Foods in Focus: Japan's Specialty Foods

As the one-year anniversary of the devastating earthquake and tsunami off the Pacific coast of Tohoku approaches, Japan’s supply chain continues to regain momentum. Patience and understanding among those who do business directly with the country has been a key to maintaining customer satisfaction in the U.S. Here, importers, distributors, manufacturers and retailers discuss how Japan’s specialty food trade is faring—as well as which products may be the next hit in America.

Photography by Mark Ferri; Food styled by AJ Battifarano; Props styled by Fran Matalon-Degni

by Nicole Potenza Denis

The Aftermath

Last September, the Japan Times reported that a total of 75.6 percent of food business operators were affected by the March 2011 disaster. Of those impacted, 61.7 percent suffered sales declines. Although most physical damage was restricted to the northeastern part of the country, the wide-ranging effects left the food supply chain in a state of uncertainty.

“It wasn’t just food-manufacturing facilities that were damaged or destroyed—there were also companies that supplied containers and wrappers that suffered, disrupting the supply chain,” says Shin Hirota, director of business development and food business for the Los Angeles branch of Japan External Trade Organization (Jetro), a nonprofit, government-related organization that promotes trade and investment with Japan.

Hardest hit was the Tohoku region: the Akita, Aomori, Fukushima, Iwate, Miyagi and Yamagata prefectures. Many of the affected food businesses were producers of sake, rice, tea, processed fruits and vegetables and seafood. The disaster caused product shortages, heightened surveillance of foods over radiation concerns and uncertainty over the availability of future product.

Overcoming Obstacles with U.S. Supply

While humanitarian efforts were at their peak following the earthquake (see sidebar), many companies were faced with immediate challenges.

“We couldn’t help wondering what effect this horrible event would have on sales,” says Jonathan Milo Leal, founder of Vino de Milo, Athens, Ohio, which exports to Japan. Yet Leal was not surprised by the country’s determination to return to normal. “Japan is resilient and tough. Our importer, Nishimoto—one of the oldest and most experienced importers and distributors of Asian food products in North America—was quick to respond to our calls, and orders continued to come in on schedule,” he says. “However, there were obviously serious distribution interruptions because of destroyed infrastructure.”

Leal ships product to Japan twice a year, and was in between orders when the earthquake and tsunami hit. Although he avoided sales interruptions, demand went down by about 10 percent following the disaster, he notes.

The destabilizing event left the tea industry—a $1.3 billion market for Japan, according to its agriculture ministry—worried for the safety of producers as well as concerned about procuring tea, says Joshua Kaiser, founder and CEO of Rishi Tea, Milwaukee, Wis. “There was an initial rush for companies to secure last year’s tea or go to cultivation areas further south,” he explains. “This resulted in lower quantities of fresh-leaf tea and doubling prices.”

Although it did not experience direct damages since its production facilities are in southern Japan, Ito En, the country’s largest green tea distributor, faced production delays due to energy conservation efforts that were instituted across Japan. Additionally, its custom bottle-cap facility suffered significant damage, forcing the company to move to another company in Japan to produce the caps. “We temporarily switched to a generic, unbranded version in order to keep production running,” notes Rona Tison, senior vice president corporate relations for Ito En, North America Inc. