J-Star makes sweet exit from Tokachi

Times, however, are changing. Many businesses, like traditional sweets maker Tokachi - recently sold by domestic mid-market buyout firm J-Star to Media Flag for JPY644 million ($6.5 million) - have been forced to adapt.

When J-Star acquired Tokachi, which operates as TokachiAmanatouHonpo, for JPY450 million in 2006, it was a classic succession play. The owner had been running the business since 1974 and was looking to get out; and the company itself was also ripe for renewal.

While its products - which use traditional ingredients such as red bean paste, chestnut and rice cake - continued to appeal, consumer habits had evolved and sales suffered as a result.

"Traditional sweets remain popular in Japan but many of Tokachi's products had been sold more as seasonal gifts and the practice is not as common as it once was," explains Sachiko Nakayama, an associate with J-Star. "So we thought it would better to shift focus to more on-the-spot purchases."

Tokachi has 26 stores in Saitama prefecture under its main brand and nine in Tokyo under the Kashin-tachibana marquee, most them located at roadsides. One of J-Star's first moves was to bring these outlets to areas in and around train stations in a bid to encourage impulse purchases. The company also began to look beyond its own outlets for customers.

"We expanded the business channels," says Nakayama, "Most of the company's stores were in Saitama, but we helped it start selling products through supermarkets and co-op stores, so it was operating more like a B2B business."

In addition, J-Star improved efficiency in Tokachi's manufacturing operations by consolidating existing factories and improving the bottom line. This involved a degree of management recalibration, replacing those who were overly focused on the sales side with experienced operations executives.

"Prior to J-Star's involvement, decisions solely relied on the founder's opinion," says Nakayama. "We believe that the mid-level management is now sufficiently well established to support operations and it is no longer a one-man company."

The acquisition by Tokyo-listed Mediaflag - which has generated a 1.3x money multiple for J-Star - represents a new frontier for the buyer. Mediaflag's chief line of business is as one of Japan major mystery shopper companies, visiting over 200,000 stores a year - including those owned by Tokachi - and offering its clients advice on sales and marketing strategy. It is now looking to M&A as a means of leveraging that knowledge.

This the second exit of 2013 for J-Star, which sold clothing brand Olive des Olive in January.

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• Topics
• Exits
• Consumer
• North Asia
• Buyouts
• Trade sale
• Exit
• Consumer
• Japan
• J-Star