Three Japanese bakeries have closed: we look at why

Two months later, two bakeries from the land of the rising sun, namely Gram Pancakes and Pablo Cheese tart, also announced their closure. These bakeries, which had previously been a sensation among Thais, were acquired by Veranda Resort in 2019. The company revealed in a letter outlining its business direction for 2024 that it would be terminating both businesses within 2024.

The closure of three prominent Japanese bakeries in such a short space of time is likely not a coincidence but rather reflects the passing of a fad that saw customers queuing in long lines for their delectable goodies. Other factors contributing to their decline include flavours that do not align with Thai preferences, prices higher than the market average, and a failure to create a lasting customer base.

Behind Veranda Resort’s decision to acquire all the shares of PDS Holdings, which brought the renowned Japanese dessert shops Gram Pancakes and Pablo Cheese tart to Thailand, was Piyalert Baiyoke, the eldest son and heir to the Baiyoke Group, a prominent real estate conglomerate.

In addition to running the family business, Piyalert sought avenues to expand his business in his fields of interest, particularly the Japanese food industry, with both dessert shops serving as the cornerstone of this new venture.

Even though the two bakeries won the attention of Thai consumers to the extent that they could open more branches, a look at the financial performance of PDS Holdings during that period reveals a consistent loss. Despite both establishments joining forces in 2018 and generating profits, it was only a brief reversal, and the company continued to incur losses in subsequent years.

In 2015, PDS Holdings reported revenue of 77 million baht and a net loss of 9.7 million baht. That increased in 2016 and 2017 to revenue of 88 million and 89 million baht and losses of 11 and 14 million baht respectively. 2018 revealed a turnaround with joint revenue reported at 176 million baht and a net profit of 1.3 million baht, only to sink again in 2019 with a higher revenue of 228 million baht but a net loss of 33 million baht.

In the third quarter of 2019, PDS Holdings agreed to sell its shares to Veranda Resort, which was interested in diversifying its business portfolio by strengthening its presence in the food industry and reinforcing its hotel business. However, Veranda Resort specifically expressed interest in acquiring only the operations of these two establishments.

Piyalert remains actively involved in the food business under BNF Holdings, which now manages the original Japanese restaurants that were once under PDS Holdings, including YamaJang, Uchida-ya, and Ramen Men, as well as Jaedang Samyan, the newly added Thai restaurant, which has already expanded significantly and now has 41 branches.

Kritinee Pongtanalert, an associate professor in the Department of Marketing at Chulalongkorn Business School and an expert in Japanese market trends, points to the similarities between the pastries sold by Gram Pancakes and Pablo Cheese tart. The pancake, Kritinee notes, has a relatively high quantity of flour, while the cheese tart has an increased proportion of both flour and cheese. Both types of pastries might be considered too heavy for Thai consumers, especially in a hot climate. In Thailand, consumers tend to prefer pastries with fewer ingredients like flour, milk, and cheese, as the combination of these is heavy to digest. This preference is consistent even in Japan, the birthplace of the brands, where sales of items like chocolate, cheese, and bread decrease during the hot season.

So while initial consumer interest in these brands was probably driven by the novelty and a fad for all these Japanese, over time, demand declined. The Covid-19 pandemic and the resultant lockdowns, pushed the focus ever further away, making it even more challenging for the brands to sustain their presence.

However, this doesn't imply that every dessert shop faces a decline as time passes. Take After You as an example of a dessert shop that has adeptly adjusted and sustained its popularity. The continuous growth and resilience of the dessert shop can be attributed to three key factors: the presence of signature menu items that create a lasting impression, the ability to tailor flavours to the preferences of the local community, and the introduction of new and exciting menu items to keep consumers engaged.

"After You is an excellent example of a shop that has performed exceptionally well. Initially, the menu included Shibuya honey toast and various cakes, with Kakigori added later. As it achieved success, seasonal items like 'Kakigori with Ma-yong-chid' emerged, and the latest addition, 'Kakigori with santol in syrup,' has also created a sense of curiosity. This approach makes people feel like they want to try it out because they're familiar with the existing menu, and the introduction of new items adds an element of excitement and makes the experience more enjoyable,” Kristine said.

Japanese brands entering the Thai market may face challenges in curating a seasonal menu due to the higher costs involved. For example, imported ingredients may incur additional expenses, impacting the overall pricing strategy. Additionally, certain brands may struggle with managing cash flow in their home country, affecting their ability to create an exciting and innovative experience for Thai consumers.

In addition to Japanese pastry brands, the decline and closures of Japanese stores are also noteworthy trends. The one retail outlet that stands out and has managed to turn a profit is Donki, a retail store with a distinctive blue penguin icon as the symbol. Donki is gradually expanding and making its mark on shopping centres throughout the Bangkok metropolitan area.

Currently, the situation for Japanese department stores in Thailand seems to remain unchanged or become worse, leading to several closures, This is attributed to the increase in online shopping, which has reduced footfall in physical stores. The capital flowing into branches abroad has also decreased.

Kritinee says Donki’s apparent success stems from adjusting its positioning and brand image. Transitioning from a discount store that operates around the clock in Japan, Donki Thailand has transformed into a premium store focusing on high-quality goods at affordable prices, creating a so-called “affordable premium” concept that offers good quality and easy accessibility.

"In Thailand, Donki gives the impression of a more premium brand from Japan. Despite the relatively higher prices compared to Thai products, the perceived quality makes it seem reasonable. Moreover, Donki Thailand has an entertainment element, making shopping enjoyable. The visually appealing arrangement of Japanese snacks, including fresh seafood and meat, enhances the overall experience and demonstrates a good understanding of Thai preferences.

Donki has also adapted to local preferences by understanding the consumption behaviour of Thai people, such as offering promotions with discounted prices. Because the store understands what Thai people like to eat and their payment behaviour, they strategically place popular products in front of the store, along with price reductions and stock clearance promotions before closing, making it a popular choice for office workers in the area.

In conclusion, the recent closures of businesses can be attributed to various factors, among them flagship menu offerings, appropriate pricing, local preferences, and more. However, what appears to be a common factor for many establishments to thrive is the ability to adapt to trends and consumer preferences, and this is something restaurant operators cannot afford to ignore.