Can Chinese restaurants learn from Saizeriya’s low prices?

Saizeriya has become popular in China with its low-priced Western food. With its precise layout and cost control, it has made a lot of money even with price increases. Read the article to learn more.

More than 90% of pre-prepared meals are still increasing in price, yet the performance in the financial reports is still poor.

Which stubborn catering company is this referring to?

It is the famous Italian "Shaxian" and Japanese chain restaurant brand Saizeriya. With a 12 yuan pizza and 14 yuan pasta, Saizeriya has gained a group of loyal fans by keeping a low price all year round, and they call themselves "Sarmen" on the Internet.

Saizeriya released its financial report for the first three quarters of fiscal year 2024 (September 2023 - May 2024), showing that Saizeriya's sales were 163.2 billion yen (about 7.45 billion yuan), a year-on-year increase of 23.6%; operating profit was 10.065 billion yen (about 450 million yuan).

Among them, the Asian region, mainly in mainland China, had sales of approximately 58 billion yen and operating profit of approximately 8.2 billion yen (approximately 380 million yuan).

During the same period, Saizeriya's domestic market in Japan had sales of 106.2 billion yen and profits of only 1.3 billion yen. That is to say, the Asian region, mainly in mainland China, directly contributed more than 80% of Saizeriya's operating profit. Saizeriya is doing better in China than in Japan.

Although on Dianping.com, the rating of Saizeriya stores is unlikely to exceed 3.5 points, and the title of pre-prepared food restaurant makes it difficult for this affordable Western restaurant to improve its style.

Through a vertical supply chain and an ultimate service system, Saizeriya's low-price strategy has attracted many followers. As time goes by, only Saizeriya itself remains. What is the secret of Saizeriya's low-price model? Why can't Chinese companies completely replicate it?

1. China’s price hikes can still control foodies

In the restaurant chain industry, Saizeriya is a rare "low-price bible".

A Japanese TV station once did a program like this, interviewing several foreigners who have been in Japan for more than 10 years, and asked them which Japanese chain restaurant brand they like the most and go to the most. As a result, several people answered Saizeriya, which shows the status of this cheap Western restaurant brand in the hearts of the Japanese people.

In the field of affordable Western food in China, Saizeriya's average customer spending of about 40 yuan is almost unrivaled. Another competitor, Pizza Hut, has an average customer spending of nearly twice as much as Saizeriya (Pizza Hut's average customer spending is about 70 to 100 yuan). After Saizeriya entered the Chinese market in 2003, it has 466 stores and its turnover has far exceeded that of Japanese catering companies such as Matsuya and CoCo Ichibanya that entered China at the same time.

15 dishes can be served in 9 minutes, and the taste is monotonous. Most consumers are well aware that Saizeriya uses pre-prepared dishes and cooking packs. In Japan, Saizeriya even directly sells some frozen semi-finished products of its own. Compared with the criticism of Chinese pre-prepared dishes in recent years, the "Sarmon" disciples are obviously much more tolerant of Saizeriya. For some "students" who can realize the freedom of Western food, "what else do they want?"

How important is the Chinese market to Saizeriya? As of the end of the first quarter of fiscal year 2024, the number of Saizeriya stores in Japan decreased by 20 compared with the same period last year; the number of Saizeriya stores in China has steadily increased. Since 2024, the number of new Saizeriya stores in China has been 34. Saizeriya China has become a growth point for Saizeriya.

Why can Saizeriya achieve higher profits in China than in Japan?

First, relying on its own supply chain, Saizeriya's prices are not more expensive than those in Japan, and its more reasonable store layout and relatively lower labor costs have brought about a greater scale effect. After becoming profitable, Saizeriya did not choose to expand into the national market.

According to public data, Saizeriya China has three branches in Shanghai, Beijing and Guangzhou. More than 400 stores are actually distributed in several large cities such as Shanghai, Guangzhou and Beijing.

According to the data from Zhaimen Canyan, Saizeriya has the largest number of stores in first-tier cities, accounting for 60.78%. Compared with the nationwide distribution of Saizeriya in Japan, the layout of Saizeriya in China is obviously more scientific.

Distribution of Zhaimen Saizeriya stores (including Hong Kong and Taiwan)

According to iBrandi, Saizeriya generally selects second-rate stores in first-rate locations.

