Two Different Paths to Growth in Japan

Published on June 4, 2026

Japan now has 2 drugstore groups generating more than ¥1 trillion (about US$6.2 billion) in annual sales.

Matsumoto Kiyoshi Cocokara & Company, better known to most shoppers as Matsukiyo, reported sales of ¥1.12 trillion for the year ended March 2026. Sugi Holdings crossed the trillion-yen mark for the first time, reporting ¥1.01 trillion for the year ended February 2026.

On paper, the 2 companies have plenty in common. Both operate thousands of stores. Both benefit from Japan’s ageing population, inbound tourism recovery, and growing interest in health and wellness.

The similarities start to fade once you step inside the stores.

Matsukiyo built a reputation around discovery. Consumers visit looking for a new supplement, a highly rated private label product, or simply whatever happens to be generating attention that month. Sugi focused elsewhere, embedding itself into local communities, healthcare networks, and the routines of everyday life.

Both approaches produced similar results.

While Matsukiyo and Sugi are retailers, the lessons extend well beyond store shelves. The same forces that shaped their growth also shape success across Japan’s digital commerce landscape: discovery, trust, consumer expectations, and ultimately earning a place in people’s routines.

Overview:

Matsukiyo and the Power of Product Discovery

Ask someone what they brought back from Japan and the answers are often surprisingly similar. Beauty products. Supplements. Eye drops. Snacks. A handful of products they had no intention of buying before walking into a drugstore.

There is a good chance that drugstore was Matsukiyo.

Matsukiyo generated ¥1.12 trillion (US$7 billion) in sales during the year ended March 2026. Its cosmetics sales reached ¥381.2 billion (US$2.6 billion), growing 7.9% year-on-year and now makes up 35.9% of total sales.

Cosmetics may be driving growth, but they are only part of the story.

Shelf Space Is Earned in Japan

Japanese drugstores rarely look the same for very long.

Walk into a large Matsukiyo today and return 3 weeks later. End cap displays will have changed. Seasonal promotions will have changed. Products that seemed impossible to miss may have disappeared altogether. The shelves are in a constant state of revision, reflecting seasonal demand, emerging trends, viral products, and shifting consumer demand.

A new product has a limited amount of time to prove itself. If a skincare item, supplement, packaged food, or other SKU fails to generate meaningful sales within its first 6 to 12 months, it is heavily discounted, cleared out, and replaced during the next category review.

This is one of the defining characteristics of Japanese retail.

In many Western markets, shelf visibility can be heavily influenced by slotting fees and trade spending. Japan places far greater weight on sales performance. A retailer may give a product an opportunity, but consumers ultimately decide whether it keeps its place.

Shelf space becomes a key form of validation.

When a product secures prominent placement across big chains such as Matsukiyo, it is often evidence that shoppers are actually purchasing it. The shelf functions almost like a continuous consumer vote. Products that earn attention stay. Products that do not quietly disappear.

For brands, it creates one of the most demanding retail environments in the world. For consumers, it keeps stores remarkably current.

Why Recommendations Matter in Japan

The retailer’s private label business offers another clue.

Many Matsukiyo products have developed loyal followings because consumers believe they deliver more than their price suggests. Some become favourites within beauty communities. Others gain traction within the Japanese supplement market, where recommendations, reviews, and repeat purchases often play an outsized role in purchasing decisions.

That matters in Japan because consumers rarely purchase in isolation. Reviews, rankings, comparison sites, creator content, and word of mouth all influence buying decisions. Japanese consumers research. They compare. They look for reassurance.

Products that consistently exceed expectations tend to generate their own momentum.

Matsukiyo understood this long before many retailers did. Rather than focusing solely on convenience, it built an environment where discovery, recommendation, and repeat purchase reinforce one another.

That helps explain how a drugstore chain grew into a business generating more than ¥1 trillion in annual sales.

Sugi Built Something Harder to Replace

If Matsukiyo built a business consumers actively seek out, Sugi built one that consumers encounter almost by default.

Sugi Holdings reported ¥1.01 trillion (US$6.3 billion) in sales for the year ended February 2026, crossing the trillion-yen mark for the first time. New store openings, acquisitions, and a growing prescription business all contributed to that growth. Yet the company’s real advantage runs deeper than store count.

Sugi has spent decades embedding itself into the daily routines of the communities it serves.

