TOKYO — Kentucky Fried Chicken recently opened its 1,000th shop in Japan, surpassed $1 billion in sales and will be selling the equivalent of 64 million chickens here this year, or more than one for every two Japanese.
But when the chain launched its business here in 1970, there were few hints of such success.
The Japanese did not know what "fast food" was. Chicken usually meant yakitori (grilled chicken parts on a skewer) or karaage (chicken cooked in vegetable oil). Mashed potatoes and gravy, a staple at U.S. outlets, was an alien intruder to the Japanese palate.
Shops mimicked their U.S. counterparts--buildings with red-and-white roofs and their own parking lots--despite the fact that "there were few car owners in Japan in those days," said Takeshi Okawara, president of Kentucky Fried Chicken Japan.
What's more, Kentucky Fried Chicken was charging 280 yen ($2.24 at the current exchange rate) for two pieces of chicken, a roll and cole slaw--"the minimum lunch you would need to fill up your stomach," according to Okawara. Meanwhile, "a bowl of \o7 ramen\f7 (noodles) cost 120 yen (96 cents)," he said.
"Our first three shops set targets of 200,000 yen ($1,600) a day in sales--but actually achieved as little as 7,000 yen ($56) a day," Okawara said.
Indeed, the familiar figure of Col. Harland Sanders that stands in front of nearly every store might easily have disappeared from Japan.
"After a year, we were 100 million yen ($800,000) in the red," Okawara said. Heublin Inc. had just taken over the U.S. parent company, but "fortunately, they were so busy getting themselves established that no one watched the red ink here."
Subsequently, the U.S. ownership changed hands twice more, with soft-drink giant Pepsico Inc. finally taking over. But throughout those years, the Japanese partner in what started as a 50-50 joint venture was the giant trading company Mitsubishi Corp.
Its involvement stemmed from its large imports of feed grain from the United States, said Enshiro Matsuyama, senior managing director for foods. Those transactions, in turn, led the company into the poultry-raising business in Kyushu in 1969. From there, the joint venture with Kentucky Fried Chicken followed as "a natural development" in 1971, he said.
It was, nonetheless, Mitsubishi's first plunge into what he jokingly called \o7 "mizu shobai"--\f7 literally, "water business," a term normally used for bars and nightclubs where employees deal directly with customers. Mitsubishi had never sold anything directly to consumers before.
Unlike Heublin, Mitsubishi noticed the mounting red ink. But Matsuyama said the company was interested in Kentucky Fried Chicken from a long-range point of view.
"We were not looking at the quarterly results, as they do in the United States. And the losses were absorbable from our point of view," Matsuyama said. (Indeed, Mitsubishi's sales amounted to $145 billion last year.)
Three Mitsubishi executives now serve on the Kentucky Fried Chicken Japan board, including one who is the chairman. The trading company also provides the chain with 60% of the chicken meat it sells here and serves as its agent to import flour, shortening, potatoes, corn and machinery for its stores.
According to a Harvard Business School study, Mitsubishi's continued financial support during those early days was crucial as the Japanese chain wound up closing two of its first three shops and laying off half of its 40 permanent employees.
Okawara, who quit a job with a large Japanese printing company to join Kentucky Fried Chicken Japan at the start, recalls moving equipment from an unsuccessful store in Nagoya to Kobe and, along with four other original employees still with the company, taking charge of the new shop.
Lacking funds to pay for hotel bills, "we slept in the back of the shop on flour bags. Our 'showers' consisted of washing ourselves from the sink in the kitchen," Okawara said, recalling how greasy he felt.
Ultimately, "that was the first shop to show a profit," he said.
French fries replaced mashed potatoes. Small shops, located in "back streets near shopping areas where the rents were cheaper," replaced U.S.-style buildings. Some were so tiny that the food-preparation area was called a "submarine kitchen"--as small as what you might expect on a submarine. Even today, "in about 10 of our shops at peak hours, we have to supply oxygen to our kitchen workers," Okawara said.
Col. Sanders came to Japan three times in his capacity as "goodwill ambassador" for Kentucky Fried Chicken, and all kinds of gimmicks were tried to attract customers. At Christmastime, employees donned Santa Claus suits and propagated the idea that there was no better way to celebrate Christmas--in this non-Christian country--than eating fried chicken.
