Table of Contents

1, Comprehensive Industry - J apan

2, Iron and Steel - J apan
3, Non-ferrous Metals - J apan
4, Paper and Pulp (Japanese only)
5, Cement - J apan
6, Chemicals - J apan
7, Pharmaceuticals - Japan
8, Petroleum - J apan
9, Automobiles - J apan
10, Shipbuilding (J apanese only)
11, General Machinery (J apanese only)
12, Electronics - J apan
13, IT Services - J apan
14, Telecommunications - J apan

15, Broadcasting (J apanese only)
16, Marine Shipping (J apanese only)
17, Logistics - J apan
18, Electric Power - J apan
19, City Gas (J apanese only)
20, Retail - J apan
21, Food and Beverage - Japan
22, Food Service Industry - J apan
23, Construction (J apanese only)
24, Real Estate and Housing - J apan
25, Travel and Tourism - J apan
26, Nonbank (Credit Cards & Credit) (J apanese
only)
27, HR Service Industry (J apanese only)

Japan Industry Outlook / 38
2012 No.1
Contact:
Industry Research Division
Mizuho Corporate Bank, Ltd.
mizuho.ird@mizuho-cb.co.jp







FY2012 Japan Industry Outlook (Food Service Industry)

The Food Service Industry








Summary
Food service expenditures (per household member) in 2011 are forecasted to be
minus 3.2% year-on-year as a whole, largely due to the fall in food service
expenditures immediately after the Great East Japan Earthquake, despite signs of
the leveling off of the expenditure declines from June and beyond. Food service
expenditures in 2012 are forecasted to increase 1.8% year-on-year. While
reconstruction-related demand is expected to peak out in the second half of the
year, bringing with it some uncertainties about the mood of self-restraint in
consumption, food service expenditures are forecasted to increase in 2012 as a
whole with the income environment expected to improve, including an increase
in summer bonuses as corporate performance improves.
Net sales of all stores of food service chain companies as a whole in 2011 were
minus 1.2% year-on-year as a result of the impact of negative factors, including
the mood of self-restraint in consumption following the earthquake, restraint in
summer events, and poor weather. Net sales of all stores in 2012 are forecasted to
increase as a whole, due to the expected increase in the number of customers and
sales per customer based on the easing of the self-restraint in consumption
following the earthquake and improvements in the income environment.
Furthermore, the number of stores is expected to increase as a result of new store
openings, primarily in the FF category.
The fiscal 2011 mid-term results of 39 listed food service companies (with over
JPY20 billion in net sales) showed revenue increases and profit increases owing
to the significant number of new store openings in the Japanese fast food
category (hereinafter FF category) centered around the gyudon chain
companies. The fiscal 2011 results of eight major companies were dominated by
the results of individual companies, including Zensho HDs revenue increase as a
result of opening new Sukiya stores and McDonalds HDs revenue decrease as a
result of franchising and store relocations.













I. INDUSTRY TRENDS
1. Food service expenditure trends
Food service expenditures (per household member) in 2011 are forecasted to be
minus 3.2% year-on-year, largely due to the fall in food service expenditures
from March to May caused by the Great East Japan Earthquake, despite signs
of the leveling off of the expenditure declines from June and beyond (Figure
22-1). While food service expenditures decreased by as much as 16.0%
Food service
expenditures in
2011 forecasted to
decrease 3.2%
year-on-year
Mizuho Corporate Bank, Industry Research Division
1


