Japan's representative pubs, "izakaya," are disappearing locally. As food costs and rents rise and the drinking culture of continuing to second and third rounds after work weakens, small izakaya have taken a direct hit.
According to the Nihon Keizai Shimbun on the 11th (local time), bankruptcies among izakaya operators in the first half of this year totaled 118, based on data compiled by Japanese credit research firm Tokyo Shoko Research (TSR). It is the highest for January to June since statistics began in 1989.
More than 90% of the bankrupt companies were small businesses with fewer than 10 employees. TSR also projected that the annual number of izakaya bankruptcies this year could hit an all-time high.
The biggest pressure on izakaya culture is rising costs. Not only food ingredients but also utility bills and rents are rising at the same time, but small operators are in a situation where they find it difficult to fully reflect the cost increases in prices for fear of losing customers.
Goto Kenji, a manager at TSR, said, "As food ingredients, utility bills, and rents all rise, competition is also fierce," and added, "The biggest cause of bankruptcy is that many operators failed to pass on enough of the cost increases to consumers, worsening profitability."
Matsubara Kazunori, who runs Kuranosuke, an izakaya with about 20 seats in Tokyo's Koto Ward, said that since the COVID-19 pandemic, customers have returned, but profitability has not recovered to the same extent.
To reduce cost burdens, Kuranosuke has cut its menu to about half of what it was before COVID-19 and raises prices by 50 yen about every six months. But the wholesale price of skipjack tuna used in its signature dishes has jumped three to four times over the past two to three years. Matsubara said, "If we raise prices further, people won't order."
A planned cut in the consumption tax on food next year is also seen as potentially negative for the izakaya industry. The Sanae Takaichi government plans to lower the food consumption tax rate from the current 8% to 1% for two years starting in April next year.
People in the industry think consumers may be more likely to buy prepared foods at supermarkets and drink at home instead of going to izakaya. Manager Goto said, "Once the habit of drinking at home takes hold, it is hard to reverse."
Competition with large dining chains and fast-food companies is also intensifying. Market research firm Fuji Keizai Group projected that the izakaya and robatayaki (charcoal grill) market will shrink to 1.1 trillion yen in 2035, down 31% from 2019. Over the same period, the fast-food market, including hamburgers, ramen, and conveyor-belt sushi, is expected to grow 58% to 5.1 trillion yen.
In the izakaya industry, a strategy that emphasizes individuality and experience rather than price competition is emerging as a way to survive. In the past, proximity to stations, low prices, and all-you-can-drink options were competitive strengths, but recently more consumers are seeking signature dishes, local sake, and distinctive atmospheres and services.
Miwa Daisuke, a restaurant industry analyst, explained, "It's not so much that people are abandoning izakaya as that the shape of demand has changed," adding, "Now more consumers choose places with a specific purpose."