All photos by Euromonitor International
The self-service cafeterias category isn’t generally seen as much of a global growth opportunity, but a new trend of high-quality, low-priced udon noodle chains sweeping across Japan has made it the fastest growing category in the highly mature market. Driven by two major chains, Marugame Seimen and Hanamaru Udon, Japan self-service cafeterias have averaged 5% in annual sales growth from 2007-2012, even in a market that saw a 2% decline in foodservice value as a whole.
Leader Marugame Seimen has grown very quickly, jumping from just over 100 outlets in 2007 to nearly 700 in 2012, and it’s easy to see why. The concept offers fresh, healthy, high-quality food at very low prices and very high speeds, appealing to busy professionals at lunch and price-conscious families for dinner. Udon is a thick Japanese noodle made from wheat flour that is commonly served with or without broth or sauces, and often topped with scallions, tempura, balls of rice or fish cakes. The format also allows for customers to take control of their dining experience from start to finish, choosing their own portion size, ingredients, toppings and seasonings, and paying only for what they really want. This kind of customisation is very appealing to modern urban consumers in mature markets, who have grown increasingly discriminating amidst a highly competitive market.
To gain a better understanding of just how the chain has managed to breathe new life into a relatively stagnant category, Euromonitor International visited a Tokyo outlet to observe the brand at work.
Key Features Include:
- Self-service format: Customers at Marugame Seimen design their own dish from start to finish. First they choose how they would like their udon from a range of options, including plain noodles in a traditional wooden bowl, noodles in various types of broth, or with additions such as a boiled eggs or dipping sauces. Customers also specify whether they would like their udon served hot or cold, and choose from between two portion sizes. Next, customers can choose to add as much tempura and omusubi (rice wrapped in seaweed with various toppings) as they would like, then finish their dish off with various sauces, condiments and spices such as tempura crumbs, Welsh onion, fresh ginger and wasabi. Adding to the flexible format, customers choose their own table and return their dishes to a designated counter after eating.
- Fresh, homemade ingredients: Contrary to many concepts that compete at the lowest price tiers, Marugame Seimen makes its ingredients and cooking methods one of the foundations of its branding. Each outlet makes its own Sanuki-style udon, a variety popular in the Shikoku region characterised by a square shape and flat edges, in-house each day by hand, from a blend of 100% Japanese wheat, flour, salt and water. Soup bases are also prepared daily and in small batches, using fresh fish as a base as opposed to dried.
- Very low pricing: Despite this attention to quality, an average meal at Marugame Seimen costs just ¥500 (US$6.26), and average spend per transaction in 2012 was just ¥747 (US$9.35), comparable to Japan’s fast food average. This kind of pricing makes the chain all the more appealing to Japanese consumers who are, as a whole, very price-conscious, and gives them a low price option that doesn’t necessitate sacrificing in quality of healthfulness. Part of the reason costs are so low is the chain’s streamlined menu, which minimises waste and supply costs, but the format is also a major factor. Marugame Seimen has managed to make the self-service format feel like a benefit, when in fact it allows the company to keep labour and operating costs low enough to maintain high margins despite low price-points.
- Rapid service: The self-serve format also allows for quick and convenient service, which is also particularly appealing. Being busy is nearly a way of life in Japan, especially for office workers who tend to work very long hours and take little vacation. As a result, quick, affordable, and most importantly, healthy, lunch options are a must.
- Broad appeal: With this positioning comes the ability to appeal to multiple segments of the population. While professional workers drawn by the dual prongs of quality and convenience form the chain’s largest customer base, the chain also appeals to families who are looking for a healthy, inexpensive dining-out option for dinner or lunch on the weekends. Finally, the chain also serves multiple dayparts, which contributes to its broad appeal. Lunch and dinner are its primary focus, but some outlets also serve a hot breakfast primarily to late-night shift workers.
Next Stop, the World?
Ultimately, this chain has been successful because it meets all of the demands of modern Japanese consumers while offering an exciting, appealing menu that feels innovative enough to set itself apart. With this positioning, Marugame Seimen has achieved average annual value growth of 51% from 2007-2012, and absolute growth of nearly US$692 mn (¥55 bn) over the same period, growing to claim 30% of the local self-service cafeteria market along the way.
While it’s unlikely this particular trend will reach global or even regional status immediately over the short-term, it serves as yet another example of the changing preferences of sophisticated consumers in urban, developed markets. Consumers worldwide continue to look for more flexible, customizable foodservice options that offer high quality at lower prices and a wide variety of formats. In fact, our recent store visit to a Vapiano self-service cafeteria outlet in the US highlighted a similar strategy despite very different cuisine and outlet design. Consumers are growing increasingly willing to experiment with foodservice formats, especially with those concepts that are willing to hand over control of the dining experience. Adding entertainment value by bringing the customer into the ordering process has also become popular, allowing the format to become a part of the dining experience.
These kinds of formats which trade heavily on customization however, also come with an inherent risk: At some point, too much choice can be overwhelming, especially for new customers. Marugame Seimen deftly maneuvers this challenge by offering a streamlined menu of a single, popular dish, allowing customers only enough options to ensure that no matter their choices, they will still end up with a pleasurable meal. This strategy echoes the menu format of US fast-casual chain Chipotle Mexican Grill, which has almost singlehandedly spawned a global movement of imitators with similarly modular menus. Like Chipotle, Marugame guides customers through the ordering and customization of their dish, offering control while still minimizing failure.
Even beyond formats and branding, however, the rise of self-service udon bars in Japan is significant because it has the potential to spur growth in an entirely new chained foodservice niche. Consumers in many developed markets continue to seek out new Asian dining experiences, and noodle bars have just the right combination of the familiar and the exotic to maximise appeal. In addition, their particular brand of fresh, high-quality, ingredient-focused positioning combined with relatively low prices and a premium dining experience is seeing growth all over the world, based on what are rapidly becoming the universal preferences of upper-income urban consumers. So far, Marugame Seimen has made only tentative forays into overseas markets, opening outlets in Russia and London in late 2013, but grander expansion plans have yet to be discussed. When that time comes, however, current trends in consumer preferences and format innovation suggest they may find many new consumers who are eager to make their first visit.