FY2012 Japan Industry Outlook (Food Service Industry)
year-on-year in March, they recovered to register a 1.3% year-on-year increase
by July. Several overlapping factors contributed to the significant recovery in
July, including the payment of summer bonuses and the easing of self-restraint
in consumption following the earthquake, an earlier-than-usual end of the rainy
season, and one additional national holiday compared to July 2011. In August
2011, the restraint of summer events and poor weather led to fewer
opportunities for food service utilization, and food service expenditures were
minus 3.3% year-on-year. However, food service expenditures are on a path to
recovery from the earthquake disaster, with expenditures increasing 0.1%
year-on-year in October and being minus 0.3% year-on-year in November.
Food service expenditures in 2012 are forecasted to register growth in the first
half of the year as the income environment improves with the recovery in
corporate performance. In the second half of the year, while
reconstruction-related demand is expected to peak out, bringing with it some
uncertainties, the income environment is anticipated to remain as solid as the
first half of the year. Hence, food service expenditures for the whole year are
forecasted to increase 1.8% year-on-year.
Food service
expenditures in
2012 forecasted to
increase 1.8%
year-on-year
The ratio between food service and home meal replacement expenditures as a
share of the food expenditures in 2011 (ratio of home meal replacements) has,
as a whole, maintained a certain ratio even after the earthquake and is
forecasted to be 28.3%, around the same level as the previous year (Figure
22-2). Due to a decline in opportunities for food service utilization, the ratio of
food service expenditures decreased by minus 0.4p year-on-year. Meanwhile,
as demand for home meal replacements increased through their sales at retail
stores, such as convenience stores, owing to their convenience in terms of both
price and location, the ratio of home meal replacements increased by 0.3p
year-on-year. As such, awareness is quickly spreading about the convenience of
home meal replacements among consumers.
Earthquakes
effect to cause
shift in consumer
demand from
food service to
home meal
replacement










Mizuho Corporate Bank, Industry Research Division
2


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
3























[Fig. 22-1] Food service expenditure and food expenditure (monthly)
year-on-year rate of growth (per household member)
(Source) Compiled by MHCB Industry Research Division based on
Ministry of Internal Affairs and Communications Statistics Bureau's
Household Survey Report.
(Note) Figures for two or more person households.
[Fig. 22-2] Ratio of food service and home meal replacement expenditures as a
share of food expenditures
(Source) Compiled by MHCB Industry Research Division based on
Ministry of Internal Affairs and Communications Statistics Bureaus
Household Survey Report.
(Note) Home meal replacement expenditures are prepared foods
excluding frozen prepared foods and food stuff for cooking. 2011
figures are based on MHCB Industry Research Division forecasts.
17.9 17.7 18.0 17.7 18.0 18.0 17.9 18.1 18.2 18.0 18.1 17.7
9.2 9.6
9.7 9.8 9.7
10.2 10.4 10.2 9.9
10.0
10.3 10.6
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e
(Unit: %)
Home meal replacement
Food service
28. 3 28. 4
28. 0 28. 2
28. 3 28. 3
28. 2
27. 6
27. 7
27. 4
27. 1
Rat io of home meal replacement
(CY)
27. 7
-
-
-
2
0
0
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/
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1
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1
1
18.0
14.0
10.0
-6.0
-2.0
2.0
6.0
10.0
14.0

12 12
()
(Unit: %)
12-mont h moving averages
(food expenditure)
food expendit ure
12-mont h moving averages
(food service expenditure)
food service expendit ure
<Yearly> <Monthly>
Food service
3.2%
Food
1.1%


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
4
2. Chain company trends
The trends of franchise chain companies, which account for JPY3.9 trillion
(estimate) of the JPY22.9 trillion-food service market in 2011 (estimate), are
examined based on the company trends of the Japan Food Service Association
(JF) members (requirement for full membership: company with over JPY100
million in annual sales) (Figure 22-3). Net sales of all chain companies,
including sales of newly opened stores, were minus 1.2% year-on-year in 2011
as a result of the impact of negative factors, including the mood of self-restraint
in consumption following the earthquake and poor weather in August and
September (Figure 22-4).
Net sales of all chain companies in 2012 are anticipated to increase throughout
the year due to the easing of the self-restraint in consumption following the
earthquake and an improved income environment with the recovery in
corporate performance. However, reconstruction-related demand is expected to
peak out, bringing with it some uncertainties, and the situation remains
unpredictable.








