Japan Ramen Chain Takes On U.S. Foodies for Overseas Growth

(Bloomberg) -- To bring savory noodles to locales around the world, the operator of ramen chain Ippudo has had to adapt one of Japan’s best-known specialties.

It took almost half a year to get the rich tonkotsu pork broth right in Europe because of the harder water. In western countries, noodles are made shorter so it’s easier for the locals to eat. Chikaranomoto Holdings Co. may face its hardest challenge yet -- bringing Japan’s iconic noodles to some of the world’s toughest foodies.

It plans to open its first Ippudo outlets on the U.S. West Coast this year in San Francisco and the nearby suburb of Berkeley, both home to competitive restaurant scenes. The company’s March initial public offering raised enough to fund the cost of roughly two overseas restaurants, yet the chain is targeting the U.S. in a global push that will quadruple overseas shops in 20 countries in less than a decade, said President Toshiyuki Kiyomiya in an interview.

Bold Ambitions

“The primary focus will be America,” said Kiyomiya, who also serves as chief operating officer, from his office in Tokyo. “If we don’t plant a big flag, we won’t be able to see the direction of our business.”

Chikaranomoto’s ambitions are bold, given that few Japanese chained restaurants beyond rice bowl operator Yoshinoya Holdings Co. have a following in the U.S. It’s leveraging the growing popularity of Japanese cuisine around the world as increasing numbers of tourists visit the island nation.

“As tourists come into Japan and they try the food and they like it, it’s creating an opportunity for restaurants in Japan to expand overseas,” said Bloomberg Intelligence analyst Thomas Jastrzab.

The company held a 690 million yen ($6.1 million) initial public offering in March. After deducting shares sold by the founder and adviser fees, net proceeds totaled about 400 million yen, according to Kiyomiya. It costs as much as 200 million yen to open a restaurant overseas, and the company hasn’t made any decision on raising additional funds at the moment, he added.

Shares of Chikaranomoto pared gains Monday in Tokyo, dropping as much as 5.6 percent after they increased almost 12 percent Friday. Net income more than doubled in the year ended March to 271 million yen, while sales rose 7.5 percent, the company reported Friday. The shares have increased almost fourfold from its offering price to 2,351 yen at the close on Friday.

The chain also plans to open two more restaurants in New York City, bringing the total in the metropolis to six. The next three years are critical for the company’s overseas expansion, said Kiyomiya. The locations aren’t fixed and success will depend on carefully picking locales, he added.

“As the state of the world becomes more volatile, we don’t want to be too detailed on shop locations and then have to revise our plans,” Kiyomiya said.

Southeast Asia is another international market Chikaranomoto plans to tap as it looks for emerging market opportunities, he said.

The company also runs a fast-food ramen chain called Kuro-Obi, which is focused on chicken broth offerings. It plans to position the concept in predominantly Muslim countries in Southeast Asia where consumers don’t eat pork, such as Indonesia and Malaysia.

The noodle operator is targeting to have 300 locations outside the country by 2025 from its current 65. The company operates some 130 restaurants in Japan and has shops in about a dozen other countries, including China, France, Singapore and Myanmar.

It partnered with Panda Restaurant Group Inc., which operates Chinese fast-food chain Panda Express, to expand Ippudo outlets in the U.S.

Experimentation is a key part of the business, said Kiyomiya. The menu in Ippudo’s New York locations changes every two weeks with new food items. The company is also considering starting a cooking school.

“Our company principle is ‘To not change, we have to keep changing,”’ Kiyomiya said.

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net, Grace Huang in Tokyo at xhuang66@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Yuji Okada at yokada6@bloomberg.net, Dave McCombs