Last week the No 2 Japanese telecoms giant KDDI revealed plans with partner Mitsubishi to take Lawson convenience stores private.
Lawson stores are ubiquitous in Japan (there are over 14,000) as is KDDI’s mobile business which trades under the ‘Au’ brand. 会うmeaning ‘meet’ as does 合う meaning ‘unite’. Both kanjis are pronounced ‘Au’.
All are corporate Sumos. KDDI has almost 50k staff, whilst Mitsubishi Corporation has 80k. Mitsubishi Shokuhin which is separately listed subsidiary manages the Lawson delivery network.
Lawson is not just a Japanese play. It has 7000 stores in China and aims for 10,000.
What’s the logic behind KDDI’s Lawson grab?
Cross merchandising
KDDI sees growth in its Au stores merchandising a wider range of Lawson goods whether that be private brand or services like banking.
Services and payment has been a growing part of the CVS business and KDDI wants Lawson to sell more mobile, insurance and entertainment offerings.
Big Data, Retail Media
As at September 2023, KDDI had 65.9m subscribers, second only to NTT Docomo with 88.5m. SoftBank, the other heavy weight muscles in with just over 50m.
Globally retailers are waking up to the opportunity to sell in store media to manufacturers. Amazon was the pioneer but others are following closely. Tesco has made hay with Dunnhumby, Walmart with retail link and Australia’s Woolworth with Cartology. You want listings Manufacturer? Well we can help drive off take through our in-house media.
Shoppers in Lawson another rival, Familymart, are facing some very large and impactful media screens (see video).
The revenue opportunity for retailers with a well managed retail media platform is huge. And it can be much more profitable.
Sustainability
KDDI claims to realise Lawson’s Blue Vision, reduce CO2 emissions through more solar panels and use of bio fuels.
What else?
Are these the only reasons for the deal?
I don’t think so. I’m sure Lawson has been watching rival 7-Eleven’s tussle with activist fund ValueAct with alarm. ValueAct holds just over 4% stake and has been pushing for a break up of 7-Eleven holdings.
Foreign shareholders are gaining muscle and influence in Japan. This is welcomed by some, but not all. The government is encouraging firms to reduce cross shareholding (like the one with Lawson). Different industry but colossus Toshiba is now privately owned.
As Asia’s urbanisation grows so does the role for CVS. Japan’s CVS brands are recognised as best-in-class. Besides China, Lawson also has a (limited) footprint in Thailand. With a shrinking domestic population Japan’s corporates are keen to find new pastures overseas.
Lawson’s shares have jumped since the announcement, whilst KDDI’s have dropped. KDDI has held a minority stake in Lawson thus far, this latest move puts it into the driving seat. What experience does KDDI have with big investments and integrations? From what I can see it’s limited.
Maybe this latest round of sumo will herald another new entrant. Someone who shakes up KDDI?