Udon Chain, Once a Hit, Struggles with Market Challenges
Beijing, China – Once a hit in the Chinese market, the Japanese-style udon chain Wakacji (味千拉面) is now struggling to maintain its market share amidst fierce competition. The brand, owned by the Hong Kong-listed company Wakacji (China), has faced declining sales and profitability in recent years.
Performance Woes and Store Closures
From 2019 to 2023, Wakacji (China) has experienced alternating periods of growth and decline in its financial performance. While the company managed to turn a profit last year, it has once again fallen into the red in the first half of 2024.
The decline in performance is attributed to several factors. Firstly, the company’s store traffic has decreased, leading to lower sales. Secondly, the company has faced significant losses from investments in property and financial assets. In the first half of 2024, Wakacji (China) incurred losses of approximately 50 million yuan from these investments, compared to gains of 63.5 million yuan in the same period last year.
In addition to store closures, Wakacji (China) has struggled to meet its ambitious 1,000 Store Plan. The company had planned to open 1,000 stores in China within five years, but the plan has been put on hold. As of August 26, 2024, the company operates only 575 stores, a decrease of 224 from its peak in 2019.
High Prices and Lack of Innovation
One of the main reasons for Wakacji’s struggles is its high pricing strategy. A survey by Sina Finance found that nearly 65% of respondents believe that Wakacji’s prices are too high and the value for money is low. Another 20% of respondents cited the lack of variety and the general taste of the food as reasons for their dissatisfaction.
Consumers have also raised concerns about the quality and safety of Wakacji’s products. The company faced a major scandal in 2011 when it was revealed that its famous pork bone broth was actually made from concentrated broth. This event significantly damaged the company’s brand reputation.
Competition from Chinese Brands
The increasing competition from Chinese brands has also put pressure on Wakacji. In recent years, the Chinese udon market has seen significant growth, with new brands like Hefu Lao Mian, Ma Ji Yong, Chen Xiang Gui, and Zhang Lala gaining popularity.
The Way Forward
Wakacji (China) needs to make significant changes to stay competitive. The company needs to focus on improving its product quality, innovating its offerings, and strengthening its customer loyalty. It also needs to adapt to changing consumer preferences and market trends.
Analyst Zhu Danpeng believes that Wakacji needs to strengthen its supply chain, focus on quality, and make innovation in the service and scene. Only by adjusting the price-performance and quality-value ratio, can Wakacji (China) overcome the winter, he said.
The struggling Japanese udon chain serves as a reminder of the challenges facing foreign brands in the Chinese market. To succeed, these brands need to understand and adapt to the local market, while also maintaining their unique brand identity.
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