The D&C merger: diversification, Kyotaru and the TSE listing (1988)

It widened the base; the earner never changed

Over the dozen or so years from 1988, Yoshinoya added a doughnut company’s initials to its corporate name, opened a new format aimed at female customers, and brought a takeaway sushi company into the group. Even so, the beef bowl went on earning most of the profit. Doughnuts and curry both ended in withdrawal or contraction, and it took four years before Kyotaru got its second chance. When a company that fell over through concentration on a single item tries to broaden out, the strength of the core business tends to become the yardstick, and the immaturity of the new formats shows up against it. The severity of that comparison is part of why the diversification of this period stayed unproductive for so long.

What did survive from the period was the capital structure assembled in it. In the ten years from over-the-counter registration to a First Section listing, the company settled its history as a reorganised firm in the eyes of the market. But the beef-bowl price war that began immediately after the listing threw into relief the role diversification had failed to fill. That a declared policy of not cutting prices was reversed within a year shows that widening the base does not by itself release a company from dependence on one item. Losing that signature item outright was three years away.