Goldman Sachs Site Visit on Japanese Consumer Brands: Three Core Observations and Stock Opportunities

Overview

Through site visits to 11 companies and offline stores, Goldman Sachs summarized three core observations on Japanese brands in the Chinese market. The report argues that strong Japanese brands maintain brand equity by avoiding over-expansion, and price competition alone is no longer sufficient; brand marketing is becoming increasingly important. In the post-pandemic era, market dynamics have changed significantly, making product launches and store expansions in high-performance channels/malls crucial. Based on the survey, the institution upgraded its confidence in Asics, Food & Life, and Ryohin Keikaku's China business, believing Nitori has passed its worst phase, while Nissin Foods' China business remains stable.

Core views

Brand Equity and Expansion Strategy: The survey found that strong Japanese brands (e.g., Asics, Onitsuka Tiger) maintain brand equity by avoiding overly rapid expansion. Onitsuka Tiger maintained scarcity value and brand premium through a DTC strategy (DTC share rose from 30% to 70%) and strengthened brand building (e.g., participating in Milan Fashion Week), resulting in supply shortages for some high-priced products. Channel Evolution and Localization Adaptation: Post-pandemic channels diverged significantly, with new formats such as snack discount stores (SD) and instant retail growing rapidly. Nissin Foods focused on high-value-added cup noodles to cope with price pressure from discount channels; Yakult expanded its last-mile delivery network (mini-routes +20%) to adapt to channel changes, maintaining retail prices in discount channels to protect brand value. Ryohin Keikaku (Muji) expanded its China local marketing team (from 10 to 40 people), with a high proportion of locally developed products (about 70% for home goods), and achieved significant results from store renovations. Individual Stock Operational Highlights: Food & Life (Sushiro) demonstrated operational advantages with compact and efficient kitchen spaces, adopting a prime location strategy (200-300 seat large stores), expecting to open approximately 70 stores in China this fiscal year. Under new management, Asics underwent a clear transformation, planning to double the number of stores by 2029, shifting product strategy from local low-end models to global models, with a target to increase the local production ratio from 47% to 100%. Nitori completed its scrap-and-build restructuring (stores reduced from 100 to 78) and expects to resume expansion in 2026, but brand awareness in the Chinese furniture sector remains low. AliFish (Damai Entertainment)'s IP licensing business slowed temporarily due to geopolitical influences, but long-term IP value growth and community building are prioritized, with significant room for improvement in per capita spending on Chinese IPs (approximately one-sixth of Japan levels).

Analysis framework

The institution adopted a combined approach of site visits and grassroots research, visiting headquarters and offline stores of 11 companies, engaging directly with management and store managers to obtain first-hand operational data. The analysis logic follows the main line of 'Brand Power - Channel Adaptation - Operational Efficiency': First, assess brand positioning and equity protection strategies in the Chinese market; second, analyze the impact of post-pandemic channel structure changes (e.g., rise of discount stores) and corporate responses; finally, verify operational quality using specific financial indicators (same-store sales, store expansion plans, localization ratios). The report also assessed market growth potential through cross-country comparisons (e.g., per capita IP spending between China and Japan).

Methodology notes

• Competition and Strategy FrameworkMoat / competitive advantage

  Brand Equity Protection

  The report emphasizes that strong brands avoid brand dilution by controlling expansion speed, which is a strategy to maintain long-term competitive advantage (moat) rather than simply pursuing short-term scale growth.

• Industry/Industrial Analysis FrameworkPenetration S-curve

  IP Consumption Penetration Comparison

  By comparing per capita IP spending between China and Japan (China is about one-sixth of Japan), the institution used penetration logic to judge that the Chinese IP consumption market is still in the early expansion stage, with significant growth potential.

• Industry/Industrial Analysis Framework

  Channel Structure Change Analysis

  The report details structural changes in retail channels in the post-pandemic era (e.g., rise of snack discount stores, instant retail) and evaluates corporate adaptability to new channels, which is a key dimension for judging short-term performance fluctuations in consumer industry analysis.

