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. 

Event-Driven

Walmart’s 18-year attempt to build a business in Japan ended last month when the US retailer announced it would sell 85% of its stake in Seiyu to KKR and Rakuten.Seiyu has been transformed under Walmart’s leadership although it is much smaller than when Walmart arrived.Now, with <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a> taking over, the hope is Seiyu could re-emerge as a leader in food e-commerce under Rakuten.The Seiyu chain could transform Rakuten’s logistics capability, allowing it to offer a comprehensive click &amp; collect service as well as use redundant store space for dark store fulfilment.What the new partners cannot afford to do is dither. Japan may well have room for more than one major online food retailer but just a couple of leaders will command the lion’s share.  <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a>’s partnership with <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1" rel="noopener">Life Corp (8194 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>’s Lohaco, <a href="https://www.smartkarma.com/entities/oisix-ra-daichi-inc" target="_blank" data-smartkarma-citation="entities:10145:1" rel="noopener">Oisix ra daichi (3182 JP)</a>, and, at some point, <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP)/</a><a href="https://www.smartkarma.com/entities/ocado-group-plc" target="_blank" data-smartkarma-citation="entities:22067:1" rel="noopener">Ocado Group PLC (OCDO LN)</a> are the ones to beat.Already the deal is causing a significant upset in supermarket and GMS retailing.

Walmart’s 18-year attempt to build a business in Japan ended last month when the US retailer announced it would sell 85% of its stake in Seiyu to KKR and Rakuten.Seiyu has been transformed under Walmart’s leadership although it is much smaller than when Walmart arrived.Now, with KKR &amp; Co Inc (KKR US) and Rakuten Inc (4755 JP) taking over, the hope is Seiyu could re-emerge as a leader in food e-commerce under Rakuten.The Seiyu chain could transform Rakuten’s logistics capability, allowing it to offer a comprehensive click &amp; collect service as well as use redundant store space for dark store fulfilment.What the new partners cannot afford to do is dither. Japan may well have room for more than one major online food retailer but just a couple of leaders will command the lion’s share.  Amazon.com Inc (AMZN US)’s partnership with Life Corp (8194 JP), Z Holdings (4689 JP)’s Lohaco, Oisix ra daichi (3182 JP), and, at some point, Aeon Co Ltd (8267 JP)/Ocado Group PLC (OCDO LN) are the ones to beat.Already the deal is causing a significant upset in supermarket and GMS retailing.

KKR & Rakuten Ignite Online Food Battle with Seiyu Purchase

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> hosted a business initiatives update for analysts last week, which provided some interesting updates on performance and fresh strategies, as we approach the end of the year. Apart from an update on sales, store closures and discontinued brands, the key initiatives discussed included the launch of a brand new Matahari.com and the collaboration with <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a> to provide branchless banking. 
There has been a choppy sales recovery since the end of 3Q2020 partly due to the fact that 42 out of 153 stores are still under transition from the last set of PSBB measures.
There has been a mixed performance across different departments with casual wear and children's wear performing well but formalwear, travel, and cosmetics underperforming. 
<a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> has discontinued seven direct-purchase (DP) brands and intends to write down the stock in these brands by the end of the year. 
<a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener"></a>The company intends to close a further six stores this year bringing the total number by the end of the year to 147 stores. There is a freeze on any new store openings next year with 23 stores under observation. 
<a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> only last week has launched its brand new Matahari.com, which is at its early stages and will be ramped up slowly as part of the company's omnichannel strategy.  
A key discussion point and the subject of a large portion of the questions in the recent analyst call was regarding the strategy behind the company's tie-up with <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a> to provide branchless banking services within Matahari stores. <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> has taken a 16.41% direct stake in <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a>.
No doubt <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> is cheap trading on 7.5x FY21E PER and 3.2x FY21E EV/EBITDA but there is still some uncertainty ahead, as it has a good number of underperforming stores still being monitored and its initiatives, appealing though they may be, will take time to gain traction.

Matahari Department Store (LPPF IJ) hosted a business initiatives update for analysts last week, which provided some interesting updates on performance and fresh strategies, as we approach the end of the year. Apart from an update on sales, store closures and discontinued brands, the key initiatives discussed included the launch of a brand new Matahari.com and the collaboration with Bank Nationalnobu (NOBU IJ) to provide branchless banking. 
There has been a choppy sales recovery since the end of 3Q2020 partly due to the fact that 42 out of 153 stores are still under transition from the last set of PSBB measures.
There has been a mixed performance across different departments with casual wear and children's wear performing well but formalwear, travel, and cosmetics underperforming. 
Matahari Department Store (LPPF IJ) has discontinued seven direct-purchase (DP) brands and intends to write down the stock in these brands by the end of the year. 
The company intends to close a further six stores this year bringing the total number by the end of the year to 147 stores. There is a freeze on any new store openings next year with 23 stores under observation. 
Matahari Department Store (LPPF IJ) only last week has launched its brand new Matahari.com, which is at its early stages and will be ramped up slowly as part of the company's omnichannel strategy.  
A key discussion point and the subject of a large portion of the questions in the recent analyst call was regarding the strategy behind the company's tie-up with Bank Nationalnobu (NOBU IJ) to provide branchless banking services within Matahari stores. Matahari Department Store (LPPF IJ) has taken a 16.41% direct stake in Bank Nationalnobu (NOBU IJ).
No doubt Matahari Department Store (LPPF IJ) is cheap trading on 7.5x FY21E PER and 3.2x FY21E EV/EBITDA but there is still some uncertainty ahead, as it has a good number of underperforming stores still being monitored and its initiatives, appealing though they may be, will take time to gain traction.

