Profile of the (surprisingly lucrative) university co-op business in Japan

When I did a year-long exchange at Ritsumeikan University in Kyoto, one of the more interesting entities on campus was the co-op that ran cafeterias and a general merchandise store. Prices were reasonable, the food was excellent, and service was comparatively decent. The store even had an entertaining message board where students could ask the staff questions on any random topic, similar to the Japanese blog “Shiraishi of the Campus Co-op.” Like me, many foreign students probably leave Japan with fond memories of their university cafeteria and the friendly middle-aged ladies who served them.

I thought I knew all I needed to know about the co-op system, but the always informative Shukan Toyo Keizai’s profile of the university co-op system taught me a thing or two.

Here are some key facts:

  • University co-ops are non-profit institutions operated and funded by student members. Around 30% of Japan’s 762 four-year universities (around 230 228 to be exact) have a co-op on campus, which will likely run at least one cafeteria, merchandise shop, and bookstore each. 40% of all university students (1.3 million) are members. At universities that have co-ops, membership is around 95%. Students pay between Y10,000-30,000 to join when they enter university, which is returned without interest once they graduate or drop out.
  • All such co-ops are organized under the umbrella of the National Federation of University Co-operative Associations in Japan, formed in 1958. While the first university co-op was formed in Kyoto’s Doshisha University in 1898, they didn’t really start to take off until after World War II, as universities set up co-ops to help ensure steady food supplies as Japan’s economy got back on its feet, similar to neighborhood co-ops (they are regulated by the same law). The federation’s website notes that co-ops offer a wide range of goods and services, among them “food, clothing, housing, books, stationery and PCs…arranging and subcontracting for tourism, Student Mutual Benefit [a type of insurance plan], language training programs, courses for applicants for public employee and computer training programs.”
  • Co-ops are a serious business – in 2008 the federation counted revenue of Y207.5 billion. Considering there are only co-ops on 230 228 campuses, it’s nothing short of amazing their revenue compares with convenience store chain am/pm (Y195.5 billion in FY08, 1,129 stores) and Tokyu department stores (232.3 billion in FY08, scattered stores in major cities). The article explains the universities benefit from a captive customer base of students on campus and virtually no other on-campus competitors (though that has changed slightly following some deregulation in 2004).
  • About a quarter of all sales are recorded in March and April ahead of the start of the academic year. However, in those two months the co-ops typically sell around 60,000 PCs. Sales in 2008 break down as follows: 15% from cafeterias, 19.9% from bookstores, and 65.1% from merchandise stores (in the merchandise category, 18.6% comes from hardware & software vs. 11.5% from food).
  • Gross margin (revenue minus cost of goods sold as a percent of total revenue) is roughly 20% overall and 50-55% in the cafeteria segment. That basically means that for every 100 yen in sales, 20 yen is profit before labor/administration, financing, and tax costs.
  • One benefit of being a student association is the university charges virtually no rent. This allows them to keep cafeteria prices low and charge the same for electronics as big-box retailers. The co-ops also have considerable bargaining power as procurement is all done through the national federation. That’s how the cafeterias can charge an average of Y380 per meal.
  • Another advantage of the co-ops is service. One student interviewed from the article bought a PC at the co-op because he liked getting advice from a fellow student.
  • One disadvantage of having your business limited to college campuses is the limited number of business days. Vacations slash the total number of business days to around 250-300, and students only show up for class on about 150-170 days a year.
  • In 2004, Japan’s national universities were stripped of their status as arms of the government and reorganized as corporate entities. This meant they gained a freer hand to get creative in running their campuses, and one such initiative has been to open convenience stores on campus in direct competition with the co-ops. Already, 40 co-ops are reported to be competing with on-campus kombini.
  • Co-ops have responded to this competition with initiatives of their own, for example opening chain stores inside cafeteria areas and selling pre-paid meal plans to students (something typical at US universities).
  • The population of 18-year-olds in Japan (an indicator of the size of the co-ops’ target demographic) expected to hold steady at 12 million in 2009 but then fall steadily into the foreseeable future. With this declining customer base, the author speculates there will be closer cooperation with universities and co-ops in the future. Already there are examples of a co-op collaborating with Yamanashi University to offer Yamanashi wine on campus.

