Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

The merger of <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co., Ltd. (3088 JP)</a> and <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a>, Matsukiyo-Cocokara, <a href="https://www.smartkarma.com/entities/cosmos-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:3797:1" rel="noopener">Cosmos Pharmaceutical (3349 JP)</a> and <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1" rel="noopener">Sugi Holdings (7649 JP)</a> the most likely contenders.

The merger of Matsumotokiyoshi Holdings Co., Ltd. (3088 JP) and Cocokara Fine (3098 JP) is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current Tsuruha Holdings (3391 JP) CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, Welcia Holdings (3141 JP), Matsukiyo-Cocokara, Cosmos Pharmaceutical (3349 JP) and Sugi Holdings (7649 JP) the most likely contenders.

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

Muji’s US bankruptcy and poor trading in Europe, along with weaker sales at home, led to <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a>’s first revenue decline in a decade and the first loss in 19 years. Growth in Asia and the promise of significant growth in the food category – an idea we are very bullish about – suggest hope for a rebound next year.

Muji’s US bankruptcy and poor trading in Europe, along with weaker sales at home, led to Ryohin Keikaku (7453 JP)’s first revenue decline in a decade and the first loss in 19 years. Growth in Asia and the promise of significant growth in the food category – an idea we are very bullish about – suggest hope for a rebound next year.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/033/original/2020-09-15_10-23-17.png?1600133037" class="editor-image img-responsive" data-smartkarma-image-id="159033"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>THE BUFFETT TRADE - Much has already written on <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway</a>'s purchase of stakes in Japan's sogo shosha, including on this <a href="https://www.smartkarma.com/insights/a-quick-look-at-the-buffet-trade-and-the-most-obvious-follow-ons" target="_blank" data-smartkarma-citation="insights:43125" rel="noopener">platform</a>. The Japanese trading houses have a long and proud tradition and continue to attract the best talent from at home and abroad. In many respects, they have similarities with BH given their long-term approach to investing and focus on free cash flow generation. The differences are as striking, particularly the exposure to commodities and Asia, and the implications for both BH and Japan are profound.In this DETAIL section, we examine: -<ul>
<li>the macro 'logic' driving these investments,</li>
<li>a more appropriate analytical and valuation methodology for these companies</li>
<li>the historically most-correlated peer groups and companies from both a technical and fundamental perspective if this trade were to be applied more broadly to the Japanese market. </li>
</ul><div class="content-highlight">We can summarise our approach to understanding the rationale behind the Buffett trade in the chart below. The sogo shosha are, in aggregate, significant generators of Residual Comprehensive Income, particularly relative to their current market valuations. Priced at a historically low 0.93x book, Japan's trading houses are one of the world's better deep value trades.</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/053/original/2020-09-15_13-42-01.png?1600144936" class="editor-image img-responsive" data-smartkarma-image-id="159053"></figure>

Source for all charts &amp; tables: Japan AnalyticsTHE BUFFETT TRADE - Much has already written on Berkshire Hathaway's purchase of stakes in Japan's sogo shosha, including on this platform. The Japanese trading houses have a long and proud tradition and continue to attract the best talent from at home and abroad. In many respects, they have similarities with BH given their long-term approach to investing and focus on free cash flow generation. The differences are as striking, particularly the exposure to commodities and Asia, and the implications for both BH and Japan are profound.In this DETAIL section, we examine: -
the macro 'logic' driving these investments,
a more appropriate analytical and valuation methodology for these companies
the historically most-correlated peer groups and companies from both a technical and fundamental perspective if this trade were to be applied more broadly to the Japanese market. 
We can summarise our approach to understanding the rationale behind the Buffett trade in the chart below. The sogo shosha are, in aggregate, significant generators of Residual Comprehensive Income, particularly relative to their current market valuations. Priced at a historically low 0.93x book, Japan's trading houses are one of the world's better deep value trades.

🇯🇵 JAPAN • Analysing The "Buffett Trade", Valuing the Sogo Shosha & The Return of Asian Inflation

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the Japanese market overall offers value investors rich pickings relative to valuations that had been getting more stretched by the day in other regions, especially the US. Below, we provide a quick synopsis of the trading companies’ business models and our thoughts on other potential investments that could attract Berkshire.

Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the Japanese market overall offers value investors rich pickings relative to valuations that had been getting more stretched by the day in other regions, especially the US. Below, we provide a quick synopsis of the trading companies’ business models and our thoughts on other potential investments that could attract Berkshire.

A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons

Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

<ul class="">
<li>We view Warren Buffett's move to invest in Japan's largest trading companies as being indicative of the lack of reasonably-valued opportunities in the US as well as the size disadvantage of Berkshire Hathaway;</li>
<li>While being in no place to judge the superinvestor's investment decision, we find better investment targets to "participate in the future of Japan," especially for those who manage a smaller AUM than Berkshire;</li>
<li>In this article, we list one superior-quality business that serves the backbone of Japan's economy (i.e., the SMEs);</li>
<li>Our investment strategy concentrates on quality from a business perspective and seeks long-term opportunities with a 10%-15% hurdle rate.</li>
</ul>


We view Warren Buffett's move to invest in Japan's largest trading companies as being indicative of the lack of reasonably-valued opportunities in the US as well as the size disadvantage of Berkshire Hathaway;
While being in no place to judge the superinvestor's investment decision, we find better investment targets to "participate in the future of Japan," especially for those who manage a smaller AUM than Berkshire;
In this article, we list one superior-quality business that serves the backbone of Japan's economy (i.e., the SMEs);
Our investment strategy concentrates on quality from a business perspective and seeks long-term opportunities with a 10%-15% hurdle rate.


One "Better" Quality Pick to Consider to Participate in the Future of Japan

Japan

Sumitomo Corp is a general trading company.  The Company imports and exports a wide variety of goods such as metals, machinery, chemicals, fuel,food products, and textiles.  Sumitomo also operates real estate, construction, shipping, insurance, finance, and leasing businesses.

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Sumitomo Corp (8053 JP)

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

The Japanese drugstore sector has seen a big merger but there will be more as the sector not only consolidates down to a few leaders but also...

Michael Causton

Muji Leaks Red After Tough Summer

Ryohin Keikaku (Muji) had a tough six months from March but its plans to grow food sales from around 6% to 30% of sales along with expansion in...

Michael Causton

🇯🇵 JAPAN • Analysing The "Buffett Trade", Valuing the Sogo Shosha & The Return of Asian Inflation

THE BUFFETT TRADE - Much has written on $ber

Campbell Gunn

A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons

Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the...

Mio Kato

One "Better" Quality Pick to Consider to Participate in the Future of Japan

Warren Buffett's Berkshire Hathaway

Urbem Capital

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