Food & Society Guest Memo: While It Won't Result in Starvation; Japan Faces Self-Created Butter Shortage None the Less

Butter spread thin in Japan

Bread is buttered on neither side as the milk product has become hard to find. There are reasons, but try telling that to the bakeries.

By Bruce Wallace, Los Angeles Times Staff Writer

May 18, 2008

TOKYO -- The food shortage that has hit Japan is announced by the glaring gap on supermarket shelves next to the margarine and the sour cream and just above the cheese.

The butter shelf is empty.

The rich yellow stuff has all but vanished from grocery stores across Japan, with the world's second-biggest economy, where fine foods are prized and aisles otherwise groan with abundance. Some stores have tried to ration the few bricks that occasionally arrive by limiting customers to a pack or two, but in most places merchants have been reduced to posting signs apologizing for having none.

Nor does anyone know when butter will be back. Japanese milk production has dropped over the last two years, leaving less available to be churned into butter.

Even bakeries that buy in bulk are finding it hard to get enough, which crimps their ability to turn out the croissants, cakes and quiches that have shouldered their way into the Japanese diet.

"We're in trouble," says Seiko Nakano, 27, who runs Levain, a small but well-known French bakery in a residential neighborhood of Tokyo, who has been told she will not receive any more butter until Tuesday, a month later than expected.

In an attempt to stretch its stock, the bakery has cut down on the number of pies it produces and cut out the extra croissants it usually bakes for the weekend rush.

"We've had to come up with some new items that use less butter, like cookies," Nakano says, standing in front of cleaned-out shelves on a weekday afternoon. "But you're talking about flavor. How can you replace butter?"

As global food shortages and ballooning prices are rocking the desperately poor from Africa to Southeast Asia, Japan's pastry problems qualify as barely more than an inconvenience. No one expects the famously controlled Japanese to riot in the refrigerated sections of supermarkets.

But the case of the disappearing butter has unnerved people here, delivering a psychological blow to shoppers utterly unaccustomed to dealing with shortages.

The butter deficit arises from a convergence of market factors that has chased hundreds of domestic dairy farmers out of business in the last two years. The sequence began when Japanese consumers began to drink less milk, a decline that coincided with a deluge of media coverage airing claims that milk is bad for your health.

Experts say consumption also has been affected by a low birthrate, which means fewer elementary school students getting a free daily carton.

The shrinking demand left the country so awash in milk two years ago that producers on the northern island of Hokkaido were dumping it down sewers. A Hokkaido beer company tried to use some of the excess by brewing a low-malt beer that was one-third milk. Called "bilk" and described as having a sweet taste, the concoction didn't catch on.

But though popularity has declined for milk as a beverage, its use in the production of cheese is expected to jump 15% this year, and demand for the less profitable butter holds steady. The result, the Japanese dairy association explains, is that there is not much milk left to make butter.

"We have plenty of milk; just no butter," dairy deliveryman Kazunari Shimakura says as he unloads cartons of milk outside Levain. Shimakura had never seen a shortage in his 20 years of delivering supplies. When he parks his truck these days, people come up to ask whether he can sell them a pack or two of butter on the side.

Last month, the government stepped in to urge the country's four largest dairy product companies to churn out more butter. And the agriculture board is moving up its scheduled purchases of butter imported from Australia and elsewhere by six months in an attempt to get some back on the shelves. Japan imports about 10% of its butter, but usually does not go to international markets until fall.

This year's butter imports are expected to hit an all-time high and are almost certain to send prices sharply higher.

Small-Format Grocery Retailing Memo: Stretching the Boundaries of Convenience Store Retailing; Some Say Japan's Natural Lawson is Awesome

Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramon noodles are. There are about 40,000 combini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest combini operators in Japan--in addition to market share leader Seven-Eleven Japan, Circle K Sunkus (number two) and number three FamilyMart,--is Lawson, which operates 8,400 convenience stores in all 47 of the nation's prefectures.