Next, chain company trends are examined according to four categories: FF
category (2011 market size: JPY1.7 trillion
1
); family restaurant category
(hereinafter FR category; 2011 market size: JPY0.8 trillion); pub and izakaya
category (2011 market size: JPY0.5 trillion); and dinner restaurant category
(hereinafter DR category; 2011 market size: JPY0.2 trillion). To understand
the characteristics of each category, both one-month and three-month moving
averages are confirmed to analyze the trends. Net sales of all stores in 2011 in
the FF category, while registering minus 8.3% year-on-year based on the

1
The 2011 market size of each category is projected based on Japan Food Service Associations March 2011 Food Service
Industry Management Trends Survey Report and Market Trends Survey and is comprised of 95 listed companies.
(Source) Compiled by MHCB Industry Research Division
based on Japan Food Service Association documents.
(Note) Three-month moving averages.
[Fig. 22-3] Estimated size of
food service market by category (2011)
[Fig. 22-4] Chain companies (monthly) year-on-year
growth (all stores)
Net sales of all
stores (including
new stores) in 2011
minus 1.2%
year-on-year

Net sales of all
stores (including
new stores) in 2012
forecasted to
increase
Background and
trends of sales
recovery differ by
chain category

(Source) MHCB Industry Research Division projections based
on Japan Food Service Association's March 2011 Food
Service Industry Management Trends Survey Report and
Food Services Report and Foodservice Industry Research
Institutes 2010 Food Service Industry Market Projection.
-6
-4
-2
0
2
4
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
0
8
/
2
0
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/
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0
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/
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2
1
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2
1
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/
4
1
1
/
6
1
1
/
8
1
1
/
1
0
1
1
/
1
2
CY)
6
8
(%)
Sales Store number
Customer number Sales per customer
<Monthly> <Yearly>
JPY19.0
trillion
(83%)
JPY3.9
trillion
(17%)
Franchise stores
Total
JPY22.9
trillion
Private stores


FY2012 Japan Industry Outlook (Food Service Industry)
single-month average in March, recovered to +2.0% year-on-year based on
three-month moving averages in November (Figure 22-5). The major
contributing factors were that among the FF category, chain companies such as
leading gyudon companies Sukiya, Yoshinoya, and Matsuya as well as
leading self-service udon noodle company, Marugame Seimen, continued to
open new stores even after the earthquake. In 2012, new gyudon and
self-service udon noodle stores are expected to open. As a result of this increase
in store numbers, net sales of all stores are expected to see a positive trend. Net
sales of all stores in 2011 in the FR category fell to minus 9.4% year-on-year
based on the single-month average in March as a consequence of the
earthquake (Figure 22-6). From June and beyond, while the number of
customers increased, helped by marketing measures centered around the mass
media, net sales of all stores based on three-month moving averages stayed at
0% year-on-year even in December, due in part to the poor weather from
August to September. In 2012, while companies will be less willing to open
new stores and the number of stores will hover around the same level, brand
shifts by existing stores of companies, such as Skylark and Royal HD, and
renovations of the existing stores of companies are projected to increase the
number of customers, in turn leading to a positive trend in net sales of all stores.
Net sales of all stores in 2011 in the pub and izakaya category fell sharply by
minus 19.8% year-on-year based on the single-month average in March and
continued to decrease based on both one-month and three-month moving
averages (Figure 22-7). This negative trend has continued almost consistently
since November 2008. The reasons include the increase of the elderly
population, the decrease in alcohol consumption among the young generation,
and the novelty of existing izakaya stores wearing off among consumers. For
these reasons, net sales are projected to continue to decrease in 2012. Net sales
of all stores in 2011 in the DR category, while falling to minus 19.5% compared
to all years based on the single-month average in March, showed strong
recovery in June, increasing 0.6% based on three-month moving averages
(Figure 22-8). It is projected that this is the result of an increase in the number
of customers and sales per customer and that this capture the consumers needs
to enjoy a little luxury in response to the self-constraint in consumption. Net
sales of all stores in 2012, while expected to increase due to the easing of the
self-restraint in consumption following the earthquake in the first half of the
year, are forecasted to decrease as companies slow down in new store openings
in the second half of the year, causing store numbers to level off.
Mizuho Corporate Bank, Industry Research Division
5


