Archive for the ‘Food & drink’ Category

Lower egg prices bad for producers, worse for chickens

Monday, October 7th, 2013

Which came first?

Which came first?

Over the summer the retail price of eggs has increased anywhere from 20 to 50 percent, which is a significant change for consumers but also for people who are pushing Abenomics and its focus on reigniting inflation, since eggs have for years been seemingly been impervious to price changes. At the beginning of May, it cost about the same to buy a package of 10 eggs as it cost to buy a package of ten eggs thirty years ago. As the prime buka no yutosei (best “student” among product prices), it’s one of those constants people took for granted.

However, the sudden increase was not entirely due to serendipity or natural market forces. In fact, the price hike was engineered in a bid to maintain market stability. In 2011 the agriculture ministry implemented a subsidy to control the price of eggs. Because a sudden drop in price can have an immediate harmful effect on egg producers’ bottom lines and potentially damage the industry as a whole, the ministry automatically provides funds when the wholesale price goes below ¥159 per kilogram. These funds are used to cull egg-laying chickens in order to reduce supply and put pressure on demand, thus pushing the price back up.

According to Tokyo Shimbun, in May the price dropped below the designated line and the subsidy kicked in. Producers receive ¥150-¥200 for every chicken they kill, and the ministry estimates that from mid-May until mid-July, when the subsidy was available, about 5 million birds were culled. Not all were thrown away. Many were processed and sold as meat, for which the producers can earn an additional ¥20-¥50 per bird, an aspect that makes the system even more popular among producers since it rationalizes the process of replacing chickens.

Usually, a hen becomes productive — meaning it starts laying eggs — 150 days after birth, and remains productive for about 500 days. The dropping off point for production can vary greatly from one bird to the next, so whenever the subsidy is in effect egg producers get rid of those older chickens that are borderline productive since it is monetarily advantageous to do so under the system. Egg production is a relatively easy farming method since it is all about volume. In the past ten years the average number of chickens kept by each producer has increased from about 33,000 to more than 50,000, thus indicating the loss of small-scale farmers and the dominance of corporate egg producers.

Of course, when it’s all about volume it’s also all about controlling inventory, which is bad for chickens. Besides the horrendous factory conditions that egg-laying hens have to endure, their fate is also subject to capricious market forces, not to mention natural ones.

This summer was one of the hottest on record, and a lot of chickens died from heat stroke, so even after the subsidy system was lifted in July, the number of producing hens continued to decrease, sending the price of eggs to its highest levels ever. Moreover, one condition for receiving subsidies is that the producer not replace culled chickens for at least 60 days. According to JA, its Zenno Tamago brand, often used as the index for egg prices, was up by as much as ¥55 per kg on Sept. 27 compared to the same date in 2012. (For reference one LL-size egg is 70-76 grams, and one kg now costs about ¥225.) But chickens grow fast, so the price is expected to drop to its normal level by December’s Christmas cake season.

You are where you eat: McDonald’s Japan sets prices by region

Thursday, September 19th, 2013

According to retail marketing research firm Soft Brain Field, McDonald’s is overwhelmingly the most popular fast food in Japan, with 68 percent of survey respondents saying they patronize the American hamburger chain regularly. When asked which fast food they like the most, the answer for 33 percent is also McDonald’s, with Mos Burger second at 25 percent and Mister Donuts third at 17 percent. Forty-two percent of McDonald’s users patonize an outlet once a month, and 29 percent do so two or three times amonth, more often for lunch (43 percent) than dinner (29 percent).

Why do they prefer McDonald’s? The most common answer is that it’s inexpensive and they can order as little as possible, meaning they can go there when they’re not in the mood for a full meal.

High overhead: McDonald's Roppongi Hills

High overhead: McDonald’s Roppongi Hills

The main underlying attraction of fast food is predictability. People who patronize national or international chains know what to expect in terms of quality and, more significantly, price. They probably think that prices are uniform from one outlet to another. The British newsweekly The Economist exploits and reinforces this perception with its occasional Big Mac Index, which analyzes relative values of national currencies by comparing the prices of Big Macs in all countries using the assumption that the value of a Big Mac is uniform.