If the name Lawson sounds American that's because it is. The origin of the Lawson name originated in the U.S. state of Ohio in 1939. A man named J.J. Lawson started up a milk business there called Lawson's Milk, and opened a chain of store's in the state to sell his milk. The milk stores evolved into convenience-type stores and in 1959 Consolidated Foods Co. bought out Lawson.

In 1974, Consolidated Foods partnered with Japanese food retailer Daiei to open the first Lawson branded convenience store in Osaka in 1975. Daiei opened many more Lawson stores throughout the 1970's and 1980's. In 1989, Daiei merged another chain called Sun Chain which it operated in Japan, with Lawson and created Daiei Convenience stores. In 1996, the combined operation was renamed Lawson, Inc., with all the stores getting the Lawson banner.

The Lawson banner is long gone in the U.S. Its stores all became Dairy Mart convenience stores in the states over a decade ago.

The majority of the 8,400 Lawson combini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other formats in Japan. The first is called Lawson Store 100, a 20-store chain which sells various items for 100 yen each. It's similar to a dollar or 99-cents store in the U.S.

Lawson's other format, and the one of interest in this piece, is called Natural Lawson. It's an upscale, high-end convenience store format positioned to serve Japanese women and the nation's seniors rather than salarymen. Salarymen are working men in Japan. Like their counterpart convenience stores in the U.S. and Europe, which traditionally target men, the majority of Japan's c-stores still do the same.

There currently are about 24 Natural Lawson small-format convenience stores in Japan, with 12 located in Tokyo. The stores' offer a broad selection of foods and other items for shoppers. The focus is on health and wellness, and increasingly on upscale, fresh prepared foods, along with natural and specialty groceries and non-foods.

Specialty foods brands line Natural Lawson's shelves and perishable cases. There's locally-grown produce, including organic, provided by a local Japanese farming collective. Organic groceries, coffee, teas and other foods and beverages are plentiful in the stores. High-end, all natural cosmetics for woman are offered for sale along with other natural health and wellness-oriented items, including those for pets.

An area Natural Lawson is moving further into is offering a diverse selection of healthy, upscale-quality fresh prepared foods, breads and related items. For example, the natural c-store retailer sells an all-natural healthier version of the popular bento lunchbox, which is a staple of Japan's working class. Basic bento boxes are sold in all of the nation's conventional convenience stores.

Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of high-end sandwich and delicatessen stores in Japan. The stores' prepared food items are all homemade, using natural ingredients with no food additives, preservatives or artificial colors. NaturalBeat also has a subsidiary called Wholesome Co. Ltd. which produces all natural healthy fresh breads and other baked goods.

All Natural Lawson convenience stores are now selling NaturalBeat's healthy, upscale-quality prepared foods, including sandwiches, salads, entrees and other grab-and-go items. The stores also are featuring the healthy fresh breads and baked goods produced by Wholesome Co. Ltd. Fresh, prepared foods--especially all natural and upscale--are a rarity in Japan's combini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to focusing on its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident at all when its first stores opened in 2001.

Today's stores reflect the retailer's target market and positioning. Soft colors and natural woods are used inside the stores, appealing to the retailer's prime target shopper--women. There's no neon lighting like in Japan's typical conventional combini. Instead, soft, recessed lighting is used throughout the stores, complementing the natural woods and pastel colors. Many of the stores have a bar area where shoppers can lounge, and where trained staff members give out health, wellness and beauty tips. Additionally, Natural Lawson uses an upscale, attractive font-style and natural motif graphic for its logo on the signs outside each store, inviting shoppers to come inside.

The stores' brand--via its design, merchandising and product offerings--says Natural Lawson is the place to shop for premium, natural and healthy merchandise in a convenient format. This is still new to Japanese shoppers who are used to going to a combini to get coffee, tea, soft drinks, pastries and other basic convenience items. Conventional c-stores in Japan also are popular for offering mobile phones, fax services, ticket sales, photocopies and other similar service-type offerings.