Whether it is Saizeriya in Japan or China, the choice of store locations is very "thoughtful": most of their stores are located in less conspicuous places in first-class business districts.

According to the data from Zhaimen Canyan, Saizeriya has the largest number of stores in shopping malls, reaching more than 75%. However, it did not choose core locations, but chose to open stores in unpopular areas. This not only saves a lot of rent, but also allows it to share the huge flow of people brought by popular business districts.

There is a "Property Introduction" column on its official Chinese website, which is specifically used to collect information on shops from all over the country.

In addition to carefully selecting store locations, Saizeriya also saves as much as possible on store expenses. It often takes over many "second-hand" stores, because most of the "second-hand" stores in China will have some hardware facilities left over. Saizeriya will basically use them, making slight changes on the original basis, as long as they can be used. The decoration is also simple. Compared with the unified style of other restaurants, Saizeriya does not require uniformity. It only needs to retain some characteristics and simple decoration of other things, and then it can open for business.

Saizeriya's financial report attributed the difference in performance at home and abroad to rising raw material prices in Japan, the weakness of the yen and the continued opening of new stores in the Asian market. For the growing Chinese market, Saizeriya believes that it relies on its brand positioning to take on the current dividends of cost-effective consumption.
In addition, the rumors of price increases at Saizeriya had little impact on loyal "Sarmen" consumers, but became a hot search for the general public, objectively leading to a new round of dissemination.

In 2023, Saizeriya once saw a 100% increase in the Japanese stock market. After entering 2024, Saizeriya's stock market growth began to slow down, and the two financial reports in April and July and the continued rise in stock prices coincided with the time of menu price increases in Japan and Asia.

In order to satisfy the needs of foodies and meet the continued growth of the capital market, Saizeriya, which has always adhered to the "low price" principle, had to resort to price increases to stimulate performance. However, why does a catering company born in Japan continue to grow in China?

2. The supply chain that outlasts copycat stores

Saizeriya entered China in 2003, when KFC and McDonald's had both been in the Chinese market for more than 10 years. With no first-mover advantage, Saizeriya has embarked on a focused and sophisticated development path in China.

Saizeriya's former president Kazunari Horino recalled that the reason why Shanghai was chosen as the first stop in the Chinese market was that the city's built-up area was large enough and the stores had more price levels. Saizeriya, which did not have much overseas development experience at the time, decided to start with some stores in secondary core areas. As a result, the first store opened, but because of the bad location, there was no business for several days. After consulting the chairman, it decided to reduce the price of the dishes to 60% of the original price, and customers only came on the second day.

However, Saizeriya's Shanghai stores only started to achieve single-store profitability after opening 20 stores in five years. During this period, it relied on the financial support of Japan's Saizeriya. If Saizeriya wants to make profits in China, it still needs to play to its model advantages.

First of all, there is the labor cost. After the establishment of Shanghai Saizeriya, it insisted on recruiting local college students. The number of employees sent from Japan has been gradually reduced year by year. Saizeriya also has an indicator called "person-hour turnover", which can calculate the turnover achieved by an employee in one hour. The store manager of each store can maintain the operation of the store with less manpower according to the number of customers corresponding to the employee.

In order to reduce the working hours of employees, Saizeriya has also invented a large number of exclusive seasonings and tools. For example, there is no kitchen knife in Saizeriya's kitchen. There is no need for a special chef to cook. There are special tools for cutting tomatoes and onions. Even for sweeping and mopping, a special mop is designed. Saizeriya's mop is equipped with an automatic water dispenser. With a light press, water will flow out of the mop, saving a lot of time for washing the mop.

Saizeriya has a strong self-built supply chain system. Saizeriya mainly imports red wine products from Italy, and its Australian factory is responsible for producing sauces, milk and soup products. There are special tomato farms and lettuce factories all over Japan, and they even participate in the research and development of vegetable freezing equipment. In Japan, Saizeriya has also established a complete set of cooperation systems with various raw material factories and ranches, including self-operated and third-party suppliers, all of which are operated through a complete supply chain system that has been established for decades.

According to research by Qicheng Capital, Saizeriya is the SPA in the catering industry, that is, a vertically integrated model from retail to production.

In order to improve the cultivation efficiency on the farm side, Saizeriya is also actively involved in the development of agricultural product varieties.