However, if you go to McDonald’s American home page, prices are not listed, and if you do a web search you find that prices seem to vary slightly from one state or city to another, though it isn’t clear for what reason. Some people seem to think it has to do with differences in wages or local taxes or the fact that some stores are franchises while others are corporate-owned, but according to a recent article in Forbes, production costs have no impact on McDonald’s pricing, only competition. McDonald’s sets prices according to what the company reasonably believes it can get for its products in a given market at a desirable volume.

McDonald’s Japan also does not list prices on its home page, but it is fairly well known that prices differ from one outlet to another. These prices are not set by the outlets themselves. They are set by the headquarters, and on Sept. 10 the company announced that it was expanding the range of prices on its menu as well as increasing prices by as much as ¥50 per item. Since last year, the company’s profits have been dropping and it has pinpointed outlets that McDonald’s believes “can absorb price increases” without undermining its loyal customer base.

McDonald’s Japan first set up regional price schedules in 2007 by dividing Japan into six zones. Under the new system there will be nine zone categories, but these zone categories are not necessarily prefecturally-based. Urban outlets within a prefecture will have higher prices than suburban or rural outlets. Realistically, this means there will be seven different prices for a Big Mac, depending on the zone, ranging from ¥310 to ¥390, up from four different prices ranging from ¥290 to ¥340.

The highest prices will, of course, be in Tokyo. There is one zone within central Tokyo, made up of 10 outlets, that boasts the highest prices in Japan, and the overall price scheme has been formulated to support urban outlets, which serve the largest cross-section of customers. Rents and other overhead in the centers of large cities are multiplicatively greater than they are in the boonies, though prices are not multiplicatively different. The largest gap in prices between zones is ¥80, up from ¥50 before the changeover. Unaffected will be the prices for promotional loss leaders, like the “¥100 Mac” and Chicken Crisps, not to mention certain meal sets. In a sense, the countryside is helping support city folks’ fast food habits.

According to the Asahi Shimbun, the strategy is simply to maximize profits and has nothing to do with regional wage demands, local taxes or cost-of-living conditions. The company tested the new pricing system last April in a select number of outlets and determined that the number of patrons did not change when prices went up slightly. Overall, about 40 percent of the menu items will be affected by the price changes.

McDonald’s predicts that the price increases will boost its profits by 1 percent, which doesn’t sound like much but with an outfit as huge as McDonald’s that should amount to billions of yen. In any case, the lower yen has increased the price of imported ingredients, particularly meat and potatoes.

Hot biz: stocks that climb with the temperature

Tuesday, August 20th, 2013

You can never have too few air conditioners

You can never have too few air conditioners.

The extremely hot weather that has covered Japan since late July has had a multiplying effect on the country’s economy. Though it isn’t going to solve all the government’s fiscal problems, the heat has temporarily revitalized some retail and service sectors and, in turn, driven up related stock prices.

Some are obvious. Makers of air conditioners, particularly Fujitsu General and Daikin, have seen their share prices rise markedly in recent weeks. Meiji Holdings’ stock has increased by 20 percent since the middle of June thanks mainly to their ice cream division. Other makers of cold treats, like Ezaki Glico and Morinaga, are also enjoying high stock prices. Beverage makers can always look forward to good sales in summer, but this year in particular breweries are having their best season in 2 years. Shares for convenience stores have also risen steadily since the middle of July, based on strong retail sales as a result of the hot weather.

Another sector that’s benefited is Internet retailers. Yumenomachi Sozo Iinkai, a web supermarket, posted record high stock prices on Aug. 8 because of its special delivery system. People just don’t want to go outside in this heat, so they even order their groceries online and have them delivered. The nation’s biggest supermarket chain, Aeon, has said in terms of volume, deliveries have increased by 50 percent since the hot weather started. Even Tsutaya, Japan’s main rental video service, has seen its deliveries of DVDs double over last year’s.

Tokyo Shimbun reports that department stores, which deliver goods but count more on customers actually showing up at their stores, have initiated special events to get bodies out of the house and into their air-conditioned spaces. Shinjuku’s Takashimaya, for instance, has an unusual policy. The first 40 patrons who visit the food fair in the store’s basement between 2 and 5 p.m. on days where the temperature hits 35 degrees get free watermelon or a free extra scoop of gelato if they buy a single scoop.

A representative of a securities company told Asahi Shimbun that another reason for the sudden jump in stock prices was the Upper House election, which essentially pushed economic news aside. Investors had little information with which to make decisions, so when the hot weather became a topic they immediately went to companies that they thought would benefit.