There's a space in Japan's huge convenience store market for something other than traditional combini retailing, which is what Seven-Eleven Japan, Circle K and in the main Lawson itself does with all but its 24 Natural Lawson and 20 100 yen format stores. This is especially true when it comes to quality fresh prepared food and meals merchandising. It's nearly non-existent in the nation's c-stores. You can get a sandwich, standard bento box and other very basic grab-and-go prepared foods' items, but that's about it.

In fact, Natural Lawson is getting some competition in Japan in this yet to be proven merchandising niche of fresh prepared foods from British retailer Tesco. Tesco is opening a Japanese version of its popular and successful Tesco Express format stores in the nation that loves convenience stores. Tesco Express stores are a mix of convenience store and small supermarket, typically selling high-quality fresh foods, prepared meals and other offerings found in Tesco supermarkets but offered in convenience store-sized urban settings.

The British retailer, parent company of small-format Fresh & Easy Neighborhood Market in the U.S., is opening 25 of these Express stores to start in Japan. The stores will sell basic grocery and other items along with lots of fresh prepared foods, meal solutions and quality grab-and-go items, as well as some other fresh and specialty grocery items. Tesco already has some of its Express format stores in Thailand through its Tesco Lotus division in that country.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end combini for fresh, natural and quality foods, but also as a destination for busy urban Japanese women who want quality natural health and beauty items in an attractive and comfortable setting designed with them in mind.

There's no question Japanese consumers love their combini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a combini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a combini on every other corner. To put it in perspective, the U.S. has about 24 times more land mass than Japan does--but it has only half as many 7-Eleven's.

Natural Lawson is stretching the definition of "convenience store" not only just in the c-store capital of the world Japan but internationally as well. Just as Tesco is importing its brand of "Express" convenience retailing to places like Eastern Europe, Japan and the USA, it will be interesting to see if retailers in these western countries pick up on what Natural Lawson is doing with its 24 stores in Japan and try a similar format at home, in the U.S. or Europe.

To a degree it's happening in the U.S. already. In addition to Tesco's Fresh & Easy stores, 60 of which have thus far opened in California, Arizona and Nevada, there's Trader Joe's (a somewhat similar format to Natural Lawson), Wawa, an upscale convenience store operator in the Eastern U.S. which puts a major focus on fresh prepared foods, Giant Eagle Express and a couple others.

Additionally, as we've reported, Wal-Mart plans to open it's own version (4-5 stores) of a small-format, hybrid basic grocery and fresh and specialty foods market called Marketside in the Phoenix, Arizona region this summer. Safeway Stores, Inc. also plans to open 4-5 new, small-format hybrid grocery markets in the San Francisco Bay Area as well this summer.

Further, Whole Foods Market, Inc. is in the process of opening its own upscale, all natural convenience-type store in Boulder Colorado. The store, called Whole Foods Express, will be a prototype for the supernatural foods retailer in terms of natural products retailing in a smaller, convenience-oriented format. The store will be about 14,000 square feet. In Japan that's considered a big store, especially in Tokyo. For Whole Foods its radically small, especially since the grocer's average new lifestyle natural supermarkets range from about 55,000 to 80,000 square feet.

In Western Europe, Tesco pioneered the Express convenience format. There are a few other players who've joined the market niche as well, with more considering doing so. Tesco's also taken it's Express format creation to Eastern Europe, especially Poland, where its small-format, hybrid Express stores are doing extremely well. And, of course, Tesco Express was the inspiration for the retailers small-format, combination basic grocery and fresh and specialty foods Fresh & Easy Neighborhood Market grocery stores in the U.S.

None though are doing quite what Natural Lawson is doing in Japan, with it's combination of quality natural-organic foods, non-foods and health, wellness and beauty offerings. If Natural Lawson can bring a new definition to convenience retailing in Japan--or at least add to the current definition--it could create a solid niche for itself among those its targeting--busy women and seniors who many think aren't currently being fully-served by the nation's conventional combini.

Men like natural products offerings too, even if they aren't the primary target market. And in Japan, like elsewhere, men buy lots of gifts for the women in their lives. That's another market Natural Lawson should look at.

