Archive for the ‘Food & drink’ Category

Deflation watch: gyudon

Monday, April 15th, 2013

Before the fall

Before the fall

Good news for beef lovers. On April 10 gyudon (beef bowl) chain Yoshinoya announced it would cut the price of its standard namimori serving by ¥100 to ¥280 starting April 18. Sukiya, the No. 1 gyudon chain, was selling its namimori version for ¥250 until April 12, and No. 3 in the race, Matsuya, was doing the same thing until April 15.

At the press conference where Yoshinoya made the announcement, company president Shuji Abe told reporters that Yoshinoya felt it could not reach its desired sales target “with prices as they are,” and since “price is the biggest factor affecting sales,” they decided to cut it by more than a fourth. Though Yoshinoya’s two rivals are ending their own price-cut campaigns this week, they carry them out on a fairly regular basis, so it’s likely they will react in kind to the announcement.

In reporting the announcement, the Asahi Shimbun reporter remarked that, although consumers will certainly appreciate the lower price, how can Yoshinoya hope to make a profit after such a drastic cut? Moreover, what does the move say about the government’s strategy of boosting inflation? Yoshinoya’s Abe stressed that the business environment has become “even more difficult” owing to the decrease in the yen’s value, which makes importing beef more expensive. But he also said that the company will still be able to turn a profit because it plans to import even more beef and thus can expect cheaper wholesale prices now that the regulations with regard to beef imports have changed.

In 2004, imports were restricted due to the BSE scare, but those restrictions have now been lifted, and beef from older animals can be sold in Japan. In addition, Yoshinoya plans to cut its retail personnel by “making the work routine in restaurants more efficient.” So even if the prices for the main product drop by 25 percent, according to company projections based on past experience the number of customers should increase by 30 percent, and if that happens sales will increase 15 to 20 percent.

A food industry analyst pointed out something else to the Asahi: Fast food in general has become cheaper in the past 10 years or so, and consumers have just become accustomed to the fact. There seems to be an upper limit to what they will pay, and chain businesses know this. What that means is that these businesses will fall into a permanent state of price competition, even as the cost of ingredients goes up. That means personnel costs will not rise; if anything they’ll have to be cut. And restaurants that don’t belong to chains will be squeezed out. For a while Yoshinoya tried to compete in terms of quality and selection by adding new products to their line, but obviously they’ve abandoned that strategy and returned to price competition.

This is not the kind of outcome the government wants, but consumers have become so used to lower prices they probably won’t spend more except for basic necessities, and the retailers who can keep their prices down will make profits through volume. Much has been made in the media of how department stores are suddenly enjoying better sales, but their customers tend to be people with larger amounts of discretionary income through investments in stocks and foreign currencies, both of which are going up. Such people spend their windfalls on expensive watches. They are not representative of the general public, much of which still decide their spending regimens based on wages and salaries, and despite the government’s hopes and efforts those aren’t likely to rise any time soon.

Japan has become a nation of coupon clippers and bargain hunters. It’s a hard habit to break.

Deflation watch: Retort curry

Thursday, January 24th, 2013

Just add rice.

The newly elected Liberal Democratic Party government and the Bank of Japan have set an inflation target of 2 percent as a means of reviving the economy. It’s a plan that has been met with as much skepticism as approval, but what sort of impact will it have on the average person? According to an analysis in the Asahi Shimbun, inflation has only exceeded 2 percent several times in the last 25 years. In 1989, when the consumption tax went into effect, and 1997, when the tax was raised, consumer prices spiked for obvious reasons. In the early 90s, after the bubble burst, it went up due to an increase in the global price of oil, but during that period wages also went up by 4.8 percent, so the increase wasn’t that noticeable. In the summer of 2008, just before the subprime crisis, consumer prices went up by 2.4 percent, also due to a rise in energy costs, but wages actually decreased by 0.3 percent. It’s this dynamic between consumer prices and wages that determines how the public “feels” inflation. According to Japan’s Tax Bureau, the average income of salaried workers in 1997 was ¥4.67 million, and in 2011 it was ¥4.09 million. In terms of total money, Japanese salaried employees earn ¥25 trillion less than they did at the peak of the bubble era. Some of this loss in buying power has been offset by the attendant decrease in retail prices. Anyone who lived in Japan during the bubble will tell you that consumer prices were very high, especially when compared to those in other countries, so the subsequent drop doesn’t seem unnatural.

All of which is to say that we plan to post occasional observations about price changes over time as a means of putting Abenomics — whose core strategy is to boost inflation — in perspective. First up: retort curry, meaning prepared curry topping in a pouch that is heated in a pan of boiling water. Except for noodles, it’s the most common instant meal in Japan and there are dozens of retort curry product lines. The volume of a single serving package is usually 200-210 grams, with higher end products topping out at ¥300 retail per piece. However, above the ¥100 price line, there really isn’t that much difference from one brand to another except maybe in terms of meat volume.