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
6















II. CORPORATE EARNINGS
1. Mid-term results of food service companies (39 listed companies)
The fiscal 2011 mid-term results of 39 listed food service companies with over
JYP20 billion in net sales showed revenue increases and profit increases (net
sales +0.2% and operating income +12.6% compared to fiscal 2010 [Figure
22-9]). The revenue increase stemmed in large part due to new store openings
by low-priced brands. Specifically, Japanese FF Zensho HD (sales +7.5%
year-on-year) and Matsuya Foods (+6.9% year-on-year) increased sales by
actively opening new stores and increasing customer numbers through
price-down campaigns in the gyudon business. In addition, Toridoll, operator of
(Source) Compiled by MHCB Industry Research Division based
on Japan Food Service Association documents.
(Note) Three-month moving averages.
[Fig. 22-5] (Monthly) year-on-year rate of growth in FF
category (all stores)
(Source) Compiled by MHCB Industry Research Division based
on Japan Food Service Association documents.
(Note) Three-month moving averages.
[Fig. 22-6] (Monthly) year-on-year rate of growth in FR
category (all stores)
(Source) Compiled by MHCB Industry Research Division based
on Japan Food Service Association documents.
(Note) Three-month moving averages.
(Source) Compiled by MHCB Industry Research Division based
on Japan Food Service Association documents.
(Note) Three-month moving averages.
[Fig. 22-8] (Monthly) year-on-year rate of growth in DR
category (all stores)
[Fig. 22-7] (Monthly) year-on-year rate of growth in
pub/izakaya category (all stores)
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2
0
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/
1
2
(CY)
(%)
Sales Store number
Customer number Sales per customer
<Monthly> <Yearly>
-8
-6
-4
-2
2
0
0
0
2
0
0
2
2
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2
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/
8
(CY)
0
2
4
6
8
10
1
1
/
1
0
1
1
/
1
2
(%)
Sales Store number
Customer number Sales per customer
<Monthly> <Yearly>
-15
-10
-5
0
5
10
15
2
0
0
0
2
0
0
2
2
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2
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1
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/
1
2
(CY)
(%)
Sales Store number
Customer number Sales per customer
<Monthly> <Yearly>
-12
-10
-8
-6
-4
-2
0
2
4
6
8
2
0
0
0
2
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1
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/
6
1
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/
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1
1
/
1
0
1
1
/
1
2
(CY)
(%)
Sales Store number
Customer number Sales per customer
<Monthly> <Yearly>


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
7
the self-service udon noodle restaurant chain (+24.8% year-on-year), increased
sales by new store openings. The profit increase stemmed from companies
continued closures of unprofitable stores and wide-ranging cost review, coupled
with new store openings by Japanese FF, including Zensho, Matsuya Foods,
and Toridoll. While the overall result was revenue increases and profit increases,
among the 11 food service categories, only 3 had revenue increases and profit
increases due to the impact of sales declines in the earthquakes immediate
aftermath.












