TT-543 -- Watami: from food to old fogies, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, November 22, 2009 Issue No. 543


- What's new
- News
- Candidate roundup/Vacancies
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Last Friday a group of us went out to Roppongi to look for
locations for future Metropolis magazine events and
afterward we hit the T.G.I. Fridays restaurant close to
Roppongi Crossing for some fast food. There may be a
recession going on, but Friday's was full to overflowing,
and people looked like they were having a good time. The
five of us had as much as we could possibly eat (the plates
are impossibly huge) and plenty of beer, and yet the total
bill only came to 14,000yen.

Leaving the store, we couldn't help but think that when
people get depressed due to economic or other
circumstances, what's the normal cure? Well, they will seek
out a cheap and cheerful place to meet friends and forget
their cares for a while. We believe that T.G.I. Fridays is
just such a place, and therefore, in much the same manner
as Uniqlo and Nitori -- the restaurant chain is providing
people with a way to enjoy themselves but at a much lower
price than a year ago.

It's probably no accident that Friday's is run by a smart
restaurant operator, named Watami. You may never have heard
of them, but you would surely recognize some of the
hundreds of pubs and restaurants that they own and run
around Japan, including Watami, Za-Watami, Nagomitei,
Gohan, Wataminchi, and of course T.G.I. Friday’s.

[Continued below...]

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[...Article continues]

Basically Watami is one of those hard-core Japanese firms
that sets a standard of excellence both in its focus and
its ability to extract a profit out of what has to be an
incredibly difficult business segment -- despite the
current recession. The company is involved in the entire
"food chain" of the restauranting business, including
running its own farms (even a fish farm) to grow the
produce it serves. Watami is in fact a pioneer in company-run
farming, having started its first operation more than 10
years ago. Today its various farms supply about 20 percent of the
leafy vegetables used in its 600+ restaurants.

Owning your own farms may not sound like a big deal, but
as a side note, Japan has laws to protect individual
holdings of farm land. Until a recent law change, companies
could only hold up to 10 percent of a given farm, and so they
would have to enter into weak lease arrangements with the
traditional farmer-owners. With the new law change,
corporates can now hold up to 25 percent -- providing extra
leverage when negotiating with farmers for control of
their operations. Based on this legal change, Watami
apparently plans to lease even more land, in Oita, to start
a large organic farm. This is smart because organic veges
command a premium in Japanese-style restaurants these days
and are certainly an attractant for young health-conscious
female customers.

Watami has had a hard time of it over the last three years,
but the company seems to be coming right now, thanks
partly to a change of the old guard earlier this year, and
also due to some very tough restructuring and cost control
measures. From FY2007 through to FY2008 (ending March 31st,
2009), the company's sales fell a dramatic 43 percent to 23.7 billion yen
($263 million dollars), however at the same time net profit over the
same period actually climbed 50 percent to 1.876 billion yen ($20.84 million dollars).

Apparently restaurant sales are down about another 6 percent
for the first half of this year, but it looks like profits
will remain steady or even improve a bit.

What is important to know about Watami, is that in addition
to bringing its restaurant operations under control, the
firm made a very smart move into a second business area a
few years ago -- that of running nursing homes. As a
result, the consolidated revenues of the firm in March this
year were 111 billion yen ($1.23 billion dollars) and the consolidated net
profit was 2.56 billion yen ($28.45 million dollars).

Like restaurants, nursing homes are also notoriously difficult
to make money out of, but Watami seems to be able to do
this, thanks in no small way to a high 95 percent occupancy rate.
It's interesting to see how they are squeezing profits from
this stone. Sales are up because last year they bought a
company named Takushoku that makes and delivers obento
(boxed lunches) for the elderly. We suppose that after
someone gets fed at home by Watami, it's only a short sales
pitch before they are ensconced in one of its 44 nursing
homes as well -- another consumption point for those farms!

All the company needs to do now is go into the water and
electricity businesses, and they will have all the inputs
to their nursing home operations tied up.

Watami, being the kind of company it is, is taking no
chances with the flow of customers over the bonenkai
(year-end parties) season, which is normally one of the
busiest times of year for restaurants and pubs. This year
they are issuing meal vouchers worth 50 percent of the bill for
parties booked before the end of this month (November). So
if you're thinking of holding a bonenkai, get your
reservation done now and experience some positive

Lastly, don't forget that our sister company, Metropolis is
launching Japan's first international Konkatsu party --
otherwise known as the Metropolis Cupid Party, on
November 29th (last Sunday in November). See you

For more details, go to


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+++ NEWS

- Diners stay away from restaurants
- Blood test for early detection of Alzheimers
- Post Office to figure in finances again
- da Vinci med-bot approved by Ministry of Health

