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. 

Equity Bottom-Up

The merger of <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co., Ltd. (3088 JP)</a> and <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a>, Matsukiyo-Cocokara, <a href="https://www.smartkarma.com/entities/cosmos-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:3797:1" rel="noopener">Cosmos Pharmaceutical (3349 JP)</a> and <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1" rel="noopener">Sugi Holdings (7649 JP)</a> the most likely contenders.

The merger of Matsumotokiyoshi Holdings Co., Ltd. (3088 JP) and Cocokara Fine (3098 JP) is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current Tsuruha Holdings (3391 JP) CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, Welcia Holdings (3141 JP), Matsukiyo-Cocokara, Cosmos Pharmaceutical (3349 JP) and Sugi Holdings (7649 JP) the most likely contenders.

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

• RESULTS - 7th APRIL •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/374/original/image_44350750721617829220885.png?1617829221" class="editor-image img-responsive" data-smartkarma-image-id="199374"></figure>RESULTS - All of the larger caps reporting on Wednesday scored negatively, with <a href="https://www.smartkarma.com/entities/bell-system24-holdings-inc" target="_blank" data-smartkarma-citation="entities:27224:1" rel="noopener">Bellsystem24 (6183 JP)</a> faring the worst - the company is also forecasting only single-digit growth in FY22. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/375/original/image_88110638531617829511197.png?1617829511" class="editor-image img-responsive" data-smartkarma-image-id="199375"></figure>• FORECASTS/REVISIONS - 7th APRIL •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/376/original/image_19503684441617829618279.png?1617829618" class="editor-image img-responsive" data-smartkarma-image-id="199376"></figure>FORECASTS/REVISIONS - Welcia's FY22 projection of a decline in net income confirms the market's pessimism towards drugstores. <a href="https://www.smartkarma.com/entities/dip-corp" target="_blank" data-smartkarma-citation="entities:6209:1" rel="noopener">DIP (2379 JP)</a> compensated for poor fourth-quarter results and a weak interim forecast with a full-year forecast of record sales and a return to 30% operating margins in the second half.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/377/original/image_45189507451617831214172.png?1617831214" class="editor-image img-responsive" data-smartkarma-image-id="199377"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/378/original/image_70346033161617831341739.png?1617831342" class="editor-image img-responsive" data-smartkarma-image-id="199378"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/379/original/image_97042980771617831451634.png?1617831452" class="editor-image img-responsive" data-smartkarma-image-id="199379"></figure>

• RESULTS - 7th APRIL •RESULTS - All of the larger caps reporting on Wednesday scored negatively, with Bellsystem24 (6183 JP) faring the worst - the company is also forecasting only single-digit growth in FY22. • FORECASTS/REVISIONS - 7th APRIL •FORECASTS/REVISIONS - Welcia's FY22 projection of a decline in net income confirms the market's pessimism towards drugstores. DIP (2379 JP) compensated for poor fourth-quarter results and a weak interim forecast with a full-year forecast of record sales and a return to 30% operating margins in the second half.

🇯🇵 JAPAN • Results & Revisions 04/​​​07 - Bellsystem24, Welcia & DIP

Event-Driven

After more than a year of negotiations and preparation, <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co., Ltd. (3088 JP)</a> and <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> finally confirmed their agreement to merge in October this year. The new company will be by far the largest in the drugstore sector.A lot of work has been done already to consolidate operations and the aim is to complete integration by 2023. The combined company will target sales of ¥1.5 trillion by 2026.Private brands will be a crucial competitive weapon for the merged chain and also provide opportunities to offer wholesale toiletries and cosmetics floors at supermarkets.The growing competitiveness in the sector amidst increased saturation demands greater scale and will spur the leading players like <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> to make further acquisitions to catch up with the new leader.

After more than a year of negotiations and preparation, Matsumotokiyoshi Holdings Co., Ltd. (3088 JP) and Cocokara Fine (3098 JP) finally confirmed their agreement to merge in October this year. The new company will be by far the largest in the drugstore sector.A lot of work has been done already to consolidate operations and the aim is to complete integration by 2023. The combined company will target sales of ¥1.5 trillion by 2026.Private brands will be a crucial competitive weapon for the merged chain and also provide opportunities to offer wholesale toiletries and cosmetics floors at supermarkets.The growing competitiveness in the sector amidst increased saturation demands greater scale and will spur the leading players like Welcia Holdings (3141 JP) and Tsuruha Holdings (3391 JP) to make further acquisitions to catch up with the new leader. 