(Source) Compiled by MHCB Industry Research Division based on corporate financial statement documents.
(Note) Major food service companies: 39 listed companies with over JPY20 billion in sales (fiscal 2010 results) and
public records of net sales and operating income by category (1. Western FR: Saizeriya; Joyfull; Create
Restaurants; Saint Marc HD; Nippon Restaurant System; 2. Japanese FR: Gourmet Kineya; Sato Restaurant
Systems; Sagami Chain; 3. DR: Kisoji; Umenohana; 4. Western FF: McDonalds Holdings Japan; Kentucky Fried
Chicken Japan; Mos Food Services; 5. Japanese FF: Zensho [individual basis]; Yoshinoya HD [gyudon business];
Matsuya Foods; Ichibanya; Toridoll; Fujio Food System; 6. Izakaya [Japanese style bar/restaurant]: Colowide;
Watami [food services business]; Daisyo; Via HD; Dynac; Sanko Marketing Foods; 7. Cafe: Starbucks Coffee
Japan; Doutor; 8. Food service: SHiDAX; 9. Kaitenzushi [revolving sushi bar]: Kappa Create; Kura Corporation;
Genki Sushi; 10. Home meal replacement: Plenus; Hurxley; Rock Field; Kozosushi So-Honbu; 11. Chinese/Ramen:
Ohsho Food Service; Ringerhut; Kourakuen; Hiday Hidaka)
While Nippon Restaurant System and Doutor are listed in separate categories, they are counted as one company.
[Fig. 22-9] Fiscal 2011 mid-term results by food service category (year-on-year change)
-40.0
-30.0
-20.0
-10.0
-15.0 -10.0 -5.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
0.0 5.0 10.0 15.0
Revenue increase / profit decrease
Revenue increase / profit increase Revenue decrease / profit increase
Revenue decrease / profit decrease
Kaitenzushi (3)
Japanese FF(6)
Chinese (4)
Western FR (5)
Total (39)
Cafe (2)
Western FF (3)
Home meal
replacement (4)
DR (2)
Izakaya (6)
Japanese FR (3)
Net sales: -2.86%
Operating income: +523%
Service (1)
Net sales: - 4.68%
Operating income: +1031%


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
8
(8 major companies)
McDonalds HD Japan; Zensho HD; Yoshinoya
HD; Colowide; Watami; Royal HD; Seven & i
Food Systems; and Saizeriya
(Source) Compiled by MHCB Industry Research
Division based on corporate financial statement
documents.
(Note) Figures: Consolidated base; For Seven & i
Food Systems, figures from Seven & i Holdings'
food business are used. Figures for FY2011 and
FY2012 are based on MHCB Industry Research
Division forecasts.
2. Results of eight major companies
The fiscal 2011 results of eight major companies show revenue decreases and
profit increases, with net sales minus 1.0% and operating income up 5.9%
year-on-year (Figure 22-10). With regard to net sales, while Zensho HDs
opening of new Sukiya stores is expected to increase revenues, McDonalds
Holdings Japans revenue decreases as a result of franchising and store
relocations are forecasted to weigh down overall revenues. As for operating
income, Zensho HDs profit increase owing to expanded sales, McDonalds
improvement in cost ratio through franchising, and all companies reductions in
cost ratio and selling, general and administrative (SGA) expenses through
cost-cutting measures are forecasted to increase overall profits.








The fiscal 2012 results of eight major companies are forecasted to record a
JPY22 billion yen increase in revenues year-on-year due to: 1) Sales increases
from Zensho HDs and Yoshinoya HDs new store openings and new menus for
their gyudon business; and 2) Sales increases from Watamis new office
openings for its nursing care and elderly-oriented home delivery service
businesses. Profits are also forecasted to increase by JPY6.3 billion
year-on-year due to: 1) Profit increases from the above sales increases for
Zensho HD, Yoshinoya HD, and Watami; and 2) Improved cost ratio from
McDonalds Holdings Japans franchising efforts.

III. TOPICS: Promising Business Areas in the Medium-Term Food Service Industry
With Japan set to face a decreasing population and a declining birthrate and
aging society, a mid- to long-term contraction of the domestic food service
market is inevitable. However, the Great East Japan Earthquake has triggered
Revenue
decreases and
profit increases in
FY2011
highlighted by
Zensho HD and
McDonalds HD
results
Revenue
increases and
profit increases
anticipated in
FY2012
[Fig. 22-10] Results forecast for 8 major companies
Possibility of food
service companies
capturing home
meal replacement
market
[Actual]
Companies FY10 FY11 FY12
(Unit) (Result) (Estimate) (Forecast)
(JPY100 million)
[Rate of Chan
13,809
Net Sales
Operating Incom
13,677 13,897
Operating Incom
Net Sales 8 Major
Companies
ge] (Year on Year)
FY10 FY11 FY12
(Result) (Estimate) (Forecast)
42.0 5.9 7.7
- 0.3 - 1.0 1.6
(Unit)
8 Major
Companies
(%)
e
e 774 820 883


