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Friday, Feb. 1, 2008


Tainted 'gyoza' fiasco to hit industry, food prices

Staff writer

The widespread poisonings reported Wednesday involving pesticide-tainted frozen "gyoza" dumplings made in China will probably hit Japan's frozen food producers and importers hard, as sales predictably fall and costs to ensure food safety rise in the coming months.

News photo
A sign announcing that JT Foods Co. is recalling "gyoza" products imported from China is displayed Thursday at the entrance to a supermarket in Kakogawa, Hyogo Prefecture. KYODO PHOTO

Analysts even forecast that companies may be forced to merge with rivals.

On Wednesday, corporate and government officials announced that at least 10 people suffered food poisoning after eating frozen "gyoza" dumplings laced with pesticide. The dumplings were imported from China by JT Foods Co., a Tokyo-based subsidiary of Japan Tobacco Inc.

But by Thursday, the number of reported victims increased to hundreds across the country. The Health, Labor and Welfare Ministry also ordered 19 importers, including JT Foods, Nikkyo Foods Co. and Japan Food Corp., which sold frozen food products made by China's Tianyang Food Processing, to stop selling products made by the Chinese company.

"Following the incident, sales of Japanese food makers and importers will drop in the short term," said Yukiko Oshima, an analyst at Credit Suisse in Tokyo. Some analysts also say the cost of recalling products could have a negative impact on frozen food companies' earnings.

Japan Tobacco shares fell as much as 7.1 percent Thursday and closed down 0.7 percent, or ¥4,000, at ¥558,000 on the Tokyo Stock Exchange, their lowest level since March 16.

In recent months, Japanese food makers have been embroiled in several food safety scandals, including recycled sweet red bean paste, mislabeled meat and the use of outdated milk in a popular brand of cream puffs.

As Japanese consumers increasingly lose confidence in food safety, upgrading quality control may be an imminent task for frozen food companies. But for the time being, the firms are too busy focusing on the task at hand of recalling tainted products from consumers and retailers.

JT Foods is recalling 23 frozen food products for household and business use, while Katokichi Co. said it is recalling 18 frozen foods, including two more products it added to its list Thursday.

The list of importers recalling frozen food products is getting longer by the day. On Thursday, three more food companies, including Maruha Corp., said they will recall food products since they included materials produced by the Chinese maker.

Frozen foods made in China have sharply increased on the Japanese market in the past decade as their cheap price attracts consumers.

According to data compiled by the Japan Frozen Food Association, frozen food products from China jumped from 38,909 tons in 1997 to 200,634 tons in 2006, up five-fold.

The data are compiled from questionnaires sent to 34 importers in Japan, which the association claims represents only a portion of the frozen food industry.

"The reason why frozen food imports from China rose was because food makers cannot procure cheap ingredients in Japan," said Hiroki Yamamoto, JFFA spokesman.

Credit Suisse's Oshima said the only way food companies can survive in the future amid rising awareness of food safety is to invest more on quality control to ensure safety.

"Companies with efficient quality control systems will be able to build a brand image of safety and survive," Oshima said.

But consumers also need to understand that higher quality means higher prices, since food producers will be forced to increase prices for the investment they make, she said. "Safety costs money."

Hidenori Tanaka, a senior researcher at research institute Fuji Keizai Co., said the latest food poisoning case is likely to push makers of frozen foods to seek alliances with other companies to share the costs they need to shoulder in upgrading quality controls.

"If companies don't have a system to control quality from the very first part of planting vegetables, the same incident will happen again," Tanaka said. "Only big companies can do that."

Tanaka noted that U.S. fruit giant Dole Food Co. has its own plantation, canning factories and other facilities, allowing the firm to control quality from planting right through to sales.

Since China's food poisoning case revealed that even Japan's major frozen food importers cannot ensure the safety of products manufactured at Chinese companies, even big-name firms may need to seek alliances with others, including overseas companies, he said.

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The Japan Times

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