Archive for the ‘Services’ Category

Whatever you do, don’t call Nestle’s coffee ‘instant’

Friday, August 15th, 2014

According to the business magazine Toyo Keizai, on July 24, Nestle Japan announced that it was quitting four industry groups it belonged to: the Japan Fair Trade Coffee Conference, the All Japan Coffee Association, the Japan Instant Coffee Association and the Japan Coffee Importers Association. These groups have, according to Toyo, had problems acknowledging Nestle’s description of its new manufacturing method for coffee products that it started using last September.

Nestle no longer calls its Gold Blend and Nescafe Excella brands “instant coffees,” but rather “regular soluble coffee,” and insists that others do the same. Two months ago, these associations revised their industry fair competition rules, saying that they couldn’t allow Nestle to use such a description in their advertising, so Nestle decided to not work with them any more.

Nestle's Dolce Gusto capsule-style self-service machine set up in a grocery store

Nestle’s Dolce Gusto capsule-style self-service machine set up in a grocery store

Nestle says the manufacturing method is different, so it has a right to call its coffee something different. Most coffee called “instant” these days is made by freeze-drying liquid concentrated coffee liquor. Soluble coffee, however, is a “unique” blend of pulverized roasted coffee beans and dried coffee concentrate. To the layman and, obviously, other members of the coffee industry in Japan, that description doesn’t qualify as much of a distinction, but Nestle wants to stress that the new method makes for coffee that is closer to the real thing, meaning coffee brewed from ground roasted beans.

An executive of the All Japan Coffee Association explained to Toyo that his group’s reluctance to accept the new designation is based on complaints it’s received from consumer groups that say people may buy Nestle’s new product under the mistaken assumption that it’s “real regular coffee.” And as far as the new designation goes, people who don’t know what “soluble” means may think that regular coffee grounds dissolve in hot water, which, of course, they don’t. In any case, “soluble” is a pretty good description of instant coffee in general, so the distinction is moot.

But Nestle Japan can pretty much do whatever it wants since its products account for 70 percent of the — pardon us — instant coffee market in Japan. It wasn’t until 1960 that the importation of coffee beans to Japan was liberalized. The next year importers started bringing in instant coffee, and by the middle of the decade Nestle’s Nescafe was the best-selling brand in Japan, as it was in the world.

Then, in 1967, Nestle Japan started selling Gold Blend, the first instant coffee to use the freeze-dried method developed by Nestle at its headquarters in Switzerland. The Japan affiliate was nervous, though, because it thought Gold Blend would “cannibalize” sales of Nescafe, so it made two different advertising campaigns: Nescafe for everyone, Gold Blend for more discerning consumers.

The Gold Blend commercials became famous for using well-known “artistic” talent, like novelists, classical musicians and kabuki actors. The ads were a success. Instead of eating up sales of Nescafe (which soon became Excella) Gold Blend’s sales augmented them. Eventually, Excella had a 50 percent share and Gold Blend a 20 percent share.

In 2012, Nestle Japan chalked up ¥7.88 trillion in sales, which boiled down to ¥1.2 trillion in profits. Respectively, those figures represented 2.3 percent and 25 percent growth over the previous year. Nestle is the biggest food-related company in the world. Their products are sold in 140 countries, and the headquarters refers to its Japanese business as a “miracle,” since demand is shrinking almost everywhere else. And it’s not just coffee. Nestle also makes Kit Kat, the most ubiquitous chocolate treat in Japan because of its auspicious associations with entrance exams. Until 2002 Nestle Japan spent ¥3 billion on TV commercials to reinforce this association and now distributes free Kit Kat bars in business hotels where university entrance exam takers stay to study before the test. They’ve become indispensable.

Now Nestle’s big scheme is Nescafe Barista, a series of refill systems it is selling to homes. The system is built around coffee making machines that use prepared single-serving capsules of its soluble coffee, and this is where the designation is important. Though it may be instant coffee by another name, that new name gives more of an impression of brewed coffee, which is important for another new system, called Nescafe Ambassador, that is being promoted to offices. Rather than capsules, these machines use larger containers of soluble coffee.

