US fast-food chains return to Japan amid McDonald's backlash

Rebuffed once in the 1980s, a number of US fast-food chains from Taco Bell to Carl's Jr are flocking back to the land of tofu and sushi.

Their return comes amid a backlash in Japan against America's best-known burger brand - McDonald's - following a series of food safety scandals.

"In some ways, McDonald's slump is driving the entry of other foreign chains," says Hisakazu Matsuda, president of Japan Consumer Marketing Research Institute.

But the influx of foreign chains also underscores a broader shift in consumer trends away from the country's traditional fish and rice-based cuisine.

Just as Japan's sushi and ramen noodles are hits in New York and London, the country's younger generation are willing to queue for hours to eat Eggs 'n Things pancakes from Hawaii and to get hold of a $10 container of Garrett Popcorn from Chicago.

Government data show the consumption of rice in Japan has halved over the past half-century, while meat eating has more than tripled.

Demand for convenience cuisine has increased, with the proportion of food spending on dining out or eating ready-to-cook dishes now at about 44 per cent, from less than 30 per cent in the mid-1970s, according to Foodservice Industry Research Institute.

Word of the latest culinary booms in Paris or Los Angeles also spreads fast thanks to Twitter and social media, making it easier for foreign brands to gain a foothold in the Japanese market.

"The world has changed so much," Melissa Lora, president of Taco Bell International, said on the opening day of its first store in Tokyo a fortnight ago[Apr 21]. "People are interested in new and interesting flavours. It's the perfect timing for us."

Yum Brands, the Kentucky-based operator of Taco Bell, KFC and Pizza Hut, is trying to boost the international presence of its restaurants as sales wane in China due to food safety concerns. Last summer, one of Yum's suppliers - also used by McDonald's - was exposed selling out-of-date meat.

Mr Matsuda says companies are putting the lessons learnt from their brief stints in Japan in the 1980s to use by returning with strong local franchise operators and adapting to tastes.

Taco Bell, for instance, is selling shrimp and avocado burrito for Y590 ($4.94) and a taco rice bowl for Y530, both at prices cheaper than the ones offered at existing Mexican restaurants in Japan. Its outlets will also have an open kitchen format so consumers can see the ingredients going into their meals.

Combined with shifts in consumer tastes, prime minister Shinzo Abe's efforts to stoke inflation have also played a role. Yuiko Mitani, research analyst at Euromonitor, says the weaker yen against the US dollar makes it cheaper for US-based companies to invest in Japan. The relaxing of restrictions on imports of foreign beef have also helped, with conditions set to improve further if a Pacific trade deal can be reached between the US, Japan and 10 other countries.

In addition to Taco Bell, CKE Restaurants, which owns California-based burger chain Carl's Jr, plans to open its first store in Tokyo in the autumn and expand to 150 outlets across Japan in a decade.

New York burger chain Shake Shack, which went public in the US in January, is making its first foray into Asia with a store in Japan next year. It plans to open 10 stores by 2020. It is not just burger chains that are moving in: 800 Degrees Neapolitan Pizzeria, which operates mainly in California and Las Vegas, is set to open next year.

Industry experts say Japan will still be a tough market to crack for foreign chains. Burger chains such as Wendy's and Burger King have already withdrawn and returned with a much smaller footprint. Euromonitor data project that Japan's fast food market grew about 16 per cent in total to $43bn from 2009 to 2014, but is expected to expand at an annual rate of less than 1 per cent over the next three years, with the burger category declining most steeply.

Amid a global shift toward healthier foods, Shake Shack calls itself "fine casual", deliberately setting itself apart from traditional fast-food chains. It markets its ShackBurger, which costs about $3 more than a Big Mac in the US, as "100 per cent all-natural Angus beef. No hormones and no antibiotics ever".

"Shake Shack offers the fine dining experience in a more casual way that customers can enjoy at affordable prices. It's not a regular fast food restaurant," says Ryota Tsunoda, director of Sazaby League, its local partner, which also introduced Starbucks to Japan.

Among the crowds waiting in front of Taco Bell in Tokyo last week was Tomoko Ikeda, a 42-year-old web designer, who opts for fast-food chains that use a lot of vegetables. "I want to eat fast food that is healthier," Ms Ikeda said. "So I want to try Shake Shack next."

Menus only in Japan

It is no easy task trying to keep finicky Japanese consumers happy. To maintain their interest, foreign fast-food chains often go out of their way with quirky marketing campaigns. One of the longstanding favourite tactics is offering products that are limited to the Japanese market.

For this year's April Fools' Day, Burger King created a perfume with the scent of the patties of their Whopper burger with a catchphrase: "No Whopper, No Life. Wear it & Have it." The limited bottle of perfume called Flame Grilled Flagrance was sold for Y5,000 ($42) with a Whopper burger for one day only.

The perfume followed a burger last year wrapped in black buns and cheese coloured with bamboo charcoal, and topped with squid ink ketchup. The US chain returned to Tokyo in 2007 after a six-year hiatus. In September, Wendy's also offered a crab salad burger for Y820 that was only sold in Japan.

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