Monday Marketing Memo: Retail Format Innovation

Stretching the boundaries of convenience store retailing: Japan's Natural Lawson is awesome

Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramen noodles. There are about 40,000 conbini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest conbini operators in Japan, in addition to market share leader Seven-Eleven Japan, Circle K Sunkus and FamilyMart, is Lawson, which operates 8,400 convenience stores in all 47 of the nation's prefectures.

If the name Lawson sounds American that's because it is. The origin of the Lawson name originates in the U.S. state of Ohio in 1939. A man named J.J Lawson started up a milk business there called Lawson's Milk, and opened a chain of store's in the state to sell his milk. The milk stores evolved into convenience-type stores and in 1959 Consolidated Foods Co. bought out Lawson.

In 1974 Consolidated Foods partnered with Japanese food retailer Daiei to open the first Lawson branded convenience store in Osaka in 1975. Daiei opened many more Lawson stores throughout the 1970's and 1980's. In 1989 Daiei merged another chain, Sun Chain, it operated in Japan with Lawson and created Daiei Convenience stores. In 1996 the combined operation was renamed Lawson, Inc., with all the stores getting the Lawson banner.

The Lawson banner is long gone in the U.S. Its stores all became Dairy Mart convenience stores in the states over a decade ago.

The majority of the 8,400 Lawson cobini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other c-store formats in Japan. The first is called Lawson Store 100, a 20-store chain which sells various items for 100 yen each. It's similar to a dollar or 99 cents store in the U.S.

Natural Lawson's key target market is women. Many of its stores also have female managers, which isn't traditional in Japan's convenience store industry. Pictured above is Shodo Yuka, manager of one of the retailer's Tokyo stores.

Lawson's other format, and the one of interest in this piece, is called Natural Lawson. It's an upscale, high-end convenience store format positioned to serve Japanese women and the nation's seniors rather than salarymen. Salarymen are working men in Japan. Like their counterpart convenience stores in the U.S. and Europe, which traditionally target men, the majority of Japan's c-stores still do the same.

There currently are about 24 Natural Lawson stores in Japan, with 12 located in Tokyo. The stores' offer a broad selection of foods and other items for shoppers. The focus is on health and wellness, and increasingly on upscale, fresh prepared foods, along with natural and specialty groceries and nonfoods. Specialty foods brands line Natural Lawson's shelves and perishable cases. There's locally-grown produce, including organic, provided by a local Japanese farming collective. Organic groceries, coffee, teas and other foods and beverages are plentiful in the stores. High-end, all natural cosmetics for woman are offered for sale along with other natural health and wellness-oriented items.

Premium, all natural international brands and products like Starbucks share shelf space with locally-produced Japanese brands in Natural Lawson convenience stores.

An area Natural Lawson is moving further into is offering a diverse selection of healthy, upscale-quality fresh prepared foods, breads and related items. For example, the natural c-store retailer sells an all-natural healthier version of the popular bento lunchbox, which is a staple of Japan's working class. Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of sandwich and delicatessen stores in Japan. The stores' prepared food items are all homemade, using natural ingredients with no food additives, preservatives or artificial colors. NaturalBeat also has a subsidiary called Wholesome Co. Ltd. which produces all natural healthy fresh breads and other baked goods.

All Natural Lawson convenience stores are now selling NaturalBeat's healthy, upscale-quality prepared foods, including sandwiches, salads, entrees and other grab-and-go items. The stores also are featuring the healthy fresh breads and baked goods produced by Wholesome Co. Ltd. Fresh, prepared foods--especially all natural and upscale--are a rarity in Japan's cobini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident when the first stores opened in 2001. Today's stores however reflect the retailer's target market and positioning. Soft colors and natural woods are used inside the stores, appealing to the retailer's prime target shopper--women. There's no neon lighting like in Japan's typical conventional cobini. Instead, soft, recessed lighting is used throughout the stores, complementing the natural woods and pastel colors. Many of the stores have a bar area where shoppers can lounge, and where trained staff members give out health, wellness and beauty tips.

Natural Lawson uses an upscale, attractive font style and natural motif graphic for its logo on the signs outside each store, inviting shoppers to come inside.

