Deflation Watch: bean sprouts

December 15th, 2014 by Philip Brasor & Masako Tsubuku

Bean down so long: Cheap moyashi is still the norm

Bean down so long: Cheap moyashi is still the norm

Last week Tokyo Shimbun reported that an industry association of food producers sent letters to supermarket chains and other food retailers saying that they had reached their limit of patience. This particular association represents companies that produce moyashi, or bean sprouts, a pretty lowly item, even within the realm of produce, and one that is not strictly agricultural in nature.

Though bean sprouts definitely qualify as vegetables, almost all Japanese producers import the basic ingredient, which is mung beans (ryokuto or midori mame), and then make them sprout in factories. In other words, no land cultivation is involved. Bean sprout production is a ridiculously simple process, since all it entails is making the mung beans wet, setting them aside for a few days to sprout, and then packaging them.

The moyashi association is saying that production costs have become untenable, which sounds strange considering how easy the process is, but what they’re really talking about is the cost of mung beans, 80 percent of which are imported from China, mainly Jilin Province, where farmers are switching over to corn because the price of animal feed has gone up and they can make more money. Consequently, the market price for mung beans has also gone up, by as much as 30 percent since a year ago.

Moreover, the value of the yen has dropped in recent months against the dollar, the currency used to purchase mung beans, pushing the price even higher. Bean sprout producers say if they don’t increase prices, they’ll go out of business.

However, retailers are refusing to pass the increase on to consumers, and won’t pay more than a certain price for moyashi. The reason is due to a quirk in marketing that applies especially to bean sprouts.

Supermarkets don’t make a profit on moyashi since, according to these retailers, most consumers don’t consider it something they’re going to spend much money on. If it’s a ubiquitous item in the Japanese diet it’s only because it’s considered cheap to begin with. Consumers buy bean sprouts to supplement other, more desired vegetables when those vegetables are out of season or expensive due to unusual market forces, like the weather. Because of the way it’s produced moyashi is never out of season. Consumers take it for granted, and retailers think that if the price goes above a given level, they won’t buy it at all.

According to a survey by the Ministry of Internal Affairs in October, the average retail price of a kilogram of moyashi in Tokyo was ¥151, which comes to about ¥30 for a standard 200-gram bag. Five years ago the average price of a 200 gram bag was ¥34 yen, which means the price of moyashi has actually decreased over time, despite the mung bean shortage.

Moyashi producers have done everything they can to honor this magic ¥30 price ceiling, but with the drop in the yen they are being bled dry. One producer told Tokyo Shimbun that the ideal retail price for him would be ¥40 per bag, which isn’t expensive at all, but retailers are telling him that their customers won’t buy it at that price because they don’t really need moyashi.

They only buy it because it’s as cheap as it is. Since these stores don’t make money on it anyway, that wouldn’t seem to be a problem, but unlike some other produce moyashi doesn’t keep, it has to be sold right away or it spoils, so if the sprouts aren’t going to sell, retailers would rather not buy them in the first place. And with implementation of a higher consumption tax in April, there has been even more downward pressure on the retail price.

But the retailers’ argument isn’t completely convincing. In actuality, production of moyashi increased from 350,000 tons in 2007 to more than 450,000 tons in 2013, which means sales must have increased during that time as well, because producers aren’t going to make bean sprouts that don’t sell.

On a household basis that means consumption has increased from 5,500 grams a year to 7,000 grams a year. We could not find any information as to why this increase occurred, but bean sprouts are an extremely nutritious produce item, a fact that has received a good amount of coverage in recent years. So maybe supermarkets are being disingenuous. Maybe consumers would be willing to pay more.

So perhaps the real reason for retailers’ reluctance to raise prices is competition. Regardless of whether or not a market thinks its customers will pay more for moyashi, it’s not going to raise its price over that of its competitor. We happen to live within a 15-minute bicycle ride of five different supermarkets, and all except one sells moyashi for less than ¥20 (excluding tax) a bag, which is a third less than the already low price in Tokyo.

It’s obviously going to be more difficult for the moyashi producers association to get these stores to raise prices, so the standoff, at least here in northwest Chiba, will continue.

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