Mad cow hammers Japan's restaurateurs

December 6, 2001 United Press International by Shihoko Goto
It's been thirty years since the first Golden Arches opened its doors in downtown Tokyo, and there's been no looking back since for Ronald McDonald and his friends. Until two cows came along several weeks ago.

The McDonald's store in Tokyo's trendy Shinjuku district, usually bustling with students and shoppers at peak lunch hour, was unusually quiet, with only three people waiting for burgers. And those who were ordering were avoiding the beef products. "McDonald's is good and inexpensive, so I like coming here. But with all the mad cow scare, I don't want to eat beef," said Hiroshi Ikeda, an engineering student at a neighboring private school who decided to dine on chicken Mcnuggets and oolong tea.

Meanwhile, a Korean barbecue restaurant specializing in grilling beef slices on tabletops near the McDonald's posted a sign outside its doors stating "out of business."

The outbreak of mad cow disease in Japan this autumn has rattled consumer confidence about beef products, and has hit the fast-food chains and restaurateurs particularly hard.

In mid-September, the Japanese government announced that a cow at a farm about 100 km south of Tokyo was found to be infected with bovine spongiform encephalopathy (BSE), or mad cow disease. A second cow was found to be contaminated with the disease late last month. Both animals were immediately destroyed, and the two farms where the cows were found have been quarantined.

The revelation that mad cow disease has struck the nation, albeit on a small scale at least for now, has caused something of a mild panic amongst the Japanese public. Supermarkets have reported a marked decrease in milk and other dairy produce since the outbreak, and the number of restaurants closing down because of slack beef sales continues to rise.

The single biggest victim of the disease in Japan, however, is McDonald's. Since its establishment in 1971 here in a country that until then consisted far more of fish-eaters than meat-consumers, the fast-food chain has revolutionized the Japanese diet, although many would argue for the worse.

Leaving the debate of the virtues- or lack thereof- of fast food aside, McDonald's Co. (Japan) Ltd. saw an exponential rise in its sales over the decades, from five stores in its initial year and now 4,311 stores nationwide, boasting sales of $3.5 billion (431.1 billion yen) last year.

That means that Japanese citizens had 9.3 burgers each last year, as the nation wolfed down 41,000 tons of beef and 111,000 tons of potatoes. Incidentally, the ubiquitous Big Mac ranks fourth in popularity on the menu here, as the teriyaki burger and chicken tatsuta (deep-fried chicken cutlet dipped in teriyaki sauce) appeal more to the Japanese palate and sell just in this local market.

The mass appeal of "Makudo", as the franchise is fondly called by teenagers, encouraged the hamburger maker to launch its initial public offering this summer amid much fanfare. The familiarity of the name among individual investors attracted them to flock to McDonald's, which listed on the Jasdaq stock exchange in July with 26.2 million shares, making it one of the nation's biggest small-market IPOs.

But many had feared that the euphoria over the McDonald's launch would be short-lived, although no one could have guessed at the time it would be because of mad cow disease.

Last month, the company revised down its net income projection for 2001 by 27.2 percent to $877 million (107 billion yen).

The revision "stems from lower sales and income than previously expected. Adding to the decline of the general consumer demand due to the prolonged recession, the recent concerns by consumers about beef safety in general has impacted on McDonald's Japan's business to some degree despite the fact that all McDonald's beef is Australian," the company stated.

Indeed, the burger franchise has been bombarding television networks with soothing ads about how all of their beef has been inspected for BSE, and that all beef comes from Australia, which is free from the disease, but in vain.

With the Japanese economy in the doldrums for the past decade, the restaurant industry has seen a surge in lower-priced eateries, for those on a tight budget. In fact, one of the biggest allures of McDonald's in Japan, as in most countries worldwide, is its cheap price tag as well as convenience. A burger set with French fries and a drink sets you back only about $4 (500 yen).

But a good price is no longer good enough for wary consumers.

"The government is saying that there could be more outbreaks, right? And how can we trust anyone saying that the beef on the market now is safe? Who knows," said Mayumi Okazaki, a university student.

Korean barbecue, a popular cuisine among the younger generation since they can enjoy a hearty meal of marinated beef slices for about $20 (2500 yen), has been particularly hard hit by the mad cow scare.

Gyukaku, a barbecue franchise with 27 stores in Tokyo, reported that their sales have plunged nearly 30 percent since the BSE outbreak, even though they have assured customers that their meat comes from either Australia or the United States. The franchise has since slashed its prices on food and drink, with a mug of beer going for 80 cents (98 yen) down from $3.20 (390 yen), and a plate of sliced meat being halved to $2.30(290 yen).

According to the Japan Korean Barbecue Association, there are over 20,000 barbecue restaurants across Japan.

"Some restaurants have seen sales plunge by nearly 70 percent," the association stated, adding that they expect the trend to continue.

"On the one hand, the government is assuring the Japanese public that domestic beef is safe. And yet on the other, they are encouraging schools to ban beef from the cafeteria menu," the association said.

But there is no denying that Japan is susceptible to a further outbreak of the disease, which has plagued Britain and continental Europe. Japan had imported the bulk of its livestock as well as meat and bone meal from Europe until 1998, and in fact, the European Union concluded earlier this year in a study that Japan was a relatively high-risk country for BSE.

Japanese politicians from beef-producing areas have made a commitment to eat beef, and even staged a joint performance to eat beef dishes on television.

Still, that does not hide the fact that there is a deep divide amongst the ministries, with the Agriculture Ministry responsible for the regulation of importing livestock, while the Health Ministry oversees food safety, and the processing of slaughtered cows.

The agriculturalists are seen to be out to protect the farmers, whilst the healthcare bureaucrats look out for the consumers, which are dividing policymakers.

Such a political divide should be overcome eventually, but not before consumer confidence in the meat on market falls still further and more stores go bankrupt as a result.

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