Stuff I want to eat: Frijoles, a Chipotle knockoff in Azabu Juban

menu_buritto001

When I lived in Washington, DC, one of my favorite places to eat was Chipotle, the formerly McDonald’s-owned seller of giant burritos. The combination of spicy salsa, sour cream, guacamole, and seared meat all wrapped in an overstuffed tortilla made for a reasonably priced explosion of flavor, guaranteed every time.

Accordingly, a complete lack of anything comparable in Japan (or any decent Mexican food, for that matter) has been a source of considerable homesickness for me.

Until now.

Joe has pointed me to Frijoles, a restaurant in Azabu Juban with a menu essentially identical to Chipotle. I have not eaten there yet, but it has so far received some positive word of mouth. I’ll be sure to report once I’ve had the chance to try it out.

Cow madness

Over the past few weeks, Taiwan has been in a furor over a recent deal to resume the importation of  beef from the USA, which has been banned for some time due to the alleged risk of mad cow disease. Readers may remember a series of protests that gripped South Korea not long ago when their government similarly decided to life the ban on US beef. In Korea the US beef issue became a catalyst for large anti-American protests by throngs of protesters whose fundamental concerns were really far more about the macro view of the South Korea-US relationship, such as the continuing extraterritoriality of US soldiers, than about an arcane and minor, if horror-film creepy, food safety issue.

Creautzfeldt-Jakob disease, the term used for the human version of Bovine Spongiform Encephalitis (BSE), popularly known as mad cow disease, is a disease that lends itself to hysteria. An infection, not caused by the familiar bacterium or virii, or even a paramecium, it is produced by a truly exotic pathogen-a mutated prion, a class of protein itself unfamiliar to the layperson. The warped protein spreads throughout the nervous system, tricking healthy proteins into losing their shape, eventually causing such a complete breakdown of neural tissue that the brain is left full of small holes, like a sponge (hence the name, “spongiform”). To make it sound even more disquietingly like the contagion in one of the more science fiction themed zombie movies, neither thermal nor chemical – or even radioactive – means of sterilization have any effect on the mutant prion. Worst of all, the initial transmission vector of BSE or other variants of transmittable spongiform encephalopathy is cannibalism (as has been down since the discovery of kuru, a similar disease found among cannibals of Papau New Guinea), specifically the practice of rendering unsellable scraps of flesh, bone, and viscera left over from cow butchering into a protein sludge, which was then added to the feed of other cows on the feed lot. Even the most ardent carnivores among us reacts with visceral disgust to cannibalism, even in other species, compounded in this case by the fact that it is implemented so casually, for minor savings, so much unlike the rare cases when it is necessary for survival. Due to the disquieting nature of the disease, it is easy to see how A) people might overreact and B) how easy it might be to goad people into over-reaction for political purpose.

Taiwan’s English language Taipei Times, generally a strident partisan supporter of the Green (DPP/pro-independence) camp, carried a surprisingly non-partisan and fact-based editorial on Friday, in which they pointed out that there is in fact no appreciable risk of  catching the zombie plague from American beef.

The ferocity of politicians would be entirely justified if it were imports of UK beef we were talking about, as the UK was where the BSE epidemic was first identified and where the vast majority of cases of variant Creutzfeldt-Jakob Disease (vCJD), the human form of BSE, have been reported. The disease is a mainly British affair and the WHO says many of the cases reported in other countries were people likely exposed to the BSE agent while living in the UK during the height of the epidemic in the late 1980s.

Figures from the UK’s National Creutzfeldt-Jakob Disease Surveillance Unit show that at the end of last month there had been 167 deaths from vCJD in the UK, with the peak (28 cases) occurring in 2000.

In the US, to date there have been just three cases of BSE (one imported) and three deaths from vCJD, but two of these three deaths were likely cases of exposure in the UK, while the other was a recent immigrant.

Not to say that American been is entirely safe, but the danger is not mad cow disease. Just the other day a US meat company issued a recall for a huge batch of ground beef following two cases of fatal E-coli poisoning, a disturbingly common occurrence. Assuring food safety is one vital task of government in general, particularly when importing food from abroad, where standards may not be the same. But since the food safety issues here are largely fabricated (no-one has even mentioned the far more serious risk of E-coli), it is clearly about politics.

