In 2012, the United States held a 7.7% value share of Japan's $1,037 million imported bottled wine market. This was an increase from the 7.5% share in 2011. Market share of bottles priced \500 JPY ($6.33) or under and \1000 - 1500 JPY ($12.66 - 18.99 USD) continue to increase. Bulk wine imports continue to grow as domestic Japanese wine companies bottle their own wine.

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This is an annual Japanese wine market report published by ATO Japan.

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Zensho, an operator of a major beef bowl restaurant chain, Sukiya, announced plans to acquire Saitama Prefecture based regional supermarket chain, Maruya, through a takeover bid. In addition to Sukiya, Zensho operates beef bowl/noodle restaurant, family restaurant chains under Nakau and Coco's banners as well as a vegetable specialty store called United Veggies. For fiscal year ending March 2013, Zensho projects \436.1 billion in sales and \27.3 billion in operating profit. Zensho expects cooperative buying among the company's food service businesses and Maruya will bring synergies to their sourcing activities. Maruya, who has been in the red for seven consecutive periods, operates 50 supermarkets in Saitama, Chiba and Ibaragi prefectures and projects \22 billion in sales for fiscal year ending, February 2013. The founding family of Maruya has agreed to sell 37% shares of the company at press time but no upper threshold has been established.

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Cocokarafine announced its plan to acquire Niigata City based regional drugstore chain, Kodama, who operates a total of 85 units in the Northeastern region. In particular, Cocokarafine will acquire 100% shares from Kodama's founding family in late October or early November. If successfully acquired, this will allow Cocokarafine to expand into Niigata, where they currently have no units.

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Uny: Consolidated net earnings for the supermarket and c-store operator for the period reached ¥20.6 billion from last year's ¥2.2 billion negative earnings.Turnaround was due to allocation of ¥16.4 billion in extraordinary income arising from takeover bid of CircleKsunkus, which was written down as negative goodwill in the prior year.

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On June 28, Ito Yokado opened the third small scale urban format store, Shokuhinkan Ito Yokado, within the shopping complex adjacent to Seibu Ikebukuro Line's Nerima Takanodai Station. Ito Yokado developed the small scale urban format which is less than half of the size of conventional supermarket with sales floor of approximately 5,400-9,700 square feet., The first and second unit opened in October 2010, in Asagaya and Takaido. The new Takanodai unit has sales floor space of approximately 9,100 square feet and operating hours are from 10am to 10pm. The store will strategically place ready to eat meals, salads, beverages and dessert items near the store entrance located towards the Takanodai Station to attract commuting office workers.

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On May 15, Lawson opened the first Lawson and HMV's co-branded test unit in Omote-Sando, one of the most fashionable shopping districts in Tokyo. The new store has a sales floor of approximately 1,500 square feet of which 185 are used to display HMV's CD and DVD products.
The store carries approximately 300 CD and DVD titles. Although checkouts are separate, customers can freely shop between Lawson and HMV sections. Operating hours are also different between the two stores. Lawson is open 24 hours while the HMV section only operates between 10am to 11pm. Lawson plans to open the second test unit in 2013. After fine tuning the format through these test units, Lawson plans to expand the co-branded format nationwide.
Lawson acquired the CD and DVD specialty store chain HMV in December, 2010, and has already integrated products and services offered by HMV to its net shopping site, Loppi, but the Omote-Sando location is the first physical co-branded unit the company has opened.

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On March 5th, Family Mart announced that it plans to acquire Senior Life Create, headquartered in Minato-Ward, Tokyo, that operates bento home delivery service for elders. On April 5th, Family Mart will acquire 81.6% of Senior Life Create's outstanding shares from investment fund groups who currently own the stocks, but purchase price of the shares was not disclosed at press time. As at the end of November, 2011, Senior Life Create operated a chain of 315 home delivery Bento depots, under Home Delivery One-Two-Three banner, through franchise agreement.Once the deal is completed, Family Mart plans to sell Family Mart's bento's in Senior Life Create's established sales network not only to elders but to other demographic groups.

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One of the major regional supermarket chains, Yaoko, based in Saitama Prefecture, reported record high earnings for the nine months ending December 31, 2011. Sales for the period increased 8.5% to \179.2 billion and operating profit increased 28.3% to \9.7 billion compared with the same period in 2010. The company commented that the healthy revenue growth was partly due to additional sales gained from six new units they opened during the period. Except for a 1.8% decline in September, comp store sales were either equal to or greater sales from the same month in 2010.The company projects 9.3% growth in operating profit to \10.5 billion for the full fiscal year ending March 31.

