TOKYO REPORT: Seven-Eleven, Lawson to cut prices for food near expiration

July 9, 2019

Tokyo--Two leading Japanese convenience store chain operators will carry out effective price cuts for rice balls, "bento" boxed meals and other prepared food close to their consume-by dates, in a bid to reduce food waste.

Lawson Inc. <2651> began a test at a total of some 450 Lawson stores in Ehime and Okinawa prefectures in June to offer shopping points to holders of Ponta and other common point cards when they buy prepared meals near their expiration at or after 4 p.m. The trial covers some 40 food items and offers 5 points per 100 yen.

Lawson, which currently throws out 44,000 tons of still-edible food a year through its convenience store chain, plans to continue the experiment until the end of August and introduce the discount system across Japan in line with the outcome of the trial.

"We want to create a program to reduce food waste as a whole and contribute to profit at (franchise) stores," said Lawson President Sadanobu Takemasu.

Industry leader Seven-Eleven Japan Co. will introduce a similar program this autumn throughout its 7-Eleven convenience store chain, using the "nanaco" cash-rechargeable electronic money card at stores operated by member companies of the Seven & i Holdings Co. <3382> group. Under the program, holders of the prepaid card will receive shopping points worth several percent of purchase prices if they buy prepared meals due to expire in a few hours.

Although supermarkets and restaurants also throw out a huge amount of still-edible food, convenience store chain operators have been criticized for food waste more strongly because they have urged franchise stores to discard food products near their expiration without selling them at a discount.

Chain operators maintain that the practice is aimed at preventing price-cutting competition. More importantly, however, they want to avoid falls in royalty incomes from franchise stores, according to people familiar with the industry.

In the industry, gross profit equals sales minus the procurement costs of goods sold, and chain operators receive a set percentage as profit. Gross profit declines if stores sell goods at prices lower than purchase costs.

Chain operators stress that franchise stores can decide whether to sell items close to their expiration at a discount, although they do not recommend such practice. The stance, however, is often viewed as a mere slogan because an outright ban on price cuts may violate the antimonopoly law, given their superior position over franchise stores.

Seven-Eleven Japan and Lawson are introducing effective discounts at a time when convenience store chain operators face growing public criticism over their round-the-clock service, which is placing a heavy burden on franchise store owners because of a severe nationwide labor crunch. They hope to improve their corporate image through efforts to cut back on food waste.

But the two companies show no intention of lifting restrictions on price cuts by franchise stores. A 7-Eleven store owner in Tokyo said it is all too clear that the shopping point-based approach is designed to maintain the chain's existing method of operations.

The discount programs by Seven-Eleven Japan and Lawson may not be effective in reducing food waste because they apply only to customers registered in chains' point programs. In addition, consumers are already accustomed to price cuts of up to 50 pct offered by supermarkets for food products close to expiration.

Takanori Sakai, who heads a small union of franchise stores, said the discount programs "can be valued to a degree but are not very effective."

"For franchise stores, it's better to do away with food waste through price cuts," Sakai said.Jiji Press