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No. 353, February 1999

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American Companies in Japan


The 17 independent COCA-COLA CO. bottlers in Japan — the second-biggest contributor to the soft drink giant's bottom line — long have resisted consolidation and the efficiency gains that mergers would bring to production and distribution. That finally is changing. In a tie-up apparently engineered by headquarters in Atlanta, KITA KYUSHU COCA-COLA BOTTLING CO., LTD. and SANYO COCA-COLA BOTTLING CO., LTD. will merge July 1 in a deal valued at $2.2 billion. The new, publicly traded company, COCA-COLA JAPAN CO., LTD., will be the largest bottler in Japan, with annual revenues estimated at $1.6 billion based on 1998 sales. It will be what Coca-Cola calls an anchor bottler, a company that can exploit economies of scale, tap capital markets for money to expand, boost sales and increase profits. Cola-Cola Japan will serve Fukuoka, Saga and Nagasaki prefectures on Kyushu, Kita Kyushu Coca-Cola's marketing territory, as well as Hiroshima, Okayama, Yamaguchi, Shimane and Tottori prefectures in western Japan, Sanyo Coca- Cola's sales area. Through COCA-COLA HOLDINGS WEST JAPAN CO., LTD., a subsidiary that it will form, Coca-Cola will own about 5 percent of the stock of the merged, Fukuoka-based business. Other major shareholders will be RICOH CO., LTD. (16 percent) and NICHIREI CORP. (8 percent), the top investors in the merging bottlers.

Big Macs will be available in Japan through at least 2030. MCDONALD'S CORP. and MCDONALD'S CO. (JAPAN) LTD. have extended a licensing agreement set to expire at the end of 2000 for another 30 years. McDonald's Japan, which has close to 2,900 outlets now and is gunning for 10,000 restaurants by 2010, is planning an IPO on the local OTC market. The sale is tentatively scheduled for 2002, by which time the company expects to be a $4.4-billion-a-year business. McDonald's, the world's largest food- service organization, will continue to own 50 percent of McDonald's Japan even after the sale of shares to the public.

Consumer spending might be on the skids, but lower property prices are encouraging more American restaurant chains to move into the Japanese market. The latest to announce plans is OUTBACK STEAKHOUSE INC. The Tampa, Florida business could have its first restaurant in operation at a yet-to-be-selected Tokyo location by the fall. According to current thinking, the company will own and manage its initial three or four locations before signing franchise agreements. It is projecting 200 restaurants across Japan within 10 years. Other newcomers include TGI FRIDAY'S INC. (see Japan-U.S. Business Report No. 352, January 1999, p. 16) and QUIZNO'S CORP. (see Japan-U.S. Report No. 349, October 1998, p. 17).

At a cost of $21.3 million, the subsidiary of premium ice cream maker HAAGEN-DAZS CO. has opened a second factory in Aramachi, Gunma prefecture as part of its strategy of producing products specifically for the Japanese market. The PILLSBURY CO. unit adopted this sales-boosting approach in 1995.

Some very American foods have arrived in Japan. KELLOGG CO.'s local operation has introduced two types of frozen bagels (plain and cinnamon raisin) as well as plain and banana bread frozen waffles. AJINOMOTO CO., INC. is handling distribution. For its part, AJINOMOTO GENERAL FOODS INC. is marketing smoothies, drink mixes that buyers freeze and then mix with cold milk. Frozen Club is available in three flavors: expresso, a strawberry, raspberry and blueberry combination and a tropical fruit mix.

An exchange rate of ¥117=$1.00 was used in this report.aaaaaa

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