• Company Fundamentals and Financial Framework

  Localization Rate and Operational Efficiency

  The institution focuses on enterprises' local production/purchasing ratios (e.g., Asics local production target 100%, Food & Life local ingredients 80%) and single-store operational efficiency (kitchen space/sales scale ratio) to assess cost structure and profit potential.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asics Corp. (7936.T)

  Beneficiary: New management transformation taking effect, clear DTC expansion and product premiumization strategy

  Strengths

  Store plan to double, increasing share of global models, higher local production ratio

  Weaknesses

  Lower-tier model share still higher than global average

  Comparison

  Compared to Nike's approx. 7,000 stores in China, Asics has only 425 stores, leaving significant growth space

  Risks

  Cost structure reform relaxation, slowdown in performance running shoe category growth

• Food & Life Cos. (3563.T)

  Beneficiary: High operational efficiency, prime location large store strategy driving rapid expansion

  Strengths

  Compact and efficient kitchen spaces, 80% local ingredients ratio, higher average transaction value than Japan

  Risks

  Staff training not keeping pace with opening speed, sharp rise in raw material prices

• Ryohin Keikaku (7453.T)

  Beneficiary: Strong local marketing and product development capabilities, significant results from store renovations

  Strengths

  Local marketing team expanded to 40 people, high proportion of local products sold

  Risks

  Slower Great China region business, supply chain reforms below expectations

• Nitori HD (9843.T)

  Neutral: Restructuring complete, worst phase passed, but brand building remains challenging

  Strengths

  Store restructuring faster than expected, cutlery and cookware performance positive

  Weaknesses

  Low brand awareness in Chinese furniture sector, avoiding price wars with e-commerce

  Risks

  Sales below expectations, exchange rate fluctuations, restructuring cost overruns

• Nissin Foods HD (2897.T)

  Neutral: Adapting to channel diversification, maintaining brand value through premiumization

  Strengths

  Focused on high-value-added cup noodles, added toppings to differentiate

  Weaknesses

  Main product noodle cake weight lower than competitors

  Risks

  Volume fluctuations, deterioration in non-instant noodle business market

• Damai Entertainment HD (1060.HK)

  Beneficiary: IP licensing platform advantages, prioritizing long-term IP value growth

  Strengths

  Signed 200-300 IPs, top IPs like Chiikawa awaiting commercialization

  Weaknesses

  IP licensing business temporarily slowed in 2H FY26 due to geopolitical factors

  Risks

  Live entertainment ticketing growth below expectations, adjustments to IP licensing contracts

Key data

• Ryohin Keikaku China Sales172.4 billion JPY (FY8/26 GSE)Year-on-year growth 23%, accounting for 19% of consolidated sales
• Food & Life China Store OutlookFY9/26 +70 stores, FY9/27 +80 stores63 stores at the end of FY9/25
• Food & Life China Sales OutlookApproximately 70 billion JPY (FY9/26 GSE)Year-on-year growth 2.4x, accounting for 13% of total sales
• Asics Greater China Revenue35.3 billion JPY (FY25)Year-on-year growth 22% on a local currency basis
• Yakult China Daily Volume4.7 million bottles (FY3/26)Year-on-year growth 6.1%, first growth in six years
• Nissin Foods China Core Operating Profit9.0 billion JPY (FY3/26)Year-on-year growth 7.5%, core margin 12%

Impact & implications

For relevant companies, the report indicates that Japanese enterprises that successfully adapt to Chinese channel changes while maintaining brand premium will gain excess returns. Asics, Food & Life, and Muji are given higher confidence due to effective localization strategies and smooth channel expansion. Although Nitori has passed the painful period of restructuring, insufficient brand awareness may limit upside potential. Nissin and Yakult demonstrated pricing resilience and business stability in an environment dominated by discount channels. For the industry, the report suggests that pure price wars cannot sustain themselves; brand building and layout in high-performance channels will become key for Japanese brands to survive in China.

Risks

• Geopolitical tensions affecting merchant behavior and orders
• Chinese macroeconomic slowdown impacting consumer spending
• Intense domestic e-commerce price competition eroding brand value
• Excessive store expansion speed leading to decline in operational quality
• Unexpected rise in raw material prices
• Exchange rate fluctuations affecting Japanese parent company financial reports

What to watch

• Asics store expansion progress and share of global model sales
• Number of new Food & Life stores opened and same-store sales performance
• Progress in Ryohin Keikaku increasing e-commerce share (target 30%)
• Nitori brand awareness improvements and SNS marketing effectiveness
• Yakult maintenance of retail prices in discount channels
• AliFish commercialization progress of new top IPs (e.g., Chiikawa)