The pitch is made directly to employees of companies rather than people in charge of office services. An employee registers as an “ambassador.” Nestle then sends him or her a coffee machine, a supply of soluble coffee and a piggy bank. The employee sets up the machine in the office and other employees who want coffee deposit ¥20 in the piggy bank whenever they enjoy a cup. Refill containers last about a month or so, after which the money is sent to Nestle.

Conventional office coffee services involve a company representative who maintains and fills the machines, adding significantly to the cost. Ambassador cuts costs by having the employees take care of everything, and is meant to replace office-set vending machines and even convenience store coffee, which are now the main sources of break-time refreshment, since many companies are doing away with free coffee and tea on the premises to cut down on expenses. Coffee from vending machines and convenience stores cost at least ¥100 a cup/can.

Three months after starting the system in 2012, Nestle had distributed 60,000 machines. Toyo says that the company projects more than 100,000 machines per year from now on. And since there are an estimated 6 million offices in Japan, that’s a lot of potential soluble coffee sales, though it should be noted that canned coffee, which for years was unique to Japan, commands a sizable share of the coffee market, especially among workers, both white collar and blue. But then, Nestle sells canned coffee, too.

Japan tourism still suffers from a credit card gap

Monday, June 30th, 2014

So close, and yet so far: Shimosa Manzaki Station on the JR Narita Line

So close, and yet so far: Shimosa Manzaki Station on the JR Narita Line

In a letter to the editor published in the June 23 Tokyo Shimbun, the writer relates an anecdote about two American women who while waiting at Narita Airport for a connecting flight to the states after arriving in transit from a vacation in Southeast Asia, decided to kill time by taking in a local onsen (hot spring bath). After checking the Internet with whatever mobile devices they had with them, they found that the nearest one was at Shimosa Manzaki station, one stop away from the Narita city terminal on the JR Narita Line. Since they weren’t going to be in Japan long they didn’t bother getting yen, and were able to buy JR train tickets with their credit cards. They could also use their cards at the onsen itself.

However, when they went back to Shimosa Manzaki station to make the return trip to the airport after their bath they discovered that their credit cards were no good. Neither the ticket vending machine in the station nor the employee selling tickets at the window would accept them. The letter writer happened to be at the station at the time and understood English. She was kind enough to buy them tickets so that they could get back in time to catch their flight.

This incident highlights a major gap in the government’s plan to increase foreign tourism in Japan. Last year, for the first time ever, the number of foreign visitors exceeded 10 million, thus encouraging the Japan National Tourism Organization to aim for 20 million by 2020, the year Tokyo will host the summer Olympic Games. Significantly, 80 percent of the tourists who came to Japan last year were individual travelers, meaning they didn’t come as members of organized tours. Individual travelers book their own accommodations and arrange their own transportation with the idea of playing things by ear and enjoying their travels at their own pace.

Credit and debit cards make it easier since they allow for more flexibility than cash or travelers checks, which have to be purchased through foreign exchange outlets. As we’ve mentioned before, most Japanese bank ATMs don’t accept foreign credit cards, but even more vexing for individual tourists is that many Japanese businesses, including some who cater to tourists and especially those outside the large metropolitan areas don’t accept credit cards.

Hotels tend to be OK, but as the two American women who visited Shimosa Manzaki found out, a lot of transportation outlets aren’t. As far as JR goes, larger stations in the cities accept credit cards, but most others don’t. If you’re buying a shinkansen ticket, it’s usually OK to use a credit card, even with the special vending machines, but the Midori Kenbaiki, the special vending machines for long-distance travel, are complicated to use even for Japanese and don’t have English instructions.

Foreign tourists can buy Pasmo and Suica prepaid IC cards just like Japanese residents do, and they certainly make life easier, but both cards require a ¥500 deposit that may put some tourists off. Both cards can also be tied in with credit cards so that they recharge automatically when their value drops to almost nothing, but that option is not available to tourists. Mitsubishi Research has found that almost 90 percent of the travelers it surveyed from Taiwan, South Korea and the U.S. buy some sort of transportation pass, be it the JR rail pass or one-day Metro tickets, so obviously it is the sort of service that’s appreciated. But while these same people express a high level of satisfaction for the transportation service that’s offered, they also find it difficult to make sense of the network.