Build a multifunction restroom and they will come

Wednesday, August 14th, 2013

Room to move

Room to move

The big question for retailers and restaurants in Japan is how to attract seniors, regardless of what it is you sell or serve. One nonprofit Tokyo organization called Check is advising businesses to install so-called multifunction restrooms on their premises and then advertise the fact. Multifunction restrooms are larger than standard public restrooms and can accommodate wheelchairs, and the NPO’s research has found that older people are more likely to patronize a business that has one.

According to a study reported in Tokyo Shimbun, the average family with at least one senior spends four hours and ¥10,000 when they go out shopping, but 20 percent also say they will likely stay out longer and spend more money if they know beforehand the location of multifunction restrooms. The study group extrapolated on its findings and speculated that in terms of time the family would stay out 30 to 120 minutes longer, and spend ¥606 more.

Check, which was founded in 2008, has made a list of some 50,000 multi-function rest rooms throughout Japan, which it provides on its website. The NPO thinks there are about 100,000, and it is providing this information to local governments so that they can use it to promote their areas to local seniors and older tourists.

However, it should be noted that toilets in general are becoming something of a sales promotional tool. The Tokyo Metro subway system actually has TV commercials aimed at women showing how modern and clean their public rest rooms are. Lawson was the first convenience store to declare that its restrooms could be used by the public without the obligation of buying something, since people were so grateful for the service they usually bought something anyway. Most convenience stores have followed suit. And many restaurants explain their rest room facilities on their home pages and Tabelog sites, since many women won’t patronize restaurants that don’t provide separate facilities for men and women.

Retailers and restaurants get slippery with unagi prices

Tuesday, July 16th, 2013

July 22 is doyo no ushi no hi — day of the ox.” It is not a holiday to mark the cultural contributions of bovine, but rather a reminder that there are 18 more days until a seasonal change, during which falls the day of the ox — one of the signs of the Chinese zodiac. Traditionally in Japan people eat grilled eel (unagi), on this day, because it is believed that eel strengthens physical stamina during the hottest days of summer. But this year foodies and purveyors of unagi are faced with a problem, since eel in the wild is becoming increasingly scarce and may soon end up on a list of endangered species. The fisheries agency reports that the amount of eel fry bought by wholesalers in Japan this year has averaged 25 percent less than last year.

Yield to eel: Banners promoting unadon outside Sukiya

Yield to eel: Banners promoting unadon outside Sukiya

So it was definitely surprising when Daiei, one of Japan’s major supermarket chains, announced on July 11 that it would be selling packaged unagi kabayaki (grilled eel) in its stores for 20 percent less than last summer’s price on July 13-15 and July 20-22. According to Asahi Shimbun the price of unagi fry is now as much as 6.5 times what it was in 2009.

In most retail outlets, the price of prepared grilled eel is 26 percent higher than it was last summer. Usually, unagi that goes on sale in July is bought by Daiei in bulk sometime after January of the same year. It is then processed and frozen by a contractor. However, anticipating the rise in prices Daiei bought its unagi last fall and asked its contractor to carry out processing and freezing “when it had the time to do so,” thus saving money. Also, Daiei usually buys unagi for lunch boxes and unagi for packaged sushi separately, but this year they bought unagi for both at the same time in bulk, saving even more money.

But the real reason they can charge less is because they want to. Daiei admits that it will lose money during these two three-day periods by selling unagi kabayaki for 20 percent less. The supermarket is using unagi as a loss leader, a means of getting customers into its stores, where they will buy other things. And it seems to be working. Daiei started accepting pre-orders last month. Another market chain, Seiyu, announced that despite increases in wholesale prices, it will sell domestic unagi kabayaki at the same price as last summer: ¥1,470 for 140 grams. Seiyu expects sales to be 10 percent higher than last year.

Restaurants, on the other hand, seem to have no choice but to raise prices, but the amount of increase depends on the type of eatery. Asahi says that Tokyo ryotei — upscale, reservation-only restaurants — have increased unagi dishes by about ¥400 since last year, and famous restaurants that specialize in unagi have raised prices by as much as ¥1,000 per dish.