-> Diners stay away from restaurants

Proof that people are actively cutting back on the small
pleasures in life, including eating out, the Nikkei
reports that the wholesale price for cooking oil -- paid by
restaurants, has dropped about 3 percent in November versus the
month earlier. The wholesale price for cooking oil is now
at its lowest level since March 2004. According to the
Nikkei, prices have dropped even as manufacturing costs are
going up, largely because of wholesalers trying to
stimulate sales again after the Kao Econa oil scandal (the
oils were found to have carcinogenic substances last
month). But as Nikkei notes, the strategy doesn't seem to
be working -- because the problem isn't availability, it's
lack of customers. (Source: TT commentary from, Nov 21, 2009)

-> Blood test for early detection of Alzheimers

MCBI Inc., a biotech start-up licencing research by the
University of Tsukuba, has announced that it has developed
a blood test that may help detect Alzheimer's disease early
on. Following on from research at the UCLA in the USA and
elsewhere over the last couple of years, MCBI says it can
detect (umm.... err...) two peptides in the blood which
appear to occur in a precursor ailment to Alzheimers, known
as MCI. MCBI says that it will start clinical trials and
hopes to bring the test to market in 2015. ***Ed: This is
an exciting breakthrough, and we're sure that the analysis
of the peptides in question will be picked up by other labs
around the world -- just as soon as they can remember where
they put those darned lab notes!** (Source: TT commentary
from, Nov 21, 2009)

-> Post Office to figure in finances again

As Junichiro Koizumi understood, the Japanese Post Office
represents a gigantic savings cookie jar that politicians
just can't keep their fingers out of. Between the Post Bank
and the Post Insurance organizations, the group holds about
300 trillion yen ($3.376 trillion dollars) in public savings and government
bonds. So now the DPJ is now floating a trial balloon
whereby they are considering having the Post Office start
lending money to regional companies in an attempt to help
outlying firms get past the current credit crunch. ***Ed:
Our take is that this is but the first move, and the DPJ
will go "whole hog" next year and put the Post savings
hoard to work on funding many more government programs. The
problem, of course, is that the Post Office is in fact
already the largest investor in government bonds, so in a
way this will be a case of Peter robbing Paul.** (Source:
TT commentary from, Nov 21, 2009)

-> da Vinci med-bot approved by Ministry of Health

In what could represent a revolution in surgical
procedures in Japan, Sunnyvale, California-based Intuitive
Surgical announced on Friday that its robotic surgery
system, da Vinci, has received regulatory approval from the
Ministry of Health, Labor and Welfare (MHLW), allowing the
company to start marketing the machine in Japan. The da
Vinci is an amazing device that looks like it's from the
future. It allows surgeons to do complex surgery using an
interactive console located some distance away from the
patient. The surgeon controls a range of four robotic arms
located on a gurney containing the patient. The arms are
fitted with scalpels and other tools. The point of da
Vinci is to scale and filter the surgeon's hand movements
into more precise movements of the robotic arms. The result
is tremendous precision and dexterity, thus allowing
surgeons to perform minimally invasive procedures even
though there may be complex dissection and reconstruction
work needed. ***Ed: In terms of industry impact, this is
Lasik all over again, but this time for prostate cancer and
other ailments.** (Source: TT commentary from and
Intuitive's own PR website, Nov 20, 2009)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

*** In TT534 we discussed the new rules to compel
foreigners to take out Health Insurance in order to get
their visas renewed -- even though for Japanese there is no
criminal penalty for not paying the insurance. We received
many comments about the discriminatory aspects and also
some about how the Japanese health system is way too
expensive for what it offers. One of the best of these
letters is from the reader below...

Our Reader Says:
I have been on Japanese National Health for over 15 years
and recently lost a baby tooth which had somehow managed
to hang on for 37+ years. Investigating replacement options
I was disturbed to find that the only replacement method
would would be a bridge, which would damage the surrounding
(one front, one lateral, and both perfectly healthy) teeth
by shaving them down and fitting them with crowns which
would in turn hold a replacement tooth in the gap in

An implant is the only way to replace a missing tooth
in a situation like this, without damage to surrounding
teeth, but this procedure is not covered by JNH at all.
Indeed, I don't even have the option of claiming the amount
that a bridge would have cost.

Given that the total cost of an implant is around 300,000
to 400,000 yen, combined with the absolute necessity of
filling in the gap -- missing teeth can cause other
serious health problems in addition to the inconvenience
and purely cosmetic considerations, this was quite

My dentist explained the JNH policy and that although he
agreed that there should be coverage. He reckons it will
take some time for coverage to catch up with more advanced
care. As with everything in Japan, this... takes...

Having just read a New York Times article
(, which appeared coincidentally
only 4 days after I forked out cash for my implant
procedure, I am even more convinced that JNH needs to be
revised to cover dental implants and for dentists to be
given more authority to decide which care is appropriate.
It should be clear that for younger and even many older
patients needing to replace teeth, bridges are neither a
quality option nor a cost-effective one.

We respond:
We think it’s only the Japanese themselves who think their
health care system is world class. It’s definitely good as
a baseline service, but if you want anything new or fancy,
the system fails its subscribers -- and what's worse is
that there is no "middle way", allowing someone to make up
the difference between the mandated treatment cost and
something that they may actually want.

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Written by: Terrie Lloyd (

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