MADE-IN JAPAN CAKES FIND SWEET SUCCESS IN ASEAN
Aweekend afternoon at Chateraise, a pastry shop located in a Singapore shopping centre, brings the usual stream of customers. “Which cake do you want? The new ones look delicious, too.” People stare at the glass display case, trying to decide which treat looks best.
Chateraise is a Japanese confectionery chain with 495 locations in its home market. Faced with a shrinking population and domestic market, it has spent the past few years expanding rapidly in Southeast Asia.
“In Japan, our shops sell only five or so whole cakes a day, but in Singapore, we sell 10 of them,” said Shutaro Watanabe, who is in charge of the company’s overseas marketing.
Chateraise was founded in 1954 in Yamanashi Prefecture, west of Tokyo. In its early days, it was known for imagawa-yaki, a pancake-like confection filled with sweet red-bean paste. Today it is one of the largest pastry chains in Japan, selling both Japanese and Western-style sweets, as well as bread.
The medium-sized company, with annual group sales of around ¥60.5 billion (US$534 million), has grown rapidly overseas. The secret of its success is found in its deep rural roots.
“It’s time to go overseas,” declared Hiroshi Saito, the confectioner’s founder, in 2015, beginning the export push. Saito is now president of Chateraise Holdings.
He felt he had little choice. His customer base continued its decades-long migration to the cities. Those still in the countryside were ageing. The company began closing shops to maintain profitability, with the number of outlets falling from a peak of 505 in 2003 to 450 by the early 2010s.
Even before his 2015 pronouncement, Saito had been eyeing Southeast Asia. But he concluded consumers there were not ready to embrace sweets from Japan. By the fall of 2014, however, the time was ripe. A test-run in Singapore showed Chateraise products were popular, drawing more customers than expected.
The big problem with Southeast Asia was the climate. Tropical weather is not ideal for making pastries, which require fresh, high-quality milk, eggs and other ingredients that spoil quickly in the heat. Chateraise’s solution: Export frozen cakes from Japan. This turned a drawback into a selling point.
The company first considered the Philippines for expansion, but gave up the idea due to difficult conditions, such as store locations. Then Isetan, the Japanese department store operator with a branch in Singapore, asked it to open an outlet in its store there.
Over the next three years or so, Chateraise has opened 50 franchise shops in eight countries and territories. Its rapid growth in Asia has been fuelled by three qualities that set it apart from local competitors: taste, variety and affordability.
Chateraise cakes were a revelation to Singaporeans, many of whom associate the word “cake” with sweet, buttery desserts that many find too heavy for their taste. Chateraise’s gateau, by contrast, is a spongecake made with fresh cream, which gives a better flavor and a light, airy texture.
“Chateraise cakes are so soft and light that I can eat two pieces a day,” said Karen Quek, a franchise owner in Singapore.
The variety also appeals. “That strength is crucial to keep attracting Singaporeans who easily get tired of one thing and go on to another,” said the franchise owner. Chateraise now offers around 240 items.
The high quality and reasonable prices have also won over customers in Singapore. A cream puff costs $1.40 or so, and cake slices start at $2.80 apiece — about the same price as in Japan.
The company’s pastries have made a splash on social media around the region. Chateraise has received offers to open shops in Thailand, Indonesia and elsewhere. “Singapore is a trendsetter in the region and people in neighbouring countries want to bring what they see in Singapore into their homes,” said Watanabe. There is a long waiting list for would-be Chateraise franchisees.
AUTOMATION EDGE
Chateraise’s three plants in Yamanashi Prefecture are critical to its success. While many Japanese food processors have plants scattered around the country to cut transport time and cost, Chateraise makes its main products in the Yamanashi plants. These are then shipped nationwide and overseas.
Automation is another strength that allows Chateraise to offer a wide range of products at low cost. It began automating its plants in the 1960s. Because centralised production pushes up transport costs, minimising the cost of production is vital to the bottom line.
So the confectioner has relentlessly automated production of items with steady, predictable sales. The cost-cutting enables it to offer products in elsewhere in Asia for nearly the same price as in Japan.
Chateraise exports frozen products by ship to overseas markets, which lowers profit margins compared with its domestic shops. But because sales per unit of floor space are higher elsewhere in Asia, the business can stay comfortably afloat.
Another Chateraise advantage is its sparing use of preservatives and other additives. Its pudding contains only sugar, eggs, milk and caramel syrup. The emphasis on natural ingredients is a reflection of Saito’s dual commitment to taste and “letting [customers] enjoy safe and secure products”.
To reduce additives, one must keep nasty bacteria at bay. The first line of defence is to minimise human contact with food during production. Here again, automation is an advantage, fresh cream, for example, is fed into a processor, then carried through pipes to the next step in the production line. There are no people in the loop.
The second line of defence is to use the freshest ingredients. These are purchased directly from contracted farmers. Among them is Shinkai Farm in Minamimaki, Nagano Prefecture, which has sold milk to Chateraise for 20 years. The manager, Shigeto Shinkai, said the farm “checks the bacteria count before shipment”. Cows are fed “in such a way as to keep them from getting sick”, he said. Chateraise also buys only one- or two-day-old eggs to ensure freshness.
This helps the company to market fresh sweets in Asia, where hot and humid climates provide a breeding ground for bacteria.
Chateraise is now looking to create healthier products to liven up its declining domestic business. These products are likely to become big sellers in Asia and the Middle East over the medium to long term, so the confectioner needs to start preparing now.
Chateraise is working to create products that combine good taste and nutrition. On the taste front, it has begun hiring skilled patissiers.
Saito believes building a healthy brand translates to a stronger bottom line, saying, “If we can win more fans, our profit will increase.”