Specifically, they have difficulty figuring out how to get to specific destinations and how to buy tickets, especially from vending machines, even when English explanations are available. Moreover, while they appreciate the various passes on offer, they don’t often know which one is best for their needs. In Tokyo, should they buy one-day passes for both subway lines or just one?

The research arm of Mitsubishi UFJ found that 88 percent of foreign tourists use guidebooks, maps, smart phone apps or some combination of the three, but they would like to be able to do everything using their mobile devices. Some businesses have already said they plan to increase the number of free wi-fi hot spots by 2020, which is a good start. But making it easier to use credit cards more flexibly would also be a big incentive for visitors since it would save them time, trouble and maybe even money.

Japanese low-cost carriers hit hard by pilot shortage

Sunday, May 25th, 2014

Onward and upward: Plane taking off from Narita airport

Onward and upward: Plane taking off from Narita International Airport

Low-cost carriers (LCC ) — airlines with cheaper fares than standard carriers — came relatively late to Japan. Peach Aviation was the first in March 2012, followed by Jetstar Japan, an affiliate of Australia’s Qantas Airlines, in July of the same year, and then Air Asia Japan, which has since changed its name to Vanilla Air, for some reason. (Skymark, which also charges less that most airlines, is technically not an LCC.)

As of March, LCCs accounted for 7.5 percent of domestic passengers, which isn’t bad, and growth seemed assured, but suddenly all three bargain airlines have hit a wall. Vanilla recently announced that it will cancel 154 flights, or 20 percent of its schedule, for June, and Peach said it would curtail its own schedule by more than 2,000 flights through October. Jetstar had planned to expand its flight coverage this year but has since postponed those plans.

The reason is a serious shortage of pilots, in particular flight captains. Vanilla says it has had personnel problems recently due to pilots quitting or taking sick leave, but its president, Tomonori Ishii, has assured the public that it will address the problem by “borrowing” personnel from its parent, ANA, but on a temporary basis. Of Peach’s 52 captains, eight were out of action due to illness or injury, but, in fact, the problem is more intractable.

CONTINUE READING about Japan's pilot shortage →

Labor shortage cutting across all industries

Friday, May 9th, 2014

A recent report in the Mainichi Shimbun says that Japan’s number one gyudon (beef bowl) chain has seen its business suffer due to lack of workers. Sukiya’s policy is 24-hour service, but in many areas the company can’t find part-timers who are willing to come in during the wee hours. The company has shortened operating hours at about 250 outlets, and a few have even been closed altogether due to the labor shortage. The Mainichi reporter talked to some former Sukiya part-timers who said when they worked the midnight shift they often ended up all by themselves, meaning they had to do everything — cook, wait on customers, clean up, etc. — alone. Besides being nerve-wracking, the job wasn’t worth the wage that Sukiya was paying, so they quit.

Sukiya in Tokyo

Sukiya in Tokyo

Sukiya isn’t the only restaurant company that’s having this problem. Watami, the popular izakaya (drinking establishment) chain that has been called by some a burakku kigyo (a “black company” that exploits its workers), has announced it will close about 60 outlets by the end of the year, which represents 10 percent of all their stores, though the company characterizes this move as being more about rationalization. More personnel will be employed at the remaining outlets in order “to improve the work environment.”

There’s a certain self-relexive irony at work here since the success of chain restaurants in the past 10 years or so was built on a greater reliance on part-time workers, for whom companies don’t have to provide benefits and whose hours and wages can be managed more flexibly. Invariably, the point is to save money so that the chain can be more competitive in terms of prices, but with the labor shortage expanding into other industries, part-timers don’t have to work for restaurants, which notoriously don’t pay well and usually involve evening and night work.

Consequently, to keep the part-timers it wants, restaurant chains are having to increase wage offers in want ads, a move that runs counter to the part-time strategy.

