Inageya and Summit to expand farm operations

Supermarket chains are increasing their direct farming interests. With Japan’s farm sector in decline and imports problematic and expensive, serious food retailers have both the opportunity and the need to take better control over their food supply chains. This is even more the case for growing Tokyo chains like Inageya and Summit. 

More and more supermarkets are shifting to direct supply for fresh foods. The wholesale supply system, run largely by the powerful and semi-private JA (Central Union of Agricultural Cooperatives) has long stymied the ability of major retailers to take supply into their own hands. This has been one of the main reasons for both high food prices and the relative lack of variety in fresh produce in most supermarkets. However, with the biggest groups looking overseas for direct supply since the 1990s and then simply taking over their own farms in Japan since 2007, JA’s stranglehold looks to be loosening quite rapidly.

Today it is not just Aeon, Seven & I and the major convenience store chains that are shifting to direct supply of fresh produce. Last month two Tokyo chains, Inageya and Summit, announced that they would begin expansion of small, experimental farming activities. Radishboya is also expanding (see Page 5).

After a decade of stagnation to the point of virtual collapse and the intervention of Aeon, which now remains the chain’s largest single shareholder, Inageya is currently making a major come back. The chain has introduced a range of new deli items and other ‘ready-to-eat’ products ideally suited to the busy, small households using its largely central Tokyo chain.

In 2013, the company set up its own farming operation under the name Inageya Dream Farm, with around 39,000 sqm of land in Mizuho-cho in Tokyo and Irina and Tokorozawa in Saitama. The operation supplies 20 SKUs for the Inageya chain and its food production business. By 2017 Inageya plans to expand its farms to around 60,000 sqm. It will also begin growing okra, leeks, edamame beans and six other vegetables. In Japan most okra, for example, is imported, which is both high cost, but also makes it hard to offer fresh. Inageya is also planning soya bean production for its own brand packaged products too. Own-grown produce sells for the same price as wholesale items, but with significantly better margins.

Summit, another of the larger Tokyo based chains, is also planning to expand beyond an initial direct farming operation set up in Yamanashi Prefecture. Summit, which is a strong supporter of the wholesale system being itself owned by Sumitomo Shoji, has a tiny 2,000 sqm of land under production at present, but will expand this by 1,350 sqm this year. Up to now it has only grown Chinese cabbage, but plans to expand into potatoes and sweet potatoes, pumpkins and sweet corn over the next year. The farm in Yamanashi works with neighbouring farmers as a training site for its own direct operation, and is concentrating on pesticide-free growing techniques.

Although the farming industry has been heavily protected until now, much of it is in decline as the next generation find easier jobs in other sectors. Japan is finally seeing larger scale farming operations grow in parts of the country, often encouraged by government support and the intervention of major corporations. Among these, retailers are likely to be increasingly prominent, especially as the weak Yen and other international supply concerns make import and wholesale that much more uncertain. The changes are also indicative of the increasing speed of modernisation in food retailing as a whole.