Matsukiyo-Cocokara Merger Heralds New Era for Drugstores

The following is an in-depth review of the retail sector by format with a brief overview of incomes and consumption trends and metrics before that. For any investor looking at the Japanese consumer/retail space, this insight will provide a rapid overview of all the major trends.2020 was a year to remember, although not for good reasons. While the news was overwhelmingly negative given the devastation that the pandemic caused to so many lives, for Japan as a country the experience could become a catalyst to spur positive change.No matter how much we might never wish to repeat the last 12 months, those governments and companies that learn from the experience will be better positioned whenever a new pandemic emerges.Department stores, convenience stores, and most fashion chains had a horrible year as so many people stayed away from major shopping areas, but many other retailers actually had stellar years, with further upside still to come.

The following is an in-depth review of the retail sector by format with a brief overview of incomes and consumption trends and metrics before that. For any investor looking at the Japanese consumer/retail space, this insight will provide a rapid overview of all the major trends.2020 was a year to remember, although not for good reasons. While the news was overwhelmingly negative given the devastation that the pandemic caused to so many lives, for Japan as a country the experience could become a catalyst to spur positive change.No matter how much we might never wish to repeat the last 12 months, those governments and companies that learn from the experience will be better positioned whenever a new pandemic emerges.Department stores, convenience stores, and most fashion chains had a horrible year as so many people stayed away from major shopping areas, but many other retailers actually had stellar years, with further upside still to come. 

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

• BEST &amp; WORST •Drugstore <a href="https://www.smartkarma.com/entities/cawachi-ltd" target="_blank" data-smartkarma-citation="entities:19359:1" rel="noopener">Cawachi (2664 JP)</a> had the 'best' trailing results announcement; however, our scoring methodology highlights the decline in earnings momentum - while the revised full-year forecasts fall short of TTM implying pre-COVID levels of profitability. <a href="https://www.smartkarma.com/entities/tokyo-steel-mfg-co-ltd" target="_blank" data-smartkarma-citation="entities:16195:1" rel="noopener">Tokyo Steel (5423 JP)</a> is the obvious 'worst' pick. Both, however, should be of interest to Japan value investors.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/319/original/2021-01-25_05-29-27.png?1611520184" class="editor-image img-responsive" data-smartkarma-image-id="184319"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/320/original/2021-01-25_05-40-08.png?1611520819" class="editor-image img-responsive" data-smartkarma-image-id="184320"></figure></section><div class="content-caption"> Source for all charts &amp; tables: Japan Analytics</div>

• BEST &amp; WORST •Drugstore Cawachi (2664 JP) had the 'best' trailing results announcement; however, our scoring methodology highlights the decline in earnings momentum - while the revised full-year forecasts fall short of TTM implying pre-COVID levels of profitability. Tokyo Steel (5423 JP) is the obvious 'worst' pick. Both, however, should be of interest to Japan value investors. Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​​​22 - Cawachi & Tokyo Steel

Japan

WELCIA HOLDINGS CO.,LTD. is a holding company established through a merger of Welcia Kanto and Takada Pharmacy.  The Group mainly operates drug chain stores which sell medicines, health foods, cosmetics, nursery items and daily necessity goods.

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Welcia Holdings (3141 JP)

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

The Japanese drugstore sector has seen a big merger but there will be more as the sector not only consolidates down to a few leaders but also...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 04/07 - Bellsystem24, Welcia & DIP

RESULTS - All of the larger caps reporting on Wednesday scored negatively, with Bellsystem24 (6183 JP) faring the worst - the company is also...

Campbell Gunn

Matsukiyo-Cocokara Merger Heralds New Era for Drugstores

The merger of Matsukiyo and Cocokara will force further consolidation through M&A in the drugstore sector as regional powerhouses begin to clash as...

Michael Causton

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

An in-depth update for investors in Japan's retail and consumer space on Japan's retail sector by retail type as well as a review of the impact of...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 01/22 - Cawachi & Tokyo Steel

Drugstore Cawachi (2664 JP) had the 'best' trailing results announcement; however, our scoring methodology highlights the decline in earnings...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

The Japanese drugstore sector has seen a big merger but there will be more as the sector not only consolidates down to a few leaders but also...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 04/​​​07 - Bellsystem24, Welcia & DIP

RESULTS - All of the larger caps reporting on Wednesday scored negatively, with Bellsystem24 (6183 JP) faring the worst - the company is also...

Campbell Gunn

Matsukiyo-Cocokara Merger Heralds New Era for Drugstores

The merger of Matsukiyo and Cocokara will force further consolidation through M&A in the drugstore sector as regional powerhouses begin to clash as...

Michael Causton

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

An in-depth update for investors in Japan's retail and consumer space on Japan's retail sector by retail type as well as a review of the impact of...

Michael Causton

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​​​22 - Cawachi & Tokyo Steel

Drugstore Cawachi (2664 JP) had the 'best' trailing results announcement; however, our scoring methodology highlights the decline in earnings...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 04/07 - Bellsystem24, Welcia & DIP

🇯🇵 JAPAN • Results & Revisions 01/22 - Cawachi & Tokyo Steel