Inflation Watch: Food manufacturers offering less

August 2nd, 2014 by Philip Brasor & Masako Tsubuku

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Use your noodle: ¥198 regular price 5-pack of Aeon instant ramen vs. ¥198 sale price 3-pack of Sapporo Ichiban instant chanpon

Economists in Japan have been carefully scrutinizing buying trends since the consumption tax was raised in April. Everyone has noted that buying has dipped by at least 4 percent since the 3 percent tax hike went into effect, but many think that it will rebound later in the year since so many consumers bought a lot of stuff just before the hike. And it is also true that some prices of goods and services have gone up, as well, especially food, but for the most part makers have tried to keep them the same, despite the fact that the lower yen has resulted in higher prices for imported ingredients, not to mention increased demand for all food products in developing countries. In addition, the higher price of oil has boosted the cost for packaging.

There’s, of course, one tried-and-true solution to the problem of stabilizing resale prices when costs go up: reducing volume. Rather than raise prices, especially at a time when consumers are specially sensitive to any change, manufacturers trim the amount being sold, according to Asahi Shimbun. Nippon Ham, for instance, did not change prices on 82 items in its product line but did reduce the amount being sold by an average of 10 percent. The company’s European sausage used to come in bags of 7 weighing 140 grams. For the same price, it’s now 6 sausages, or 120 grams. The company’s main competitor, Ito Ham, however, has decided to take a chance and increased the price of its pork products, saying that it was inevitable because worldwide demand for pork has risen recently.

The confection industry has been affected as well. Lotte cut the volume and weight of 6 products. Meiji shrunk 10 of its chocolate items, citing a 20 percent increase in cocoa prices from two years ago: Its best-selling Almond Chocolate treat went from 23 pieces to 21.

Chain restaurants are also dealing with the environment. Ringer Hut has increased prices on a number of its chanpon dishes by 3 to 5 percent, mainly due to higher prices for shrimp grown in Thailand, as well as higher transportation costs.

Dairy prices and volumes have changed, but for a slightly different reason. Morinaga has increased the price of a standard block of butter by ¥10, and cheese prices by about 7 percent. Snow Brand is boosting prices for 17 cheese items by 5 to 14 percent. Since Japan’s dairy industry is protected, much to the disappointment of the U.S., the problem isn’t imports or competition for ingredients abroad, but rather economic factors within Japan. Production of milk has been dropping due to an acute labor shortage and the fact that as older dairy farmers are retiring there is no one to take over their businesses.

But even if you’re on the lookout for such price and volume changes, you can sometimes be fooled. Recently, we came across packages of Sapporo Ichiban instant ramen in a discount store for less than ¥200, which we thought was very cheap for a so-called name brand. Usually, multi-packs of instant ramen from companies like Sapporo and Nissin cost more than ¥300 regularly and about ¥250 on sale. Private generic brands usually cost about ¥200 for the same amount.

So when we saw the cheap Sapporo Ichiban pack and bought it, it wasn’t until we left the cashier that we noticed the pack only contained three servings. Traditionally, multi-pack ramen has five servings. It was a stupid mistake, and we wondered how many other people picked up the pack without realizing. The point is that Sapporo Ichiban didn’t sell 3-packs of instant ramen before the consumption tax hike, so it’s obviously a sales strategy, and one we’ll just call clever, not underhanded.

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