Itochu has clearly taken full advantage of a depressed Familymart share price and an opportunity for the trading house to begin more adventurous diversification of the convenience store business.
This will include moving into more types of food format, including its nascent hybrid store collaborations with supermarkets and drugstores and an upcoming push into e-commerce, but will also mean more integration with Itochu's food wholesale business – which when combined is bigger than that of its arch rival, Mitsubishi Corp (8058 JP).
Mitsubishi and Itochu have been playing catch-up with each other for the last two decades in a race to build Japan's first integrated food wholesale-retail businesses.
Now that Itochu has succeeded in its bid, the question remains whether Mitsubishi will now look to consolidate its own food retail assets like Lawson Inc (2651 JP) and Life Corp (8194 JP).

Familymart: What's Next? And Will Mitsubishi React?

Japan

Mitsubishi Shokuhin Co.,Ltd. is a wholesaler of processed food. The Company sells a varietyof groceries including canned products, dried food, frozen food, pet food, beverages, and liquors.

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Mitsubishi Shokuhin (7451 JP)

Major Japan Wholesalers up 2.8% in 2021, but Problems Looming

Wholesalers in Japan had a good year last year. The biggest firms like Medipal may prosper but there are challenges for the sector which could...

Michael Causton

Daiwa House Logistics Trust IPO: The Flow of Things

DHLT has launched an SGX IPO to raise gross proceeds of S$464 million ($343 million). Overall, we believe that DHLT offers an attractive value...

Arun George

Japan's Governance: TOB of Own Stock

More listed subsidiaries will acquire own stock from their parent companies through TOB. It's not easy to dissolve a parent-subsidiary listing, but...

Metrical Inc

The Walmart Japan Sell Off: A Huge Gain for Rakuten

We predicted the sale of Seiyu by Walmart to Rakuten and this is now happening (with KKR funding). It is a huge step for Rakuten in the war for...

Michael Causton

Familymart: What's Next? And Will Mitsubishi React?

Itochu initiated a buyout for an additional 10% of Familymart shares over the summer. The move is widely seen as Itochu taking full advantage of a...

Michael Causton

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