JAPAN: Convenience sector ripe for consolidation – analysts

By Michael Fitzpatrick | 26 February 2009

Lawson Inc.'s acquisition of am/pm Japan Co. could lead to a major realignment in the Japanese convenience store industry, with big players swallowing up struggling smaller rivals in an increasingly saturated market, leading analysts have told just-food.

Forming business alliances is a key part of Lawson's attempt to generate further growth in the saturated Japanese convenience store sector, Robert Gregory, Japan retail analyst at Planet Retail, said.

"The acquisition of am/pm will allow it to boost its presence in the key Tokyo region, while allowing it to bring its expertise, brands and systems into the loss-making chain," Gregory said. "Although still the second-largest convenience store player in the market after 7-Eleven, Lawson is emerging as the most innovative and dynamic of its rivals."

Gregory predicted that the deal marks the beginning of a period of consolidation within the Japanese convenience sector. "With other smaller chains likely to come under increasing pressure in the years ahead, further consolidation is likely," he suggested.

A spokeswoman for Goldman Sachs in Tokyo told just-food that the deal was viewed as highly positive for Lawson.

The acquisition will provide an opportunity to grow earnings on more city-centre stores and lower procurement costs, the spokesperson said.

"It will also lead to more bargaining power increasing the mark-up, store revamp (which am/pm had not carried out), and rebranding with the Lawson name," she added.

Sectors: Retail

Companies: Lawson Inc