A CAPPUCCINO AT THE PEPE LE MOKO coffee shop outside Tokyo is, like many things Japanese, defined by rituals. While Sayoko Kaseda frantically whisks a small pan of milk over a gas burner, her husband, Toshio Saito, grinds a mug's worth of beans and places them in a filter atop an antique cup. Coffee lovers can take it all in from one of nine bar stools jammed along a single counter that fills the 350 square-foot shop. The brew costs five bucks.
Traditional coffee joints like Pepe le Moko, most of which predate the U.S. occupation, are fast becoming an endangered species. While coffee imports were up 10% last year, to $934 million, Japan's old-style coffee shops have diminished from 155,000 outlets in 1981 to 94,000 last year.
But Starbucks is thriving. A 50-50 joint venture between the Seattle-based chain and Japan's upscale retailer Sazaby opened its first Japanese shop in 1996 and is on track to have 200 outlets by next year. In sections of Tokyo they are barely blocks apart. They offer $2.50 cappuccinos--in no-smoking cafes with comfortable chairs.
Homegrown fast-service chains like Doutor Ltd. are fighting back. In the past year, Doutor has opened 20 outlets of a copycat extension called Excelsior. So similar, in fact, that Starbucks sued, demanding Excelsior change its signs and interiors so that customers don't think they're walking into a Starbucks. Doutor promises to change the signs; the suit remains pending.
Starbucks also faces competition from other imports, including Seattle's Best and Tully's Coffee. Low rents and vacated prime retail spots speed the process. Even Japan's traditional mom-and-pop coffee shops are trying to fight back. The owners of Pepe le Moko are working 14-hour days and selling wine in a bid to stem the slide that has pulled monthly sales from $20,000 to less than $10,000 over the past decade.
Nearby, the traditional Trianon coffee shop also struggles with the times. While staffers proudly showed off its brand-new Italian espresso machine, nobody in the shop knew how to operate it.