Matahari Department Store (LPPF IJ) - Slow Transition to Newness

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<a href="https://www.smartkarma.com/entities/wal-mart-stores-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Wal Mart Stores (WMT US)</a> will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP). </a>
This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.
The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. We previously suggested <a href="https://www.smartkarma.com/insights/walmart-will-relist-japan-unit-soon-and-at-last-has-potential-to-grow-but-only-online" target="_blank" rel="noopener">in this Insight</a> that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.
</div><div>
As described before <a href="https://www.smartkarma.com/insights/online-food-demand-brings-new-ideas-and-innovations" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/online-food-boom-rakuten-walmart-alliance-goes-live" target="_blank" rel="noopener">here</a>, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> in a joint venture with <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1" rel="noopener">Life Corp (8194 JP).</a> 
If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.
</div>


Wal Mart Stores (WMT US) will sell 85% of its stake in Seiyu, the Japanese general merchandise store (GMS) chain to KKR &amp; Co Inc (KKR US) and Rakuten Inc (4755 JP). 
This ends Walmart's original plans to relist its Japanese business and confirming widespread speculation that it has been trying to sell off its 330-store Japanese operation after 17 years of trying to turn the business around. The purchase price is a reported ¥172.5 billion, considerably less than the ¥441 billion Walmart paid for the business in 2007.
The deal is a win for KKR of course, but much more interestingly, is a huge win for Rakuten. We previously suggested in this Insight that should the Walmart/Rakuten deal not grow fast enough, Rakuten would be a natural acquirer of the Seiyu business and this has turned out to be true – and for good strategic reasons.

As described before here and here, the Japanese online food market is only just beginning to boom (penetration of food retail by online is still less than 3%) and many of the key players are jockeying for position, led by Amazon.com Inc (AMZN US) in a joint venture with Life Corp (8194 JP). 
If Rakuten can begin to properly exploit Seiyu's physical store presence to quickly build out a nationwide online food delivery business, it should rapidly become one of the leaders in this fast-expanding market. And given how important the food/FMCG category is, leadership in food e-commerce equals leadership in BtoC e-commerce overall.


The Walmart Japan Sell Off: A Huge Gain for Rakuten

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Leading Thai consumer company <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> had a reasonable start to the year but COVID-19 has taken its toll in 2Q2020, with lockdown measures and curfews forcing the closure of large swathes of its retail business. The alcohol ban also impacted its Mini BIGC business but its packaging business in Thailand and Vietnam has held up well. A conversation with management revealed an improving outlook from May onwards.
</div>
April was a tough month but May was better, with a gradual opening-up of malls and hard line and a relaxation of the alcohol ban. It was offset to some extent by increased online sales. 
The company has modified its store expansion and renovation plans slightly this year but remains positive over the longer term. 
<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a>'s bottling business had a good start to the year with some benefit from stocking up ahead of curfew and the temporary alcohol ban in Thailand but Malaysia saw a temporary shutdown given extended lockdowns, which was a drag.
The aluminium can business still adjusting for the gradual departure of <a href="https://www.smartkarma.com/entities/carabao-group-pcl" target="_blank" data-smartkarma-citation="entities:12027:1" rel="noopener">Carabao Group (CBG TB)</a> but margins are improving as it strategically shifts to new 500ml cans.
The company's consumer supply chain food business snacks business has seen some negative impact given these products are not necessities but other consumer products in non-food such as hand sanitiser, tissues, and wet wipes have more than offset this segment. 
<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> looks attractive from a historical perspective trading on 20.8x FY21E PER versus its 5-year avg forward PER of 29x. It also looks attractive versus its retail peers in Thailand, trading at a discount to both <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP ALL PCL (CPALL TB)</a> and <a href="https://www.smartkarma.com/entities/central-retail-corp-ltd" target="_blank" data-smartkarma-citation="entities:28240:1" rel="noopener">Central Retail (CRC TB),</a> despite having a more defensive profile.


Leading Thai consumer company Berli Jucker (BJC TB) had a reasonable start to the year but COVID-19 has taken its toll in 2Q2020, with lockdown measures and curfews forcing the closure of large swathes of its retail business. The alcohol ban also impacted its Mini BIGC business but its packaging business in Thailand and Vietnam has held up well. A conversation with management revealed an improving outlook from May onwards.