The Dominant Strategy Behind Sugi's Growth

Many retailers expand by spreading themselves across a country. Sugi took a different approach.

In Japan, the model is known as a dominant strategy. Rather than opening stores everywhere, the company concentrates heavily within specific regions and neighbourhoods. One area might contain 10 nearby Sugi locations, each serving a slightly different role.

At the centre sits a core store.

These locations do more than sell products. They build relationships with local hospitals, clinics, care facilities, and municipal health programmes. The surrounding stores then operate as part of the same local ecosystem.

The result is a business that becomes increasingly difficult to avoid. A consumer may have a Sugi near home, another near the station, and another beside their doctor’s office. At some point, choosing Sugi stops being a conscious decision and simply becomes part of everyday life.

Building for an Older Japan

Japan is already the world’s oldest major society. It is also continuing to age.

For years, policymakers have promoted a community-based care model that allows people to remain in their own neighbourhoods while accessing healthcare, support services, and daily necessities through connected local networks. Sugi’s business happens to fit remarkably well within that vision.

Its acquisition of dispensing pharmacy operator I&H expanded its prescription business and strengthened its presence around hospitals and medical facilities. In many communities, Sugi is no longer simply a retailer. It has become part of the infrastructure that supports everyday life.

The company’s wellness app follows a similar philosophy. Users can earn Sugi Points through activities such as walking and redeem them for products or shopping vouchers, reinforcing the connection between everyday health and everyday shopping.

That reflects a broader shift taking place across Japan, where healthcare, retail, loyalty programmes, and digital services are becoming increasingly interconnected within Japan’s evolving omnichannel retail landscape.

Matsukiyo built a business around discovery. Sugi built a business around continuity.

Both crossed the ¥1 trillion mark. The difference is that Sugi’s model becomes more valuable as Japan gets older.

What This Means for Global Brands Entering Japan

The interesting thing about Matsukiyo and Sugi is that neither company’s success comes down to product alone.

A strong product is rarely enough on its own. Positioning matters just as much.

The Price-Value Equation Still Matters

One of the biggest mistakes global brands make when entering a new market is assuming consumers will perceive their products the same way they do at home.

Japan rarely works like that.

Consumer expectations are shaped by the local market, local competitors, and the alternatives sitting on the shelf beside you. Before entering Japan, brands should understand how products in their category are positioned, where they sit within the market’s pricing structure, and what consumers expect at each price point.

Japan’s consumers are often willing to pay a premium. What they are less willing to accept is a mismatch between price, positioning, and performance.

A premium product with weak differentiation struggles. A value product priced like a premium one struggles. A brand positioned around quality must deliver quality that consumers can clearly recognise and justify.

Misalignment creates confusion. Confusion rarely drives sales.

Growth Follows Relevance

The lesson from Matsukiyo and Sugi is not that brands should copy either strategy.

The more useful takeaway is that both companies understand exactly what role they play in consumers’ lives.

Matsukiyo succeeds because consumers expect discovery, recommendations, and products that feel worth talking about. Sugi succeeds because it has embedded itself within routines, communities, and healthcare networks that people already depend on.

Both businesses are aligned with customer expectations.

That alignment becomes particularly important when entering Japan. Many brands focus heavily on what they want consumers to think about them. Far fewer spend enough time understanding how consumers actually see the category, what alternatives already exist, and where the brand genuinely fits within the market.

The brands that build lasting positions in Japan are often the ones that feel immediately understandable to consumers. The value proposition is clear. The pricing makes sense. The product delivers what shoppers expect it to deliver.

Growth tends to follow from there.

The Brands That Last Build Both

The most interesting thing about Matsukiyo and Sugi is not that they reached the same destination through different routes.

It’s that both companies have a remarkably clear understanding of what customers expect from them.

Matsukiyo does not try to be the cheapest retailer in Japan. Sugi does not try to be the most exciting. Both have built businesses around strengths that consumers recognise and value.

That may be the more useful lesson for brands entering Japan.

Success rarely comes from forcing a position in the market. It comes from understanding where the brand genuinely fits within the competitive landscape and delivering consistently against that expectation.

Consumers can forgive many things. Confusion is rarely one of them. The companies that endure are often the ones that make that choice easy.

If Japan is part of your growth plans, WPIC helps brands navigate market strategy, digital commerce, logistics, and local execution. Contact us to discuss how your brand can build a lasting presence in one of the world’s most sophisticated consumer markets.

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