At First, It Was a Clash of Pride: The Samurai Who Developed Seven Premium
"Why do we have to do this together!?"
This was the honest reaction made by the seven individuals who witnessed the birth of "Seven Premium" right after the project was explained. The brand, which now offers more than 3,460* items, had a series of difficulties in its beginnings.
Among the products and services created by the Seven & i Group, many have now become things we take for granted. However, this "normal" existence was only made possible by the people who kept moving forward, even through rain and storms.
"After the Storm Comes the Calm" delves into the honest thoughts of these challengers, revealed only now. This time, we present the story of how Seven Premium came to life.
*As of the end of August 2024
Contents
- Creating Synergistic Products through Economies of Scale!
- The "Seven Samurai" Assembled from Different Industries
- Everything Can Be Understood Through Conversation; If Not Spoken, It Can’t Be Understood
- The Price Barrier Stood in the Way. The Breakthrough Lay in "Work from the Customer's Point of View"
- Convenience Stores and Supermarket Join Forces: A Breakthrough in Successful Product Development
- The Launch of 49 Products: Evaluation Came from an Unexpected Source
Creating Synergistic Products through Economies of Scale!
The first Seven Premium was launched in 2007.
Private brands were considered cheaper because their quality was inferior to that of national brands.
This was an unshakable norm in the retail industry. To break this common perception, the "Group MD Reform Project" was launched in the fall of 2006. The driving force behind this was Otaka, who was the President & Representative Director of York-Benimaru at the time (now Honorary Chairman).
Otake, Executive Officer and Head of the Group Merchandise Strategy & Planning Division of Seven & i Holdings (who was the Head of the Food Division of York-Benimaru at the time), reflects on this as follows.
"At that time, it had been about a year since Seven & i Holdings was established. It all started with the idea of creating valuable products by leveraging the group’s economies of scale. But it was also a challenge like no other."
The "Seven Samurai" Assembled from Different Industries
For this challenge, seven elite members were selected from the convenience stores and supermarket divisions of the Seven & i Group. These individuals, who would later be called the "Seven Samurai," included Osada, Senior Advisor of the Merchandise Procurement Department, Group Merchandise Strategy & Planning Division of Seven & i Holdings Group (then working at Seven-Eleven Japan). He still vividly recalls the events of that time.
"I received my appointment on September 30, 2006, and Otaka told me, 'Meet in the headquarters' smoking room.' When I went there, the smoking room had been converted, and that was where the office was."
After Otaka explained the project and left, the first words spoken by the seven were, "Why do we have to do this together!?"
Until then, there had been no concept or precedent of working together between group companies, and since they had a competitive stance of not sharing information about their own companies even within the same group, the seven were surrounded by a tense atmosphere.
Everything Can Be Understood Through Conversation; If Not Spoken, It Can’t Be Understood
Even after one or two months had passed since the project was launched, there was almost no communication. Unable to bear the situation, Otaka ordered the members to go on an inspection to the United States.
Osada
On the first day of the inspection, the members were still carrying the same tense atmosphere from Japan. However, during the inspection, they inevitably ate three meals a day together, and in the evenings, there was also alcohol. Before they knew it, conversations started to flow, and by the final day, they were united with the determination, "Alright, let's do this together!"
Otake
Looking back, I think Otaka's true intention was to create a situation where we had no choice but to communicate.
Adversity strengthens the foundations.
Although the project finally started moving, an unexpected hurdle awaited.
The Price Barrier Stood in the Way. The Breakthrough Lay in "Work from the Customer's Point of View"
At that time, Mr. Suzuki, then chairman of Seven & i Holdings, instructed, "Create valuable products that can be sold at the same price across all business formats." However, a price barrier existed between convenience stores and supermarket.
Otake
Supermarket lower their prices, while convenience stores keep them unchanged. The price ranges and corporate cultures were completely different. However, Suzuki strongly believed that "if we create valuable products that overcome price, they can be sold across any business format." The team on the ground, tasked with turning this challenge into reality, was in complete chaos, with many differing opinions being thrown around.
Aiming for the private brand that sells across the entire group.
The new challenge of "selling in all business formats without changing prices" required a mindset that would completely overturn traditional product development norms.