For example, Saizeriya has developed a new variety of tomatoes that are only half the height of ordinary tomatoes. They do not require continuous squatting, which reduces labor time during the harvest season and improves farmers' harvesting efficiency.

Saizeriya has also made improvements to the lettuce needed for salad. Ordinary lettuce has a large core and can only be used to make 2 to 3 plates of salad. Saizeriya has developed a new variety "Saizeriya No. 18", which reduces the size of the core so that a single lettuce can be used to make 5 to 7 plates of salad.

Image source: Qicheng Capital

After entering the Chinese market, Saizeriya also began to replicate a similar model. In 2012, Saizeriya established a food factory in Guangzhou. In March this year, Saizeriya also increased its capital by US$30 million to its Guangzhou subsidiary responsible for the supply chain to expand the production of raw materials. At present, Saizeriya's core products such as pasta, pizza, sauces, etc. have been localized, and other dishes such as cheese are turned over through its powerful global supply chain.

In China, counterfeiting is an insurmountable problem for catering. Saizeriya encountered a similar situation in its development. When Saizeriya's business was just booming, various counterfeit stores soon appeared. However, Saizeriya's powerful supply chain system eventually outlasted those counterfeiters.

A Saizeriya employee recalled that the Japanese management secretly visited these knockoff stores and found that these knockoff stores only copied Saizeriya's low prices and menus, and that the staff management was still managed according to traditional methods, and they did not have their own complete supply chain. These knockoff stores often did not maintain their low prices for long, and would return to Pizza Hut's prices and then close down.

3. How to replicate God’s model

Some people say that Chinese companies cannot replicate Saizeriya's model. In fact, there is a failed case in Japan. Saizeriya's founder, Yasuhiko Masagaki, later founded many sub-brands, but none of them lasted longer than Saizeriya.

Just like the arbitrary price increases, Saizeriya continues to use pure pre-prepared dishes in its menu. Even though pre-prepared dishes have a bad reputation and it is difficult to adjust the taste, in the end Saizeriya waited for consumers to adapt themselves.

Due to the success of Saizeriya’s low-price strategy, more brands in the Chinese market are targeting this track.

Recently, Saizeriya has also welcomed its strongest competitor. In May this year, Pizza Hut launched a new store, Pizza Hut Wow, in Guangzhou. The difference from the regular Pizza Hut restaurant is the price. Pizza Hut, which used to cost 90 yuan per person, now has steak main dishes for 19-49 yuan, pizza for 25-29 yuan, and even drinks and ice cream scoops for 6 yuan.

On Dianping.com, most netizens gave four-star reviews to this "Sarah-style" Pizza Hut with a smaller store area and smaller food portions. However, according to Yum China's first quarter report for 2024, Pizza Hut's revenue fell by 0.68% year-on-year, and its profit fell by 5% year-on-year, and its revenue has been negative for four of the past five years. For a restaurant brand with a national chain of 3,312 stores, it is a bit of a last-ditch effort for Pizza Hut to go the other way and pursue a more cost-effective approach.

According to the data from Hongcan, by 2023, the per capita consumption of Western fast food in China will be less than 40 yuan, accounting for more than 90%, of which 60% will be less than 20 yuan per capita. The model of low-priced Western restaurants undoubtedly meets the needs of consumers. In the core business districts and university towns of some first-tier cities, affordable Western restaurants have even become an exclusive catering track.

With the maturity of cold chain logistics, the number of restaurants where more than 70% of their dishes are pre-prepared is increasing. In the Chinese fast food market, Micun Bibimbap and Lao Shengxing also use a large number of pre-prepared dishes, chain catering models and self-built supply chains to gain market share in the business districts of major cities.

Compared with the complicated cooking methods and varied flavors of Chinese food, Western food is more standardized and more suitable for pre-prepared dishes. Some catering industry insiders said that Western pre-prepared dishes have higher requirements for raw materials, and the control, management and processing of ingredients and raw materials all rely on the construction of a complete supply chain. Although Saizeriya has many years of industry advantages in this regard, many Chinese companies have also entered this field in recent years.

With the support of capital and the participation of various players, Saizeriya, which only has low prices, may also face new challenges in China.

Author: Xingying

WeChat public account spicy (ID: ylwanjia)