While the debate over US beef has similarly gone well beyond the realm of science into political theatre, the issue is not anti-American or Taiwan’s relationship with the United States. No, instead, as with almost every contentious issue on the island nation, it comes back to Taiwan’s hyper-partisanship, so extreme that it almost makes American political arguments look reasonable. (Well, maybe not America…)

The details are too complex and boring to get into, but the short version is that the KMT (Chinese Nationalist Party) government pushed through an unpopular accord over US beef in a attempt to curry favor for more important issues, while on the other side the opposition and pro-independence DPP (Democratic Progressive Party) is making ridiculous claims about the danger of US beef in a cynical attempt to peg the KMT as anti-democratic incompetents that are willing to trade public safety for a minor diplomatic advantage. However true such an assessment of the KMT may be overall, their opponents are being unfair in this particular case.

The beef issue has been a sticking point for US diplomats in several countries, due to the strength of the US agricultural interests that benefit from such exports, and in Taiwan specifically, eliminating the ban on US beef is widely considered to be one of several precondition for granting Taiwanese the visa-free entry status that has been rumored for a couple of years now. I also want to repeat that the idea of caving to US pressure is in and of itself not as much of an issue here as in many other countries, as both sides want stronger ties with the US in terms of trade, military, and diplomacy. However, the real issue, as always, is China. Since Ma took office the KMT led government has been promoting a series of pacts with the Communist governed People’s Republic across the strait, and the Taiwanese opposition has been far from happy, claiming (with some merit) that such pacts tend to favor China more than Taiwan, and promote economic and cultural integration that will eventually lead to political integration along the lines of Hong Kong. It is in this context that the protests over US beef must be considered.

As yesterday’s Taipei Times editorial states:

The government’s atrocious handling of the expansion of US beef imports — opaque, peremptory and confused, regardless of the merits of the products — is becoming a real cause for concern in terms of the bigger picture: cross-strait detente, and particularly a proposed economic pact with China.

[…]

One legacy of the US beef controversy is that many more people have little or no confidence in the government’s ability to negotiate with China without jeopardizing Taiwan’s interests.

[…]

Once again, this cavalier attitude toward ordinary people only raises suspicion as to how open and trustworthy any agreements between this China-friendly government and Beijing will be.

Even though the paper’s editorial board has correctly dismissed the health claims of the beef accord opponents, they are still greatly concerned about the WAY in which the accord was reached. If the pro-China KMT government is willing to negotiate behind closed doors and against public opinion with the US, why not with China? The government’s quid-pro-quo trade of US beef for progress on several outstanding issues (visa free status, progress on a larger trade accord, increased likelihood of more and better weapons systems) is therefore seen less as a capitulation to the US than an example of the KMT’s general attitude of capitulation towards China. And of course, food safety of imports from China is a far more serious problem. I’m sure everyone remembers the horrible milk-poisoning incident from last year. Well, some of those products made it into Taiwan, and although nobody was sickened, the incident spurred anti-KMT and anti-China protests. The controversy over American beef is actually more similar to those protests than to the anti-US beef protests in Korea.

Halal food in Kyoto University is news?

The Japan Times posted the following small item from Kyodo News:

Kyoto University will start providing food permissible under Islamic law at the school’s cafeteria to meet the needs of the increasing number of Muslim students on campus.

The cafeteria will introduce a halal food corner from Tuesday, avoiding pork and seasonings of pork origin, which Muslims are banned from eating. The new menus include chicken and croquettes made of broad beans, it said.

More than 1,000 Muslims live in the city of Kyoto, and many are Kyoto University students and their families.

The rare introduction is aimed at supporting such Muslim students, whose population is expected to rise under the university’s plans to accept more foreign students.

While the co-op said it had problems in arranging a cooking environment to avoid mixing pork and related seasonings with halal food, it solved the issue by preparing the food at different hours.

The odd thing is that they have actually been serving dishes labeled as Halal in the main cafeteria (中央食堂) since, at the very least, when I arrived in April of last year. I’m rather puzzled at why something that they have been doing for some time would be reported as news.

The Meat Guy

It’s about time I finally gave a shout-out to everyone’s favorite American butcher living in Nagoya. I’m of course talking about The Meat Guy. Whether you’re looking to buy Australian steaks, mutton, real bacon, Polish sausages, American BBQ sauce, unique meats such as ostrich or crocodile, or even your very own American-style outdoor cooking grill, The Meat Guy is the place to go. He ships all over Japan, and it’s high quality meat that is welcome change to Japan’s delicious but nonetheless lacking in variety meat markets. The Curzon estate has been very happy with the bacon, sausages, steaks, chops, and spices bought at TMG.