April was a tough month but May was better, with a gradual opening-up of malls and hard line and a relaxation of the alcohol ban. It was offset to some extent by increased online sales. 
The company has modified its store expansion and renovation plans slightly this year but remains positive over the longer term. 
Berli Jucker (BJC TB)'s bottling business had a good start to the year with some benefit from stocking up ahead of curfew and the temporary alcohol ban in Thailand but Malaysia saw a temporary shutdown given extended lockdowns, which was a drag.
The aluminium can business still adjusting for the gradual departure of Carabao Group (CBG TB) but margins are improving as it strategically shifts to new 500ml cans.
The company's consumer supply chain food business snacks business has seen some negative impact given these products are not necessities but other consumer products in non-food such as hand sanitiser, tissues, and wet wipes have more than offset this segment. 
Berli Jucker (BJC TB) looks attractive from a historical perspective trading on 20.8x FY21E PER versus its 5-year avg forward PER of 29x. It also looks attractive versus its retail peers in Thailand, trading at a discount to both CP ALL PCL (CPALL TB) and Central Retail (CRC TB), despite having a more defensive profile. 

Berli Jucker (BJC TB) - Calm After the Storm

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Despite the announcement of a 5bn GBP special dividend and a favourable macro environment for grocery, <a href="https://www.smartkarma.com/entities/tesco-plc" target="_blank" data-smartkarma-citation="entities:22187:1" rel="noopener">Tesco PLC (TSCO LN)</a> shares have been sanguine as we believe investors may be concerned about deal completion for Tesco and its Thailand and Malaysian assets. In this note, we discuss the latest news from Tesco regarding its Thai deal and perhaps other reasons for Tesco’s shares to be struggling, which we believe may be due to burgeoning matters in other parts of its business. We discuss these elements below.Our previous research on Tesco is here:<a href="https://www.smartkarma.com/insights/why-tesco-should-sell-not-its-thai-business" target="_blank" data-smartkarma-citation="insights:37004" rel="noopener">Why Tesco Should Not Sell Its Thai Business</a> <a href="https://www.smartkarma.com/insights/tesco-sells-thailand-to-cp-all-will-anti-trust-approve" target="_blank" data-smartkarma-citation="insights:37320" rel="noopener">Tesco Sells Thailand to CP All: Will Anti-Trust Approve?</a> <a href="https://www.smartkarma.com/insights/tesco-sells-thailand-to-cp-all-will-anti-trust-approve" target="_blank" rel="noopener"></a>

Despite the announcement of a 5bn GBP special dividend and a favourable macro environment for grocery, Tesco PLC (TSCO LN) shares have been sanguine as we believe investors may be concerned about deal completion for Tesco and its Thailand and Malaysian assets. In this note, we discuss the latest news from Tesco regarding its Thai deal and perhaps other reasons for Tesco’s shares to be struggling, which we believe may be due to burgeoning matters in other parts of its business. We discuss these elements below.Our previous research on Tesco is here:Why Tesco Should Not Sell Its Thai Business Tesco Sells Thailand to CP All: Will Anti-Trust Approve? 

Tesco/CP Group: Is Thai Asset Sale at Risk of a Deal Break?

United Kingdom

Tesco PLC is a British multinational retailer specializing in groceries and general merchandise. It operates various store formats, including hypermarkets, supermarkets, and convenience shops, alongside an extensive online marketplace. The company also offers banking, insurance, and telecommunications services. Tesco is headquartered in Welwyn Garden City, UK, and was founded in 1919.

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Tesco (TSCO LN)

KKR & Rakuten Ignite Online Food Battle with Seiyu Purchase

E-commerce has less than 3% share of Japanese food retailing. This will change dramatically in the next 3 years, led by Amazon but also by Rakuten...

Michael Causton

Matahari Department Store (LPPF IJ) - Slow Transition to Newness

Matahari Department Store's latest strategies such as the relaunch of Matahari.com and its collaboration with Bank Nobu seem sensible but it may...

Angus Mackintosh

The Walmart Japan Sell Off: A Huge Gain for Rakuten

We predicted the sale of Seiyu by Walmart to Rakuten and this is now happening (with KKR funding). It is a huge step for Rakuten in the war for...

Michael Causton

Berli Jucker (BJC TB) - Calm After the Storm

Leading Thai consumer company Berli Jucker (BJC TB) had a reasonable start to the year but COVID-19 has taken its toll in 2Q2020, with lockdown...

Angus Mackintosh

Tesco/CP Group: Is Thai Asset Sale at Risk of a Deal Break?

Despite the announcement of a 5bn GBP special dividend and a favourable macro environment for grocery, Tesco PLC (TSCO LN) shares have been...

Rickin Thakrar

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