Below ¥100 is where the competition lies, and in that price range the most representative brand is House’s Kariya. Though the recommended retail price is ¥120, after the turn of the millennium Kariya usually retailed for about ¥98 in line with the “one coin” marketing strategy that said people tended to resist a product once its price floated above ¥100. Following deflationary patterns over the course of the decade, Kariya’s price actually dropped, first to ¥88 and then to ¥78, in discount and drug stores that specialized in bulk sales. The spread of such stores put pressure on regular supermarket chains to also reduce the price of Kariya, since it was so popular. Last weekend, we found it on sale at our local discount drug store for ¥68. That’s even cheaper than generic brands, which usually go for ¥296 for a set of four pouches. More significantly, the price of other brands of retort curry has also come down, and while none are as low as ¥68, more have drifted below the ¥100 line. This means a curry meal can actually cost less than two convenience store onigiri (¥200), the standard model for a cheap lunch, since a microwave package of prepared white rice is ¥80-¥90. Of course, non-instant curry, made from packaged roux, costs less per serving, but retort curry will likely become even more in demand with the projected increase in single-person households, and so we predict it will resist any inflationary pressure.

Annals of cheap: bananas

Thursday, November 8th, 2012

Yes, we have mo’ bananas

Bananas have been unusually inexpensive this fall. Normally the retail price remains in the ¥200-¥230 per kg range (1 banana is about 150 grams) year-round, and the average price for all of 2011, according to the Ministry of Internal Affairs, was ¥218. However, the ministry recently conducted a survey of 42 retail outlets in Tokyo and found that from January to September of this year, the price was slightly less than ¥210, and at the end of September it suddenly dropped to ¥197. Then, in early October, it fell further to ¥192 and has stayed there ever since. It’s the lowest price for bananas since 1979, and importers and wholesalers don’t like it at all. According to Tokyo Shimbun, smaller importers are hoping that the larger importers will limit their supply since it appears the price drop is due to a continual flood of bananas into the market.

Why the sudden price collapse? Apparently, it has to do with political situations on two fronts. China is, for all intents and purposes, currently carrying out an embargo of Philippine bananas due to a diplomatic flareup between the two countries over control of an island in the South China Sea. Though there are no formal sanctions involved, China recently reinforced inspections for diseases and pests that have resulted in banana shipments from the Philippines being held for extended periods of time in Chinese ports. Consequently, they are in danger of spoiling, so a lot of the bananas originally meant for the Chinese market have been coming to Japan.

China is the second biggest producer of bananas in the world (after India, which consumes 80 percent of its product), but several years ago the country signed a free-trade agreement with the Philippines, and bananas are one of the latter’s few big export crops. Another major banana market for the Philippines is Iran, which is currently under the shadow of a genuine U.S.-led embargo owing to Iran’s nuclear development program, so some of the bananas that the Philippines were planning to ship to Iran are now also going to Japan.

Continue reading about bananas →

Fast-food joints hail relaxed rules for U.S. beef, signal end of the world

Saturday, September 15th, 2012

Earlier this month a panel of experts recommended to the health ministry that it relax standards restricting imports of beef from the United States, Canada, France and the Netherlands for animals that are more than 20 months old. The panel suggests that cattle up to 30 months old be allowed for import and sale in Japan.

Get it while it’s cheap: Yoshinoya outlet in Roppongi, Tokyo

The restrictions were implemented in 2005 after BSE, or “mad cow disease,” was discovered in some livestock in the U.S. in 2003. Between 2003 and 2005 beef imports from the U.S. were banned. When the restriction went into effect, the U.S. objected, saying there was no conclusive proof that the age of the animal has anything to do with whether or not it can get BSE, and in any case, the incidence of the disease was extremely small and statistically insignificant. The government panel seems to have agreed with this opinion by saying that the age of the cow has no relationship “to people’s health.” They will give their official evaluation to the health ministry some time this fall, and the regulations should be relaxed by early next year.

Retailers and restaurateurs, especially fast food chains, are happy with the panel’s decision since it means they can start selling more U.S. beef, which is very popular among consumers here because of its higher fat content. More than 60 percent of the beef sold in supermarkets now is Australian, with 20 percent coming from the U.S. and the remainder from domestic producers. Though the American dollar is, for the moment at least, worth less in Japan than the Australian dollar, U.S. beef is more expensive than Australian beef due to the restrictions. In fact, the high yen is the only reason U.S. beef is at all affordable in Japan right now. By limiting U.S. beef to animals less than 21 months old, imports are seasonal and thus more expensive. Only about 20 percent of all cattle in the U.S. is slaughtered at less than 21 months, while 90 percent is less than 31 months. Consequently, almost all the animals slaughtered in the U.S. can be exported to Japan after the new year.