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According to the consolidated financial report released by the second largest c-store chain Lawson, cumulative operating profit for nine months ending November 30th increased 8.4%, reaching record levels to \49.7 billion. Comp store sales increased 5.9% for the period and 4.8% for the third quarter. However, gross margin rate declined 0.5 points to 30.2%. This was due to the rise of cigarette sales to total sales ratio, which yields only 10% margin. Gross margin for the third quarter alone improved 0.6 points with strong sales of Lawson's private brand, called Lawson-Select line, which went through a major renewal in October, 2011.
The group added 375 units net of closing in nine months, operating a total of 10,369 stores domestically, under Lawson Store 100, Shop 99, and Lawson banners.

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On December 1st, Aeon announced that the company's investment ratio for equity method affiliate, Maruetsu, exceeded one third of total outstanding shares after adding 2.24% shares retained by Marunaka, a Shikoku based supermarket chain Aeon acquired in November 2011. To be exact, Aeon now owns 34.21% of Maruetsu shares.

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On November 25th, one of the major convenience store (c-store) chains, FamilyMart, opened a new upscale formatted store in Shibuya Ward, Tokyo. The new format was developed by FamilyMart's "C-store Research Institute" team, which was established last year in September to develop products that target the mature 50-65 year old age group. The company positions the upscale Shibuya store as its new flagship store that targets the affluent senior consumers in urban markets. The store stocks approximately 2,600 items. 700 of them are exclusively sold in FamilyMart stores. Specialty chilled desserts, imported sweets, and a wide variety of wines are examples of the exclusive line-up. The interior of the store is coordinated in well-poised brown with timber floor covering and wood-grain shelves.The store has a separate eat-in area with seven seats.

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Ministry of Internal Affairs and Communications reported that Consumer Price Index (CPI) for April increased 0.6％ from the previous year and marked the first increase in 2 years and 4 months. The index for all items less fresh food was 99.8 (2005=100). The increase was mainly due to the price increases of grains and energy, which were caused by a short supply as a result of the aftermath of the earthquake. Another factor was the impact of elimination of high school tuition fees last year. The index for all items including fresh food rose 0.3 to 99.9. The index for fresh food was down 5.6％ due mainly to the price decrease of vegetables for the concern of radioactive contamination.

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Seven & I holdings, nation's largest retailer in terms of sales volume, reported record-high operating profit for the first half of the current fiscal year which ends in February 2012. The operating profit for the period increased 25.9% to \15.01 billion. The healthy increase was due mostly to the group's core GMS business, Ito Yokado, that managed to return to the black by cutting down on price promotion and strong growth in comp store sales (+8.0%) of Seven Eleven Japan. These make up the majority of the group's earnings. On the other hand, sales for the period dipped 7.9% to \2,357.2 billion with changes in accounting method and strong yen negatively affecting sales of Seven Eleven. U.S. net profit also declined 15.4% due to posting \54.3 billion extraordinary loss, which was made up of \23.4 billion in asset retirement obligations and \22.5 billion in loss caused by the earthquake.

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・Department Store
According to the Japan Department Stores Association, total March comp sales drastically decreased 14.7% due to the Great East Japan Earthquake. Electricity shortage caused by the disaster was also blamed for the shortening business hours resulting in lost sales. Consumer sentiments plummeted the demands for apparel and luxury goods such as jewelry. Major r cities, Sendai, Tokyo and Yokohama were all down 61.1%, 21.5% and 21.7% respectively.

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McDonald’s Japan started a non-contact payment service for smartphones on March 4. Smartphones that are operated by Google's Android and have "OsaifuKe-tai: FeliCa" installed can be used for payment. A similar system has already been implemented for regular cell phones. The service was expanded to accommodate popular smartphones. The system can also accept the digital coupon, "Kazasu Coupon." A free App is being provided for smartphones and a new App for iPhone will be available later.

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・Department Store
According to Japan Department Stores Association, total January sales were about 554.1 billion yen and the comp sales were down 1.1%. This was the third consecutive monthly decrease. The sales that started in January for coats and winter apparel in Tokyo and Yokohama fared well but stores located in Hokkaido & Tohoku lost customer traffic due to the heavy snows. Sales by cities: Tokyo was up 1.4% and Yokohama was up 1.9%. Sapporo was down 5.5% and Sendai was down 4.8%. Among major department stores, Mitsukoshi was up 5.1%, Isetan was up 1.7%, Daimaru-Matsuzakaya was down 3.3%, Takashimaya was up 1.7%, Hankyu was up 1.3%.

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Kokubu, the largest grocery wholesaler, signed a contract with the largest produce wholesaler Tokyo Seika, to expand its produce offerings on January 17, 2011. Kokubu started produce offerings last year and this agreement will enhance its position in the produce distribution by combining its marketing and distribution with the sourcing expertise of Tokyo Seika. Both companies will share information as well as human resources and will mutually develop new programs for product planning, sourcing, and marketing. Tokyo Seika had revenue of 213.2 billion yen for the fiscal year ending March 2010. This move was to enhance Kokubu's position in the distribution businesses as other major wholesalers such as Ryoshoku and Nippon Access are consolidating their businesses as well.