FY2012 Japan Industry Outlook (Food Service Industry)
Mizuho Corporate Bank, Industry Research Division
9
an increase in home meal replacement expenditures. Furthermore,
home-cooked meals and home meal replacements account for a large
proportion of the food expenditures of elderly households. A key to a successful
business strategy for food service providers will thus be the capturing of the
home-cooked meal and home meal replacement markets. In particular, as many
operators of low-priced food service chains have said, it is certain that
convenience stores, too, will become competitive in both price and convenience.
In this context, food providers will face an increasingly fierce battle for the
food market, with retail stores also participating in the battle. From this
perspective, the food service industry has witnessed an increasing number of
companies starting home delivery services from their restaurants, as well as
companies establishing drive-thru services, with the aim of capturing the home
meal replacement market by offering a wide selection of eat-in, take-out
(drive-thru), and delivery services.
Nonetheless, food service companies core service is providing food and
customer service to those consumers who come to their restaurants (eat-in).
Home meal replacement services, such as take-out and delivery, are merely
additional services or an extension of eating-in. As long as the QSC
2
evaluation
is low (based on the eat-in menu, the cleanliness and atmosphere of the
restaurants exterior and interior, and customer service), this will not lead to the
use of take-out and delivery services, and in turn, to the capture of the home
meal replacement market. Therefore, it goes without saying that it is essential
that the food service industry continues to improve the attractiveness of
eating-in.
In view of the growing elderly population, another possible option for food
service providers is to use food as a gateway into businesses for the elderly. For
example, Watami, an izakaya (Japanese style bar/restaurant) operator, entered
the nursing care business by purchasing R No Kaigo Inc. in 2005. It has also
entered the food delivery business for the elderly by purchasing Takushoku Co.,
Ltd. in 2008. Watami has succeeded in expanding both businesses by utilizing
its knowhow in materials procurement and meal preparation accumulated
through its food service business, as well as by setting forth a concept to
provide high quality food.
Meanwhile, overseas, the middle income tier is expanding with the economic
growth in neighboring Asian countries. Also, with Japanese food increasing in
brand value, the overseas is becoming an attractive market and steadily drawing
in Japanese food service companies. Nonetheless, most companies that have
established businesses overseas are chain companies with overseas stores
numbering in the range of only a few stores to several dozens of stores. It is
difficult to say that at present Japanese food is being provided to a greater

2
QSC stands for Quality (quality of menu), Service (customer service), and Cleanliness, and is the most fundamental principle that
ought to be followed by companies and employees in the food service industry.
Possibility of
using food as a
gateway into
businesses for the
elderly

Possibility of
establishing many
stores overseas
utilizing local
companies


FY2012 Japan Industry Outlook (Food Service Industry)
number of the world population. Furthermore, due to the difference in price
levels with Japan, the contribution to the companys sales and profits continues
to remain low. For future expansions into the overseas market, it is the view of
the author that it will be most effective to forge partnerships with local
companies as a solution to different challenges confronting companies,
including those challenges which cannot simply be dealt with through the
business knowhow acquired in Japan, such as the overseas securing of real
estate, marketing, and labor management, and the large amount of investment
required to open new stores. In Asian countries, with the expansion of the
middle income tier and the diversification of the food culture, local companies
may be found that are interested in the Japanese food service business. It is
hoped that Japanese food service companies will forge partnerships with local
companies to establish many stores swiftly, provide Japanese food to more
people overseas, and contribute to the development of the food culture in all the
countries.
Shinya Endo
Distribution & Consumer-related Team
Industry Research Division
Mizuho Corporate Bank, Ltd.

Mizuho Corporate Bank, Industry Research Division
10