However, chain restaurants are trying to keep the increase to a minimum. Many sushi chains that usually charge ¥100 per plate serve unaju (grilled eel over rice) in the summertime, though usually only for takeout. One of these chains, Kura Sushi, is advertising unadon (eel over rice in a bowl) for only ¥598. That’s pretty cheap compared to gyudon (beef bowl) chains, which also do good business with unadon in the summer. Sukiya, the biggest gyudon chain, is selling unadon for ¥780, while Yoshinoya has increased its eel bowl ¥30 since last summer to ¥680. In 2010 it was only ¥500. Both Sukiya and Yoshinoya buy their unagi from China, but insist that they supervise the raising and harvest themselves, without relying on middlemen, to ensure quality.

Summer travel biz shows signs of recovery

Friday, July 12th, 2013

So close, and so far away

So close, and so far away

According to statistics released by Japan Travel Bureau on July 3, overseas travel this summer is projected to be up by 5.8 percent from last year, though continued sour relations with China and South Korea have seen fewer Japanese travelers this year to those two destinations. Another important consideration that doesn’t seem to have had a bad effect is the higher value of the dollar and other currencies against the yen. In terms of numbers, 2.6 million have reservations to travel overseas between July 15 and Aug. 31. The main bright spot is Europe, which will see a 15 percent boost in Japanese visitors as opposed to 2012. Also, Southeast Asia seems to be maintaining its popularity as a vacation spot. The average amount of money being spent per person on foreign travel this summer is ¥243,000, which is ¥11,800 more than was spent in 2012.

In addition, 76.2 million people have domestic travel plans this summer that involve more than one night away from home, which is the highest number since 2000. Even better, the average amount of money spent per person for these trips is ¥35,010, or ¥1,280 more than last summer. Several circumstances are credited with pushing up these numbers: the 30th anniversary of Tokyo Disney Resort; renovations to Ise Shrine in Mie Prefecture and Izumo Shrine in Shimane Prefecture; and Mount Fuji’s recent listing as a UNESCO World Cultural Heritage site and the intense media coverage that preceded it.

Continue reading about the recovery of tourism in Japan →

Deflation watch: Kabocha

Monday, July 1st, 2013

Japanese pumpkin, raw and prepared

Japanese pumpkin, raw and prepared

The main story at the heart of Abenomics as far as the Japanese media is concerned is that Japanese exporters are making more money since the Liberal Democratic Party regained power. Secondarily, energy costs are rising thanks to a related increase in the dollar against the yen, not to mention imported wheat prices, which affect all sorts of processed foods in Japan. Many food-related manufacturers started raising prices on July 1 as a result.

So far, the price of imported fresh produce hasn’t been affected that much. Last year we reported on the very low price of bananas due to specific circumstances, and since then the price has gone up quite a bit owing to a typhoon that destroyed much of the Philippines’ crop. However, the prices of other fruits and vegetables that tend to be imported in large amounts haven’t changed significantly. If anything, some local produce may have come down in price and thus become more competitive, notably kabocha, the Japanese style of pumpkin, often called buttercup squash in English.

Kabocha is grown in Japan but is mainly available in the fall and early winter. During the rest of the year it is imported mainly Mexico and New Zealand, but also from New Caledonia and South Korea. Demand is so strong that Japanese companies have been running farms in these countries for almost 20 years to grow kabocha exclusively. New Zealand first started exporting the vegetable to Japan in 1988. Actually, China, India and Russia produce much more pumpkin and other types of squash but the kind they grow is not necessarily popular here. (Also, there seems to be some issue with China’s use of agrichemicals.) Japanese prefer a strain referred to as kuri-kabocha, which is drier.

Normally, the price of Japanese kabocha is two to three times that of the imported kind. In April at the Tokyo Central Produce Market, domestic kabocha was going for ¥356 per kg, while foreign kabocha was only about ¥97. However, lately the price of Japanese kabocha has come down to almost even with foreign kabocha, which is a remarkable drop. Last week at our local supermarket kabocha from Mexico was only a little less expensive than kabocha grown in Ibaraki Prefecture. It’s not clear if this is due to higher import prices because of the rising dollar or just that the domestic product is suddenly cheaper. It’s probably both, since Japanese farmers have to contend with Mexican kabocha almost year-round now that there are two growing seasons for kabocha in Mexico.

Also, kabocha, once a standard item in the Japanese diet, lost popularity some years ago and seems to be making a big comeback now among health-conscious families — kabocha contains more calcium than milk does — so farmers are producing as much as they can, thus bringing the price down.

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