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A Canadian company is offering $47 billion, but some fans of the Japanese-owned convenience chain question whether the bidder understands local tastes

TOKYO—At a factory outside Tokyo, workers cook bowls of chicken and eggs one by one in small pots. The eggs are from hens raised on special feed so the yolk is dark in color and richer in flavor.

The closely guarded recipe is prepared only for 7-Eleven convenience stores in Japan.

What might happen to the chicken dish and hundreds of others is tied to a battle for 7-Eleven’s Tokyo-based parent, in what would be the largest acquisition of a Japanese company by a foreign buyer in history.

Executives at the parent, which is called Seven & i Holdings 3382 0.66%increase; green up pointing triangle, are resisting a $47 billion takeover bid by the Canadian owner of Circle K convenience stores in the U.S. They are raising concerns about what might happen if the foreign company were to gain control of a distinctly Japanese way of operating convenience stores.

In a September letter rejecting an initial offer by Quebec-based Alimentation Couche-Tard ATD -0.79%decrease; red down pointing triangle, the Japanese company’s board pointed to “the crucial role that 7 & i plays in everyday life in Japan across food retail, banking and other services.”

Chief Executive Ryuichi Isaka, while avoiding direct criticism of the Canadian company’s management, said his current team was best-positioned to build global growth around “the 7-Eleven brand’s high-quality food.”

In the U.S., the land of 7-Eleven’s birth, few people usually think of convenience stores as a foodie destination. But the Japanese version of 7-Eleven, after a half-century of evolution, has become a mecca for the type of person who gets fussy about the consistency of the rice in a rice ball or the crunchiness of sandwich lettuce.

In this country, that is a lot of people. Although Seven & i Holdings controls all 7-Eleven operations around the world, including those in the U.S., the 21,000 stores in Japan are the company’s crown jewel, accounting for more than half of operating profit in the first half of this fiscal year.

The Canadians behind the takeover bid, who raised their offer price in recent weeks, say they wouldn’t spoil 7-Eleven Japan. “We have tremendous respect” for the “outstanding level of excellence” of the Japanese stores, said Alimentation Couche-Tard, which runs convenience stores around the world including its namesake Couche-Tard, or “night owl,” stores in Canada.

Foreign companies have often struggled in Japanese retail acquisitions, encountering stiff competition and different consumer preferences. Walmart bought control of a Japanese supermarket chain called Seiyu in the early 2000s but mostly pulled out in 2020 after years of struggles to turn a profit. French retailer Carrefour gave up on Japan in 2005 after just four years.

On a recent afternoon, Chigusa Okazaki, a 51-year-old office worker, stopped by a 7-Eleven store in Tokyo for a snack. She pointed out her favorites—baumkuchen, a cake of German origin that is popular in Japan, and a cup of octopus and broccoli marinated in basil sauce.

“My impression is you can’t go wrong with Seven’s quality,” said Okazaki. “If it’s bought out, I have the feeling it might change for the worse.”

The 7-Eleven food gained a wider fan base during the Tokyo Olympic Games in 2021, when foreign visitors, held back by pandemic-era restrictions from trying the city’s finer restaurants, found convenience-store offerings weren’t such a poor substitute.

In Japan, hundreds of types of food are found in a typical 7-Eleven, from salads and sandwiches to fish, beef and chicken dishes. Its main competitors in Japan, FamilyMart and Lawson, usually have similar offerings.

Food and drink accounts for about two-thirds of 7-Eleven stores’ revenue in Japan, according to the company. Much of it is made exclusively for 7-Eleven at 172 factories across Japan and delivered up to three times daily, with a high proportion of perishable items that must be sold in a day or two.

Yuka Kobata, a 47-year-old homemaker, said she often turned to 7-Eleven when she wasn’t able to cook dinner. She said she was worried that foreign executives might trim the selection.

Kobata said her children liked the rice balls at 7-Eleven because the rice is fluffy. The company attributes that in part to its technique of shaping steamed rice into a triangle with a dedicated machine. A rice master in Kyoto, the eighth-generation head of the Hashimoto rice-merchant family, selects the varietal blend that fits best for rice balls.

As for potato salad, 7-Eleven believes that the tastiest part of the potato is right under the skin, so it worked with a machinery maker to develop a peeler that removes the thinnest possible skin layer. It installed the device at three factories that serve Japan—and nowhere else.

In Japan, 7-Eleven “isn’t just in the retail business,” said Rakuten Securities strategist Masayuki Kubota. “It is a huge system that includes product development, production and distribution.”

Its local suppliers speak respectfully of “Seven-san.” Meatpacker NH Foods, owner of the baseball team that used to employ Shohei Ohtani, makes a ground-beef dish sold under 7-Eleven’s private brand. The company says that over the past 15 years, it has had to develop a new recipe every year, even if the product is selling well.

“Seven-san says that the more delicious it is, the more you get tired of it, so we always evolve it every year,” said Toshihiro Yoshikane of NH Foods.

Even before the Canadian buyout offer, 7-Eleven Japan’s management was beginning to hit the limits of such strategies. The company has had to raise prices to support the intricate recipes suppliers are creating at its command, and growth in store sales has flattened.

“I don’t go to Seven, because it’s more expensive. The quality might be better, though,” said Ryo Yabumoto, a college student.

In response, 7-Eleven has recently advertised a lineup of lower-priced items it says offer “pleasant value.”

Both the 7-Eleven parent’s current management and the potential buyers say they want to bring more of the Japanese chain’s strategy to the U.S. Some U.S. 7-Elevens now feature rice balls and other Japanese-style foods such as sandwiches made with thin, fluffy bread.

The company faces challenges in replicating the way it makes and ships food in Japan. For example, the U.S. and many countries require rice balls to be kept cool for food-safety reasons, but in Japan 7-Eleven can keep them at 68 degrees Fahrenheit from the factory to the store shelves to ensure the rice doesn’t harden and lose its taste.