Rising seafood prices and decreasing disposable incomes hindered revenue
Los Angeles, CA (PRWEB) April 12, 2012
The Sushi Restaurants industry is highly fragmented, consisting mainly of many small establishments that employ five people or fewer. This fragmentation increases competition, but external competition also exists in the form of quick-service sushi restaurants, other ethnic restaurants and American foods. Only Benihana's RA Sushi chain secures a significant share of the total market for restaurants that specialize in sushi and include table service. Key demand factors consist of disposable incomes, health consciousness, the number of relatively affluent households and seafood prices. “With regard to consumer demand, disposable incomes largely determine the ability and willingness of consumers to dine on sushi,” said IBISWorld industry analyst Josh McBee. When disposable incomes are low (as has been the case since 2009 when the latest recession began), consumers avoid dining out across the board, thus negatively affecting sushi demand. As such, IBISWorld expects overall industry revenue to decline at an annualized rate of 3.4% during the five years to 2012.
In addition to reductions in disposable incomes that limited demand, rising seafood prices further hindered sales and pressured operators to narrow their margins or risk alienating customers. As primary sushi ingredients, fish and seafood represent major costs for sushi restaurants. In light of reduced incomes, operators were reluctant to pass on increases in the price of seafood to their customers, and profit is expected to fall during the five years to 2012. Sushi restaurants sought to salvage margins by reducing employee head counts and thereby decreasing wage costs, but business numbers are expected to decline marginally in light of adverse operating conditions. Through 2017, operating conditions are forecast to improve, beginning with an expected recovery in 2012. As the unemployment rate drops and consumers slowly regain their disposable incomes, demand for sit-down restaurants is anticipated to increase. In addition, although seafood prices are projected to continue rising, restaurant owners will increasingly be able to pass on these increases to a more well-funded public, thereby widening their margins. The return to higher profitability levels is forecast to raise most industry statistics back to or near pre-recession levels.
IBISWorld analysis reveals a low degree of market share concentration in the Sushi Restaurants industry. The industry is highly fragmented, with many small operators spread throughout the country. Because sushi is a niche food item of an ethnically Japanese nature, demand remains relatively low compared to American foods and other ethnic options like Mexican food. Also, the relatively high average bill at sushi restaurants limits demand on an economic level. These factors (cuisine type and price) restrict the ability of all but the largest operators to develop sustainable chains across regional geographies. According to McBee, Benihana's chain of RA Sushi restaurants, by far the industry's largest player with an estimated 44.9% market share, has succeeded on the back of its parent company's ability to leverage existing assets and name recognition from its Japanese restaurant brand. Market share concentration has been increasing during the past five years, as low disposable incomes hindered the ability of consumers to dine out across the board, including at sushi restaurants. Concentration is forecast to decrease as new establishments enter the industry in line with an overall recovering economy. For more information, visit IBISWorld’s Sushi Restaurants report in the US industry page.
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IBISWorld industry Report Key Topics
The industry comprises chain and franchised restaurants primarily engaged in providing sushi-style foodstuffs to patrons who order and are served while seated (i.e. waiter or waitress service) and pay after eating. These establishments may provide this type of food service to patrons in combination with selling alcoholic and other beverages. Establishments using conveyor belt-style sushi delivery systems are excluded.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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