Continue reading about U.S. beef imorts →

Vitamin drinks demonstrate their stamina in the market

Wednesday, August 15th, 2012

I feel better just looking at them

The marketing firm Fuji Keizai reports that the eiyo inryo (nutrition beverage) market is one of the few consumer sectors that has performed spectacularly in the past few years. Often referred to as “stamina drinks” since they are typically bought by salarymen who need a boost of energy to get them through the work day, eiyo inryo saw its market balloon from ¥114.8 billion in 2010 to ¥121.7 billion in 2011. And if sales so far this year are extrapolated, revenues should increase significantly again in fiscal 2012.

Stamina drinks usually come in two sizes: mini (less that 50ml) and regular (50-100ml). They also fall into two general categories: iyakuhin, meaning they are considered “medicinal” and thus can only be sold in drug stores; and shiteii yakuhin bugai, which do not contain controlled active ingredients and thus can be sold anywhere.

The most expensive of the four general types is mini iyakuhin, and one of the biggest sellers in this category is Yunker Koteieki, made by Sato Pharmaceutical, which retails normally for ¥840 for only 30 ml. It contains lots of herbs but also extract from the gall bladders of cows. The Yunker series also boasts the most expensive stamina drink: Yunker Star, which costs ¥4,078 for 50 ml. It contains a whopping 20 herbs. According to a Sato publicity person interviewed by the Asahi Shimbun, people buy Yunker Star “when they feel tired and know they have to do something important.”

Continue reading about energy drinks →

Somebody has to pay for cheap beer

Friday, August 3rd, 2012

Aeon’s beer case: Does this look cheap to you?

Late last month, the Fair Trade Commission issued a warning to three liquor wholesalers whom the commission suspected of violating the Antimonopoly Law by selling beer to the supermarket chain Aeon at below cost. It was the first time the FTC ever made such a warning about dumping for alcoholic beverages, and while the media is reporting that the commission apparently does not have enough evidence to prove a clear violation of the law, the FTC has made an exception and issued the warning anyway, which would seem to indicate that it strongly believes some hanky-panky is going on.

The main reason for the warning in this instance is to protect smaller liquor retailers located near Aeon outlets who can’t hope to compete with such low prices. In fact, a closer reading of the coverage would seem to indicate that it is really Aeon who is bending the rules to its advantage rather than the three wholesalers — Mitsubishi Shokuhin, Nihon Shurui Hanbai, Itochu Shokuhin — but in any case the warning was mainly directed at them. Nevertheless, Aeon decided that the adverse publicity attached to the warning was serious enough for it to hold a press conference on July 23. A representative stated that the company made no such demand to the three suppliers to sell them beer at below cost.

Apparently, the FTC was suspicious of dumping as long ago as 2005, when it heard that 10 brands of beer and happoshu (malt liquor) were being sold to Aeon at prices that were below the price they paid to the manufacturers, even with ancillary costs like transportation factored in. Aeon would then add its own margin and, supposedly, still undersell competitors. For instance, the wholesaler would buy a case of beer from a manufacturer for ¥3,800 and then sell it to Aeon for ¥3,700. The wholesaler would supposedly make up for the beer loss by carrying out a business practice known in Japan as arari-mikusu, which means jacking up the prices of other alcoholic beverages they sold to Aeon. Consumers would pay more for these products than they normally would. Such a practice violates National Tax Agency guidelines for fair trade.

Continue reading about cheap beer in Japan →

Boomer boom: Businesses tapping consumption where they can find it

Friday, July 20th, 2012

It’s 10 a.m. Do you know where your grandmother is?

In July, the Bank of Japan released the results of its quarterly tankan survey of business sentiment for April-June. The most notable, and hardly surprising, result was the drop in confidence among major manufacturers. Less was said about the fact that domestic demand and individual consumption appear to be stabilizing. The numbers get even more encouraging when you look at specific industries.

In the tankan, an index of “0″ means no change in sentiment, with minus numbers indicating a loss of confidence and positive numbers a gain in confidence. The index for hotels and restaurants was +3, the first positive rise in five years, and a substantial one. Even more impressive was the index for “individual services,” such as travel agents, a category launched in 2004. The most recent tankan showed an index of +25. These numbers are at once heartening and baffling. Average income did not rise during the same period, which means consumption shouldn’t have risen, so why the increase in confidence?

The report’s authors credit these hopeful signs to people over 60, and smaller businesses’ resourcefulness in tapping this demographic. A recent article in Tokyo Shimbun profiled an izakaya (drinking establishment) chain called Hokkaido, which has an outlet in Kokubunji, Tokyo, that offers a special hiru enkai (daytime party) plan: If each member of a party orders at least ¥3,500 in dishes, then the party can drink as much as they like without paying extra.

Continue reading about senior citizen consumers →

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