Cafés/Bars in Japan

2020 IMPACT

COVID-19 measures deal a heavy blow to bars/pubs

The government announced a state of emergency on 7 April, with it requesting that non-essential retail and foodservice outlets close on a voluntary basis or at least reduce their hours, with most establishments complying with this request. As such, during the state of emergency bars/pub closed their doors.

Players adjust their business models to manage through the pandemic

Some players within cafés/bars responded better than others to the crisis and looked to create new opportunities to compensate for the loss of sales stemming from COVID-19. For example, many bars/pubs in Japan only open in the evenings, but with operators asked to stop serving alcohol after 19:00hrs some players started to open during the day offering light meals and refreshments, while some even started opening in the morning and offering breakfast.

Starbucks extends its lead with customers attracted to new products and menu items

Despite seeing a significant decline in sales in 2020 due to COVID-19, Starbucks Coffee Japan nonetheless extended its lead in cafés/bars with its value share increasing by three percentage points. The company’s growing lead is being driven by ongoing expansion of its store network and the frequent introduction of seasonally limited drinks, which have been well received by Japanese consumers.

RECOVERY AND OPPORTUNITIES

Challenges remain for bars/pubs but this could inspire new innovations

Bars/pubs is expected to return to growth in 2021 although the speed of recovery is largely dependent on the successful rolling out of Japan’s vaccination programme and the containment of COVID-19. With a rapidly ageing population Japan is exercising caution to prevent any significant rise in case numbers.

New smoking ban could detract from the desire to visit cafés/bars

Smoking in foodservice outlets was effectively banned by a law which came into force in April 2020, which had aimed to reduce the risk of the harmful impact of passive smoking ahead of the now rearranged 2020 Tokyo Olympics. While small privately owned restaurants with no employees are exempt, typical chained izakaya will be required to either ban smoking indoors or provide a separated smoking room.

Customer loyalty important in bringing consumers back into outlets

Gaining consumer loyalty will likely become increasingly important heading into the forecast period as competition intensifies, with repeat business being crucial to success. Not only are cafés/bars facing competition from within the channel and from other channels such as limited-service restaurants and full-service restaurants, but they are also likely to face the mounting challenge of consumers who choose to prepare and drink alcoholic and non-alcoholic drinks at home.