The slowdown of the economic growth of China and emerging markets and the steep fall in natural resources and crude oil prices have been increasing anxiety regarding the global market, while negative interest rates and speculations on the consumption tax increase, sudden drop in stock prices due to foreign exchange fluctuations, continue to keep the Japanese economy is uncertainty. In addition, the tight labor market has been giving rise to personnel costs, increasing the challenges for the restaurant industry. Given such circumstances, we implemented the “Sagami Group Philosophy” for us to have a common and shared thinking, values, and behavioral principles and to strengthen our thinking from the customer perspective. In terms of our business performance, as a result of transfers of parts of our business and the change in the business operations in China from direct operations to franchise operations, our revenues fell short of our budgeted plans, but our profits exceeded our plans. On March 1, 2016, 6 outlets of a Japanese cuisine restaurant, Hamacho, in the Kanagawa prefecture joined our group, of which one outlet was converted into Sagami brand. This was the first “Sagami” to open in 8 years and sales have been performing well. Our core restaurant, Sagami, expanded its delivery operations and executed measures such as unique menus for each outlet, increase of the internal owner system of outlets, and as a result sales increased by 103.8% over the previous year. Ajino-Mingei Food Service, which joined the group in January 2014, achieved profitability in the first half of 2014 and in its second year of operations in 2015, all outlets were profitable and we are sure it will continue to contribute to the group. With regard to our overseas business, we participated in the “Milan Expo” and had a booth in the Japan Pavilion from May 2017 for six months. In the long history of expos, this was the first time that “food” was the main theme of the expo, and as it was held in Italy, the home of pasta, we thought our participation would contribute to the realization of our vision. Our sales were 1.5 times what we had ambitiously planned, and were able to end our participation with a huge success. We mainly served Tenzaru (cold buckwheat noodles with Tempura), Tempura Soba (hot buckwheat noodles with tempura), and Tenmusu (rice ball with a tempura inside) at the Milan Expo, and as the leading company of “Soba” and “Nagoya-Meshi” we think we were able to raise awareness of the Sagami name to the world. With regard to the ASEAN countries, which remain our area of focus for our outlet roll-out, we opened “Sagami Aeon Mall BSD City” in Jakarta, Indonesia in May 2015, and “Sagami Silom Complex” in Bangkok, Thailand in January 2016. With these recent openings, we now have a total of 7 outlets in the Asia region. We introduced Soba at the Japan Healthy Lifestyle Exhibition held in Vietnam, Thailand, Myanmar, and also served Soba at the Jakarta Japan Festival held in Indonesia. As the leading restaurant in Soba, we will continue our efforts in promoting and raising the awareness of Soba.
Initiatives for FY 2016
The recent Japanese economy continues to be fraught with uncertainty with the downturn risks of the economy as well as the prolonged economic slowdown of China. In our company, a series of reforms have been bearing fruit, such as “consciousness reform”, “system reform”, and “organizational reform”. In 2016, with the slogan “Let’s Master!” we will engage in our business aggressively and encourage our staff to “think for themselves”, “master their craft”, and “take the initiative and act”. This fiscal year, we prepared a “Rolling Plan 2018” for our new 3-year medium-term business plan, for the first time. We will be reviewing the plans every year so that we could be flexible in responding to the quickly changing business environment. We have been executing a test marketing case of Soba and Nagoya-Meshi (specialty food from Nagoya area) in Milan, Italy, since April 13. Because we saw great success at the Milan Expo, we will be opening an outlet in the city to determine our business potential and viability in an open and public location as opposed to a closed location like the expo. Although it will be opened for only a limited time until May 30, as of now, we have received a favorable reputation and going forward, we would like to consider opening in Europe as well. In July, we are planning the opening of our 2nd outlet in Vietnam, and we are moving step-by-step towards the realization of our group vision as the “No. 1 Noodle Restaurant Company”.
In closing, we thank you and request for your continued support and encouragement as we move ahead.
Toshiyuki Kamada, President and COO (May 11, 2016)