The stores' brand--via its design, merchandising and product offerings--says Natural Lawson is the place to shop for premium, natural and healthy merchandise in a convenient format. This is still new to Japanese shoppers who are used to going to a cobini to get coffee, tea, soft drinks, pastries and other basic convenience items. Conventional c-stores in Japan also are popular for offering mobile phones, fax services, ticket sales, photocopies and other similar service-type offerings.

There's a space in Japan's huge convenience store market for something other than traditional cobini retailing, which is what Seven-Eleven Japan, Circle K and in the main Lawson itself does with all but its 24 Natural Lawson and 20 100 yen format stores. This is especially true when it comes to quality fresh prepared food and meals merchandising. It's nearly non-existent in the nation's c-stores. You can get a basic sandwich and other prepared foods like in U.S. convenience stores, but that's about it. ( Basic bento boxes and versions of a few other traditional Japanese foods are available at some conventional stores.)

In fact, Natural Lawson is getting some competition in this yet to be proven merchandising niche of fresh prepared foods from British retailer Tesco. Tesco is opening a Japanese version of its popular and successful Tesco Express stores in the nation that loves convenience stores. Tesco Express stores are a mix of convenience store and small supermarket, typically selling high-quality fresh foods, prepared meals and other offerings found in Tesco supermarkets but offered in convenience store-sized urban settings.

The British retailer, which also is opening similar stores in the U.S. under the Fresh & Easy Neighborhood Markets banner, is opening 25 of these Express stores to start in Japan. The stores will sell basic grocery and other items along with lots of fresh prepared foods, meal solutions and quality grab-and-go items, along with other fresh and specialty grocery items.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end cobini for fresh, natural and quality foods, but also as a destination for busy urban Japanese women who want quality natural health and beauty items in an attractive and comfortable setting designed with them in mind.

Natural Lawson cobini (convenience stores) even have all natural pet treat and upscale pet toy sections for man's (and women's) best friends.

There's no question Japanese consumers love their cobini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a cobini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a cobini on every other corner. To put it in perspective, the U.S. has about 24 times more land mass than Japan does--but it has only half as many 7-Eleven's.

Natural Lawson is stretching the definition of "convenience store" not only just in the c-store capital of Japan but internationally as well. Just as Tesco is importing its brand of "Express" convenience retailing to places like Eastern Europe, Japan and the USA, it will be interesting to see if retailers in these countries pick up on what Natural Lawson is doing with its 24 stores in Japan and try a similar format at home, in the U.S. or Europe.

To a degree it's happening in the U.S. and Europe already. In addition to Tesco's Fresh & Easy stores, eleven which have thus far opened in California and Nevada, there's Trader Joe's ( a somewhat similar format to Natural Lawson), Wawa, an upscale convenience store operator in the Eastern U.S., which puts a major focus on fresh prepared foods, and a couple others.

Whole Foods Market is in the process of opening its own upscale, all natural convenience-type store in Boulder Colorado. The store, called Whole Foods Express, will be a prototype for the supernatural foods retailer in terms of natural products retailing in a smaller, convenience-oriented format. The store will be about 14,000 square feet. In Japan that's considered a big store, especially in Tokyo. For Whole Foods its radically small, especially since the grocer's average new lifestyle natural supermarkets range from about 55,000 to 80,000 square feet.

In Western Europe, Tesco pioneered (and controls the market share) the upscale, Express convenience format. There are a few other players who've joined the market niche as well, with more considering doing so. Tesco's also taken it's creation to Eastern Europe, especially Poland, where its Express stores are doing extremely well. None though are doing quite what Natural Lawson is doing in Japan with it's combination of quality natural foods, nonfoods and health, wellness and beauty offerings.

If Natural Lawson can bring a new definition to convenience retailing in Japan--or at least add to the current definition--it could create a solid niche for itself among those its targeting--busy women and seniors who many think aren't currently being fully-served by the nation's conventional cobini. Men like natural products offerings too, even if they aren't the primary target market. And in Japan, like elsewhere, men buy lots of gifts for the women in their lives. That's another market Natural Lawson should look at.