The Yomiuri Shimbun

Junichi Sato, 57, president of liquor store chain operator Kakuyasu Co., has been expanding the company’s business by offering delivery services through a well-organized store network. The following are excerpts from an interview with Sato.

Mountain of debts
My family operated a liquor store in Tokyo that supplied bars and izakaya Japanese pubs. I joined the company in 1981, when Japan was heading toward an economic bubble. As a salesman, I went from place to place all over Roppongi, Akasaka and elsewhere in Tokyo.

When the bubble burst, however, business plummeted. Many of our clients went bankrupt one after the other, and debts from defaulted credit piled up like a mountain. At the same time, many retailers started selling beer at discounts. Until then, beer had mainly been sold at the retail prices suggested by makers. To stem the downturn in sales, we had no choice but to resort to discount pricing — not only for commercial use, but also for households. Against the objections of my father, I opened a discount liquor store in 1992.

The shop was on the former site of a convenience store, but it was located on a one-way street so cars could only enter from one direction. Then I had an inspiration: “Why not use the bad location to my advantage and just make deliveries?” I started doing this immediately after the store opened.

The domestic liquor market started to decline after it peaked in fiscal 1996.

I knew that rebates offered by beer companies, which had supported discount pricing, would soon fall. It was decided in 1998 to deregulate the liquor retail business, and I thought supermarkets and convenience stores would start selling liquor sooner or later. What would happen to liquor stores? Whenever I went out for sales promotion and even when taking a bath, I fretted constantly over this question.

Delivery anywhere
Finally, I decided to end excessive discount pricing, such as special sales, and specialize in more convenient deliveries for our customers. I thought this would be the only way to survive, even if major distributors entered the market.

I figured if we were able to deliver efficiently within a 1.2-kilometer radius from the store, we could sell liquor at the same price as in a shop.
If an order was received in Tokyo’s 23 wards, we would deliver it for free within two hours, even if it was only one bottle of beer. To realize this goal, I calculated that I would need a network of over 130 stores to cover all the wards in Tokyo. At that time, liquor license regulations still existed, and I had to buy out individual shops one by one. Using a broker, I purchased around 30 shops a year as I organized a network map like a jigsaw puzzle.

It took longer than I imagined to achieve successful results. When we reached 100 shops, 56 of them were in the red. The branch manager of one of our creditor banks asked me quite pointedly, “What the devil are you doing?”

At a meeting of the board of directors, I was pressed to stop opening new stores. However, I made a desperate appeal, saying, “The only way we’ll get a workable distribution infrastructure is by completing the store network.”

We started forming the network in 2000, and it was completed in 2003. I felt more dead than alive until 2006, when the company’s overall performance went into the black. Whenever I thought about it, I couldn’t sleep and, even though I had always been a light drinker, I drank almost every night.

Nowadays, the company business is doing well. But things just happened to turn out all right in the end. If you don’t pitch the ball, you’ll never know if you will throw a strike. That’s what I realized. Our strength is that we can greet our customers right at their doorstep. We’ll keep working through trial and error to improve our door-to-door services.

(The interview was conducted by Yomiuri Shimbun Staff Writer Ryosuke Yamauchi.)

Sato’s profile
After graduating from the University of Tsukuba in 1981, Sato joined Kakuyasu Honten (now Kakuyasu Co. based in Kita Ward, Tokyo), a liquor store founded by his grandfather. At the time, annual sales were ¥700 million and the company had 15 employees. Sato succeeded his father in 1993 to become the company’s third president.

As of the end of November 2015, Kakuyasu operated a total of 173 stores in and outside Tokyo’s 23 wards, including stores in Kanagawa, Saitama and Osaka prefectures. Earnings for the business year ending in March 2015 were ¥105.7 billion. As of the end of that month, the company had 3,238 employees.