A panel displayed at the 2007 Seven Premium launch event. In order to reach these seven points the team continued their relentless efforts.
Otake
In the past, private brands were strongly associated with the image of being cheap but low quality. However, Otaka firmly stated, "That’s absolutely unacceptable. Without a clear concept, organization, and system, it will never succeed." The first rule was that quality could never be compromised, and the price had to be 20% lower.
This mindset may be linked to the "Two-piece profit" policy from the founding days of "Yokado" (the predecessor of today’s Ito-Yokado). This policy involved selling a dozen items and only making a profit on two of them. At the time, the products were sold at a price 20% lower than the standard retail price.
At the core of this approach is Seven & i Holdings' philosophy of "working from the customer's perspective."
Osada
One of the commitments to quality was to list the manufacturers. While it is common for other private brands to include this information now, at that time, it was a breakthrough from the conventional private brands concept. This allowed customers to recognize that the private brand products were made by well-known manufacturers, which helped to convey that the quality was exceptionally high.
Otake
In the U.S., it was common for the seller to take full responsibility for the sale of private brand products. However, Otaka, who was always encouraged by Suzuki to "think from the customer's point of view" adhered to that mindset and clarified the responsibility of the seller and the manufacturer. After all, customers want to know which manufacturer made the product. I firmly believed that this information should be displayed.
Convenience Stores and Supermarket Join Forces: A Breakthrough in Successful Product Development
The thaw during the U.S. inspection and the solidified Seven Premium Strategy seemed to bring them closer to the "clear skies" of its launch. However, progress in product development remained stalled.
Osada
The differences between convenience stores and supermarket couldn't be erased. Both sides insisted on their own ways of doing things, leading to constant arguments. However, from the customer's point of view, the goal was clear—we just wanted to create delicious and affordable products. Since we were aiming for the same thing, we decided to leverage each other’s strengths.
The strength of convenience stores lies in their immense number of locations, which generates powerful sales, and their expertise in product development.
Osada
Seven-Eleven Japan's product department revealed its exclusive "Product Development Process Sheet," which is a culmination of Seven-Eleven Japan's expertise in development processes. This was a major step forward. I believe the key to this disclosure was the presence of Isaka, the President and Representative Director of Seven & i Holdings, who was the Head of the Product Division at Seven-Eleven Japan at the time.
On the other hand, supermarket had specialized knowledge of products, expertise in identifying the best seasonality of ingredients, and strong connections with manufacturers. By leveraging these strengths from both sides, the development began in earnest.
Otake
In the beginning, manufacturers with strong brand power and technical expertise weren’t willing to work with us. The breakthrough came with Ajinomoto's mayonnaise. We had a long-standing relationship with them in the convenience store business, so that connection played a role. Additionally, the sales power of the convenience store business helped advance negotiations on the supermarket side. Through repeated experiences of recognizing each other's strengths, we gradually became more unified.
The "clear skies" of Seven Premium were finally in sight.
The Launch of 49 Products: Evaluation Came from an Unexpected Source
Osada, who attended the Seven Premium launch event, seemed a bit nervous for the long-awaited unveiling.
The first batch of Seven Premium products, released in May 2007, consisted of 49 items. There were many candidates, as each business unit wanted to showcase their strongest products. After extensive discussions about taste, ingredients, and price, the number of items was gradually narrowed down.
Interestingly, the initial launch did not include sales at 7-Eleven stores but was limited to supermarket. It wasn’t until August 2007 that Seven-Eleven began offering these products, starting with a small selection of six items focused on seasonings and specialty goods.
Osada
Honestly, it was a shock... But you know, the part-time employees working at 7-Eleven were more excited about the launch of Seven Premium than anyone else. They said, "I used to go to the supermarket after work, but now I can buy it here, so it's so much easier." They were buying it, and it made me really happy. It also sparked my motivation.
said Osada, reflecting on the first "moment of clarity".
Afterward, Seven Premium gained support from housewives and the elderly, and it steadily took root.
However, beyond its growth, another wall awaited. Not only was it important to see things from the customer's point of view, but also to respond to the changing voices of society. Moreover, aiming for an even brighter future ahead—In the second installment, we will deliver the story of "After the Storm Comes the Calm" after the birth of Seven Premium.
This text has been translated using an automatic translation tool.
