Japan C-store Chains Add Farming to Their Undertakings

TOKYO -- Japanese convenience stores, including Lawson Inc. and Seven & i Holdings Co., are getting their hands dirty for fresh fruits and vegetables. The two retailers are among a growing number of companies investing in corporate farms.

Takeshi Niinami, CEO of Lawson, has started 12 farming joint ventures since 2010 and plans to establish 28 more. He also heads an agricultural reform committee that advises Japan Prime Minister Shinzo Abe.

The move into farming by c-store retailers comes as the prime minister cuts subsidy payments to food/rice growers and creates land banks to consolidate small holdings into large tracts that can be leased by companies as older farmers put down their plows. Abe also has raised the idea of establishing special economic zones this year that could test majority corporate ownership of farmland, something that's blocked by current laws, Bloomberg reported.

"Farm output will keep falling unless we take action," said Yayoi Sugihara, a spokesman for Lawson in Tokyo. "We want to bring on young farmers to become professional producers."

Retailers' investment in farming is increasing as consumer demand for fresh fruit and vegetables increases. Lawson estimates that shoppers who drop in to buy perishable items visit its stores about twice as often as others and spend 20 percent more. However, agricultural land in Japan has decreased 36 percent over the past five decades. Additionally, the typical farmer in Japan today is a man in his mid 60s whose heirs have abandoned rural industry, the news outlet reported.

According to Bloomberg, the number of farming corporations increased by 1,732 to 13,561 in the three years since rules were relaxed in December 2009 allowing companies to take a stake of almost 50 percent in agricultural ventures, from less than 10 percent previously. In 2010, companies held stake in 7 percent of the farmland in Japan, according to the agriculture ministry.

In addition to Lawson, Seven & i started farming in 2008 by establishing a joint venture with an agricultural cooperative in Tomisato, a city located in Japan's northeastern Chiba Prefecture. That two-hectare farm has been joined by nine more, mostly producing vegetables, the news outlet reported.

Seven & i has more than 15,000 7-Eleven convenience stores in Japan and another 215 outlets under the Ito-Yokado supermarket brand, said Hirotake Henmi, a company spokesman. Lawson has about 11,500 convenience stores.

To read Bloomberg's full report, click here.