Kura Sushi, a leading Japanese conveyor-belt sushi chain, opened its first outlet in Mainland China in June 2023, as part of its global expansion plans. With this, it joins the ranks of several Japanese restaurant operators who are aggressively scaling up their overseas presence. Besides targeting revenue growth in the immediate future, the diversification move is part of the Japanese operator’s long-term play to ensure business continuity. Japanese operators are accelerating overseas expansion even as the domestic foodservice sector is set to expand by a value compound annual growth rate (CAGR) of 10% over 2023–27*, according to GlobalData, a leading data and analytics company.
Bobby Verghese, Consumer Analyst at GlobalData, comments: “Kura Sushi operates 541 conveyor-belt sushi (Kaiten-zushi) outlets in Japan, 47 in the US, and 51 in Taiwan (Province of China). The company’s new China outlet is located in a bustling shopping center in Shanghai close to three subway lines. The restaurant is fully automated, with robot sushi chefs preparing dishes, circular conveyor belts that carry dishes to diners, and contactless ordering and payments. Kura Sushi offers a menu comprising a mix of Japanese dishes and China-only dishes. The company plans to source 80% of its ingredients locally to optimize costs. Kura Sushi aims to open 100 stores across China by the end of the decade, in line with its plan to expand its overseas locations to 400 stores, and worldwide network to 1,000 outlets by 2030.”
Tim Hill, Key Account Director at GlobalData Singapore, remarks: “With consumers dining out more often, the Japanese foodservice sector is recuperating from the impact of the pandemic. However, inflationary pressures and economic uncertainty are stifling consumer spending. As they operate at a higher cost-price ratio than conventional sushi restaurants, Kaiten-zushi restaurants are bearing the brunt of the surge in seafood prices due to the Russia–Ukraine conflict, rising competition with China for seafood catch and supplies, and the global climate change phenomenon. Moreover, fierce competition among outlets and an ongoing labor crunch are constraining the growth of per-outlet transaction revenues. The rapidly greying populace and shrinking working class cloud the long-term outlook of sushi quick service restaurants (QSRs).”
Verghese notes: “In sharp contrast to Japan, both the Chinese and US foodservice sectors rebounded from the pandemic lull in 2021 and 2022, respectively, in terms of transaction numbers and revenues. As a result, Japanese foodservice operators are setting their sights on bluer oceans abroad, particularly larger overseas markets with high-spending crowds, such as China and the US, which offer more dollar revenue opportunities than Japan. By expanding overseas, these operators can thereby accelerate their post-COVID-19 recovery and ensure long-term business continuity.”
Hill concludes: “Due to their high-tech ambiance and fresh offerings, conveyor-belt sushi chains have rapidly gained popularity in Taiwan (Province of China), Hong Kong, Singapore, Mainland China, and the US over the past decade. Among these, China holds the highest potential owing to the similarities between Japanese and Chinese cuisines. While Japan is the larger market for sushi QSRs, the Chinese market is set to narrow the gap significantly in the coming years. However, any fresh geopolitical conflicts between Japan and China can mar the performance of the Chinese outlets.”