You can meet the Meat Guy here. I’ve only heard his biography as rumor from fellow fans of his service, and from what I generally understand, his family farm in Nebraska produces Wagyu for American markets. He married a Japanese woman, moved to Japan, and set up this operation more than ten years ago. Now, thanks to the power of the Internet, he ships his goods all over Japan.

My favorite item currently on the shipping menu: Continue reading The Meat Guy

Pepsi Shiso: Great Soft Drink, or GREATEST Soft Drink?

pepsi shisoI bought and enjoyed Pepsi Shiso for the first time today (it went on sale on Tuesday). I’m a big fan of the shiso leaf flavor and have enjoyed shiso juice that I’ve bought in the inaka wilderness of both Hokkaido and Kyushu. I LOVE the new soft drink, and would recommend it to anyone who enjoys the general adventures that can be enjoyed in Japanese nutty snack cuisine.

Unfortunately, it’s a kisetsu gentei drink and will only be sold through the summer. And for those of you who think that Pepsi is some amazing cross-cultural mastermind of Japanese tastebuds, this is actually the brainchild of Suntory Foods, which has wholly owned Pepsi Japan since 1998.

All this being said, you’re going to have to like the taste of shiso to enjoy the drink. But if you love shiso, you’ll love Pepsi Shiso. Want to see a comparison of the color of Pepsi regular and Pepsi Shiso? Check out this photo.

Canned oxygen was just a fad

This morning, I went to 7-Eleven to pick up some groceries for breakfast, and spotted a few cans of oxygen in the clearance bin. They had already been marked down from 600 yen to 400 yen, and were on clearance for 200 yen. Apparently this was just another wacky Japanese fad, despite all the buzz around it three years ago.

I bought a 200 yen can and tried it. It didn’t do too much for me, despite being coffee-scented. Any positive effect of the stuff probably comes from the fact that you have to deliberately inhale in order to enjoy the burst of stinky O2. Perhaps all the salarymen need to do is take a deep breath once in a while.

Warren Buffett Hates Japanese Food

From TNR, concerning Warren Buffett:

He confines himself to the diet of an eight-year-old, refusing to eat anything much beyond spaghetti, hamburgers, and grilled cheese sandwiches. Schroeder describes a bizarre scene in which Katherine Graham escorted Buffett to dinner at the Manhattan apartment of Sony Chairman Akio Morita. Japanese chefs served plate after plate that Buffett left completely untouched. “By the end of fifteen courses, he still had not eaten a bite,” writes Schroeder. “The Moritas could not have been more polite, which added to his humiliation. He was desperate to escape back to Kay’s apartment, where popcorn and peanuts and strawberry ice cream awaited him. ‘It was the worst,’ he says about the meal he did not eat. ‘I’ve had others like it but it was by far the worst. I will never eat Japanese food again.’

Despite that pretty atrocious diet, Buffett appears to be relatively healyh at age 78. Maybe it’s due to his polygamous lifestyle.

McDonald’s offering 8,000 yen in savings in exchange for your FREE MONEY

I have already received my FREE MONEY from the government, but it is already spent on my recent trip to the US. But for those who haven’t spent the 12,000 yen handout yet, McDonald’s has an idea – give it to them! In exchange, they will give you a coupon booklet worth 20,000 yen.

According to Sankei, purchasers of the coupons will have until November 14 to eat the equivalent of 69 value meals (or value “sets” as they are called in Japan). Booklets will be available to buy at McDonald’s restaurants throughout Japan from May 15 through July but might sell out at some stores before others.

A 40% discount is significant and a better deal than some of the other campaigns out there, but consuming 69 value meals in six months could be a challenge. A single person who buys one of the booklets on May 15 and never shares it would have to eat a value meal once every 64 hours or two or three times a week to use up all the coupons. I know I’d get sick of the food after a while, and surely just about anyone will have tried everything on the menu and then some after a few visits. The coupons might make more sense for large families who could space out their visits more and still use all the coupons. While some savvy shoppers might figure out ways to profit from the deals, I am not that sophisticated (sell them for a 20% markup and pocket the difference?).

Like most gift card programs, McD’s must be counting on a) lazy customers never bothering to use up the coupons’ full value, and b) those who do use them to generate additional sales by bringing friends or picking up side dishes. It could also have a PR element designed to deflect some of the negative publicity of its labor practices or even its own recent runaway success thanks to 100 yen burgers’ popularity in the recession.

My verdict – keep your money and spend it on what you really need/want, and save by skipping McDonald’s and making delicious home-cooked meals. They are cheaper AND better for you.