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Convenience store chain, Lawson, tested an LED light system for one year and found that the system used 20% less electricity compared to existing stores. After further testing, LED lights will be installed in all Lawson stores that will open after March 2012. The lights will be used for general lighting as well as in display cases, signage, & lightings in the parking lot. Already tested solar panels and lithium-ion battery systems will be installed as well. Additionally, adiabatic glasses and insulated panels will be used to maximize the efficiency of HAV. The front of the store has the glass facade and skylights are installed for the new designed stores. Lawson's goal is to reduce the carbon-foot-print by 10% from 2006 levels.

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On November 9th, Seijo Ishii, an upscale supermarket chain headquartered in Yokohama City, Kanagawa Prefecture, opened the chain's 75th store near Todoroki station in Setagaya Ward, Tokyo. Todoriki train station caters to Denenchofu and Jiyugaoka, which are Tokyo's renowned high-class residential areas. These residential areas are known as the battleground of upscale supermarkets, with upscale food chains like Kinokuniya, Shell Garden and Daimaru-Peacock all operating units within a walking distance from the station prior to Seijo Ishii's arrival. Having good performance as the tail wind, Seijo Ishii has been accelerating its pace of expansion in recent years. This year alone, the company opened 9 stores in their primary markets.

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One of the major C-store (C=convenience) chains, Family Mart, formed a business alliance with major consumer electronic store chain, Big Camera, and will experiment with catalog sales of Big Camera's products in approximately 480 outlets in Hokuriku and Shikoku area during October 12th through December 27th. During the period, consumer can select products from Big Camera's Home Electronics Selection catalog placed in Family Mart' stores, which contains approximately 60 home electronic products ranging from high ticket items such as 42" plasma TVs with Blu-ray recorder and refrigerators, to small appliances such as electric toothbrushes. To make a purchase, customers contact Big Camera's call center, place the order, inform the shipping address and obtain the order number from the operator, then enter the order number to Family Mart's multi-media terminal, Fami Port., Fami Port will print out the order receipt slip, that is used to settle the payment. The alliance will give Big Camera a new market opportunity since the chain does not have any stores in Hokuriku and Shikoku area and Family Mart seeks to gain customer traffic with the new service.

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*This web report is distributed by Diamond Friedman, a subsidiary of DIAMOND,Inc.

The Food Processing Sector in Japan remained strong during 2011 even with resulting consumer restraint after March 11. The Japanese market experience growth in 2011 and the U.S. continued their strong relationship with the Japanese market. The health, safety, prepared, and processed foods sectors showed increased demand. Key market drivers such as greater women in the workforce, an aging population, and health conscious consumers have led to product personalization, product convenience, and product innovations. The Japanese food processing industry remains a vibrant market.

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The events of March 11, 2011 affected the operations of the Japanese Retail Food industry, but even with the resulting consumer restraint, the Japanese market experienced growth in 2011. Convenience stores were first responders in the Northeast portion of Japan and developed mobile stores. Supermarkets continued to expand with AEON and Ito Yokado looking to develop city-style stores. Department stores unveiled new and renovated locations to reach customers. Overall market consolidation, mergers, and alliances continued in 2011. The growth of smartphone users for making purchases increased greatly in 2011, and is expected to remain a growing force for Japanese consumers in the years to come.

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The Japanese food processing industry was valued at US$255 billion or 22.6 trillion yen in 2010. Key market drivers such a strong health consciousness, growth of an aging population, and more women in the workforce have led to personalization of product packaging as well as greater demand for convenience and ready-to-eat foods. These factors indicate that demand for processed food products should continue to grow for the foreseeable future.

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Some say that Japan was moving into a period of economic growth right until March 11, 2011 and the Japanese retail industry was poised to improve on sales and revenues. But sales were severely restrained because of the Great Northeast Japan Earthquake and Tsunami. However, changes in the retail industry impacted industry alliances with the merger of department store giants Mitsukoshi and Isetan; the expansion of the Mitsubishi group food distribution network; the tie-up of two Eastern Japan supermarkets, Arcs and Universe; and headstrong competition between AEON and Seven & i Holdings.

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Japan was poised to reverse years of stagnation in the economy until the March 11 Great Eastern Japan Earthquake and Tsunami hit. Despite that setback, Japan continues to represent one of the best opportunities in the world for U.S. exporters of food products. The total food and drink market in Japan is huge, valued at around $745 billion. In 2010, the United States exported $12.5 billion worth of agricultural and fish products to Japan. There exist tremendous opportunities for U.S. exporters who are willing to follow the strict Japanese regulations and keep up with the fast-moving trends in this market.

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The Japanese food processing industry was valued at US$251 billion in 2009. Key market drivers such as personalization of product packaging as well as greater demand for convenience and ready-to-eat foods indicate that demand for processed food products should continue to grow for the foreseeable future. Health and functional foods also continue to increase in popularity, especially with the growth of the aging population.

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