JIN-375 -- The Japanese Beef

The J@pan Inc. Newsletter

Commentary on the Week's Business, Technology and Cultural News
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Issue No. 375
Friday July 14, 2006 TOKYO

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CONTENTS

@@ VIEWPOINT: The Japanese Beef

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Why Choose the So-Fast Corporation?

Failed logistics is a frequent reason why foreign import/retail companies
in Japan eventually pull out.

In the start-up phase, management is focused on just getting the business
up and running, and so it is tempting to abdicate the logistics to a large
trading or transportation firm. But the reality is that the convenience is
soon replaced by frustration -- as any change request, any problem resolution
takes forever and becomes "too hard to do".

Now, So-Fast Corporation offers its "Start Logistics Package" which includes:
1. A reasonable and set price,
2. Simple distribution, and
3. Quick, customer-oriented service to satisfy end-customers.

One customer that did switch is Guthy-Renker, featured alongside So-Fast in
the Spring 2005 issue of J@pan Inc, www.japaninc.com/article.php?articleID=1429.

Guthy-Renker is one of Japan's largest TV marketing companies.
If logistics are a key part of your success in Japan - get connected with So-Fast.

Email: info@so-fast.co.jp
http://www.so-fast.co.jp/en/index.html
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@@ VIEWPOINT: The Japanese Beef

The import of American beef, suspended a second time, in December 2005,
after the discovery of parts deemed liable to infect consumers with BSE, is
set to resume at the end of August. US meat-packing companies are eager
to restart exporting to Japan, but they have yet to dispell Japanese consumers'
anxieties. They must clear several hurdles before American beef, which once
corraled 30% of the Japanese market, wins back consumer confidence and
earns a place in supermarkets again.

Japanese importers aver that while there are parts of beef cattle for which
demand is greater than supply, potential imports from America exceed
demand.

According to the US Department of Agriculture, through May of this year
10.349 million head of beef cattle were processed, up 4.2% over the same
period last year. American ranches have more steers this year than last.
Because the price of steers on the hoof has dropped, meat processors are
expected to slaughter more beef cattle in expectation of Japanese demand.
Many industry analysts estimate processed beef will be up 2 or 3% on a
full-year basis.

Even so, after the ban on the import of U.S. beef is lifted, the import volume
is expected to be about 1,000 tons a month, far below the approximately
20,000 tons imported in December 2003, before the first ban. Importers say this
is to be expected in a market where consumers worry about food safety.

Just what will be the import price of American beef? Rough estimates (including
shipping cost) yield the following prices for the main cuts of beef cattle. Chuck
roll, which can be used for sukiyaki and shabu shabu, 175 cents per pound.
That is about the same figure as before the ban. Boneless short rib, suitable
for beef barbecue restaurants, should go for 600 cents a pound, also about the
same as the pre-ban price.

On the other hand, there are cuts of beef that will be in short supply. One
example is short plate, for which there is strong demand in beef bowl and beef
barbecue restaurants. It should cost about 180 cents per pound. In May of
2003, before the discovery of BSE in Canada caused a drop in imports,
it went for 70 to 80 cents per pound. Tongue should cost 600 cents per pound,
about 80 percent more than before the ban.

Consumers' anxiety over the safety of American beef is only one hurdle to
its recapturing market share in Japan. Another is customs clearance. One
hundred and twenty tons of Canadian beef were imported in May. On account
of inspection for specified-risk materials, clearance required up to 10 days,
in contrast to three days in the past.

Yet not only will US beef be imported on a much larger scale than Canadian beef,
it will undoutedly undergo a more rigorous inspection, with the result that
customs clearance could require more than 10 days.

Consumers' wariness of American beef remains firmly entrenched. Shortly
after the resumption of imports of US beef last December, specified-risk
materials were discovered in beef from America. So at present few mass retailers
are prepared to push the sale of US beef. For US beef to resume its place in
Japanese supermarkets exporters will have to win back consumers' trust by
strictly observing export conditions.

What are the chances of their regaining consumers' trust?

I took a survey of J@pan Inc.'s Japanese staff. In response to the question,
"Would you eat American beef?" four said no and five yes with one maybe.
This survey is of such a size as to have little statistical validity,
but was nevertheless of interest for comments elicited.

One male staffer opined that it was a question of trust rather than safety: the
Americans said they would not export spinal parts of beef, yet they did just that.
They lied. How can they be trusted?

A woman on the staff snapped, "Americans look down upon us as [a] yellow [people]."

The issue is about more than food safety. Are Americans listening?

-- Burritt Sabin

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