Kefir and three of its affiliated companies have filed a bankruptcy application to the Tokyo district court early this month. Its affiliated companies were in the business of power supply and hot spring spa services.
Its system of seeking investments from the public to expand its business with the promise of guaranteed returns, also known as the ownership programme, was reportedly the main cause of its downfall.
An individual who invests in Kefir’s food selling business will receive a 10% interest when the contract matures in half a year’s time.
However, Kefir’s sluggish business was unable to keep up with the payment to the investors. A system glitch had also led to payment delays since November last year.
The firm's cash flow suffered as worried investors cancel their contracts, which exacerbated the situation.
“The majority of our business has been sluggish. It is a situation that took a considerably long time to earn profits and I could not make money as I have expected,” Shuuki Toki, the representative director at Kefir said in a statement published on the company’s website.
“Although we have searched for all measures to overcome the difficulties, we are finally in a situation where future prospects for business are not established, and in order to ensure equality and fair treatment of members, we are forced to file a petition for commencement of bankruptcy proceedings,” he added.
With as many as 33,747 creditors, Kefir’s decision to bank for bankruptcy was widely reported in Japan local media.
Most creditors were elderly, according to Tokyo Shoko Research.
Japan’s Consumer Affairs Agency added that it had received more than 1,400 consumer complaints directed at Kefir in the past one year.
Those affected had sought legal respite and had plans to file a criminal complaint against the group for fraud or violation of the investment law.
Founded in 1999, Kefir started out as a yogurt seller.
Its food business also involved the selling of maple syrup and dried persimmons and it later expanded into a multi-portfolio business, including solar and biomass power generation.
Although it had recorded a net sales of 100.4 billion yen in the fiscal year ending in July last year, most of it was income from the "ownership system."