TOKYO – Japan’s restaurant industry, which has been hit hard by the COVID-19 pandemic, may finally see the light at the end of the tunnel as the state of emergency was fully lifted on October 1. However, some owners have struggled with a distinct set of challenges that overshadow their hopes of returning their restaurants to a pre-pandemic state – rising ingredient prices.
Jun Sakaguchi, 41, of Tokyo-based Five Group Corp., which runs beef chop chain Gyukatsu Motomura, rolled his eyes and moaned, “Then it’s going to increase even more.”
Beef tongue costs have increased virtually month-to-month since around February of this year, with the purchase price in July rising to 1.8 times that in February. Sakaguchi had no choice but to increase the price of the popular beef tongue chop dish from 1,600 yen (around $ 14) to 1,800 yen (around $ 16).
In the midst of it all, Sakaguchi had been told of a further price hike by the purchasing staff. “We cannot raise the price higher,” he said. The company had no choice but to decide to suspend the sale of its meal of beef tongue cutlets.
Due to the coronavirus pandemic, the company reduced the number of establishments it operated in Japan and abroad from around 30 to 19. Sakaguchi lowered his voice and said, “I would love to that customers come back around December, but it’s difficult with the purchase price barriers. ”
Shinsui Furuya, 49, who operates a branch of the Torisho karaage fried chicken store in Yokohama, has also faced a drastic increase in purchase prices. Following the spread of the coronavirus, the number of customers had temporarily dropped by 20 to 30%, and the establishment devoted itself to home delivery services to recover lost profits. The store has managed to return the revenues almost to the original state. Despite this, ingredient sourcing expenses piled up and overall profits are said to have declined by 10-20%.
Cooking oil has seen an extreme rise in prices. An 18-liter keg cost around 3,000 yen (about $ 27) at the start of the year, but the latest price is 1.5 times the price. The cost is expected to increase further in November. Furuya grimaced and said, “Mayonnaise, takeout containers, eggs, vegetables and all kinds of things are going up in price, and I’m sick of it.”
What rubs salt in the wound is the reality that the restaurant is unable to increase its selling prices despite an increase in purchase prices. Furuya said, “Customers come to our store because of the current price. If we increase the price, I’m afraid we will revert to a state like when customers suddenly decreased due to the coronavirus.” The store manager is wondering what to do with his selling prices, which have not changed since the store opened in December 2017.
It is not only catering which is directly affected by the rise in the prices of raw materials. According to the Bank of Japan, the Business Goods Price Index, which measures the change in the prices of goods traded between firms, has shown an increase of around 5% in recent months compared to the same month of the previous year. A rise in prices was noticeable in various categories, such as food products like vegetable fats, oil and beef, as well as petroleum and coal products, plastics and other chemicals, metal and wood. .
The Sugino-gomu chemical plant in the Katsushika district of Tokyo, which manufactures construction materials and anti-vibration rubber, is suffering from rising prices for the rubber raw material. President Yukio Sugino, 72, commented, “Big buyers don’t react to price hike negotiations.
So why are raw material costs rising? Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, said: “China has been leading a recovery in demand after the spread of the coronavirus was contained at an early stage, and following that , resource prices in general have been on the rise. in the United States and other countries as well. ”Another factor is the impediments to production caused by crop failures due to the abnormal weather conditions observed around the world and the difficulties in accepting foreign workers in various countries due to the pandemic.
It is difficult to pass on the price increases of raw materials to the selling prices. “In Japan, where deflation has long continued, consumers have strongly rejected price increases. Therefore, companies have no choice but to absorb them themselves,” said Tsuyoshi Ueno, senior economist. at the NLI Research Institute.
So how long will this situation last? Bank of Japan Governor Haruhiko Kuroda told a press conference on September 27 that the spread of the coronavirus is expected to “peak at the earliest this year, and at the beginning of next year at the latest. , leading to an increase in going out and eating, which facilitates the transfer of price increases to consumers. ”
However, according to an August survey by research firm Teikoku Databank Ltd., around 70% of companies predicted that they would see an increase in unit purchase prices a year later, while only around 40% estimated that there would be an increase in sales. Unit prices.
Teikoku Databank pointed out that many companies have taken a cautious stance as prospects of whether the coronavirus will be fully contained are unclear.
(Japanese original by Hironori Takechi and Mio Ikeda, Tokyo Business News Department)