CONTINUE READING about labor shortages →

Call the sitter: Parents resort to online services out of economic necessity

Monday, March 31st, 2014

Public daycare center closed for the day

Public daycare center closed for the day

A few weeks ago news outlets were all over a story about the death of an infant who had been placed in the care of a young freelance babysitter. The media was quick to blame the mother, at least by implication, since she had found the man through an Internet portal site that matched people who needed babysitters with people who provided such services. Many of these providers seem to be unlicensed, but babysitting as a job description is relatively new to Japan.

What seemed unusual in this case — though it’s actually quite common — is that the two boys the mother left with the man were watched at the man’s apartment in Saitama Prefecture, rather than at the woman’s residence in Yokohama, which is normally the way babysitting works. In the woman’s defense, some media pointed out that she had used the man as a babysitter previously and didn’t trust him, but because he used a different name this time she wasn’t aware she was leaving her children in his care.

However irresponsible the woman was in this situation, the fact is that there is an increasing number of parents who rely on such services. The Internet portal site that the woman used has 10,000 registered users and 6,000 registered sitters. The paucity of daycare services in Japan is a well-covered issue, and some parents can’t wait for the government or the private sector to rectify the situation, especially if they have infants and toddlers, which conventional daycare centers don’t usually accept anyway.

CONTINUE READING about childcare portal sites →

Consumption tax hike projected to increase appeal of electronic money

Monday, March 24th, 2014

The ones: You'll be seeing more of these guys in the near future

The ones: You’ll be seeing more of these guys in the near future

Last month the national mint intensified production of ¥1 coins in anticipation of the consumption tax hike on April 1. The Ministry of Finance wants 26 million of them manufactured by the end of March, and then another 160 million after the start of the new fiscal year. Once the consumption tax goes up from 5 to 8 percent, retailers will need more small change.

With a 5 percent tax, it’s relatively easy for stores to limit their use of coins since they can set prices based on multiples of 5. Maybe it’s possible to do that with multiples of 8, too, but not right away, and many fear they will not have enough ¥1 coins on hand when the tax hike goes into effect. An employee of the nationwide ¥100 shop CanDo told Asahi Shimbun, “Altough we sometimes receive ¥1 coins in payment from customers, we don’t recycle them as change to other customers, but now we’re trying to hoard as many as possible.”

If the consumption tax increase is an inconvenience to retailers, it’s even more of a pain in the neck for the government, since it costs between ¥2 and ¥3 to make a ¥1 coin, which is 100 percent aluminum. It’s the first time the mint has produced ¥1 coins on anything approaching this scale in four years. It will also produce an extra 100 million ¥5 coins, just to be safe. The government doesn’t want to relive the small change panic that happened in 1989, when the 3 percent consumption tax was first introduced.

CONTINUE READING about the consumption tax hike's effect on e-money →

Believe it or not, pay phones are here to stay

Tuesday, March 18th, 2014

Hello stranger: Pay phone in residential area of Sakae, Chiba Prefecture

Hello stranger: Pay phone in residential area of Sakae, Chiba Prefecture

Last December, during its end-of-quarter news conference, NTT announced that it would shorten the length of time for a basic call on public telephones when the consumption tax is raised from 5 to 8 percent in April. Since pay phones don’t give change and NTT discontinued its IC card service in 2006, it would have been difficult to pass the extra tax levy on to users, so the more logical scheme was to make a ¥10 call shorter. As it stands, ¥10 will get you 60 seconds of connection to a number within the same calling exchange during the day. After April it will be shortened to something like 58 seconds.

At the time it wasn’t exactly breaking news, and for obvious reasons. Who uses pay phones any more? As long as you have a cell phone you likely won’t even notice that pay phones still exist, but they do. According to a government white paper on telecommunications that came out last year and cited on the Sarayomi blog, as of March 2013 there were 210,000 pay phones in Japan. In 2002 there were 680,000. (The peak year was 1986, when there were 910,000.) That means two-thirds disappeared over an 11-year period.

CONTINUE READING about public pay phones →

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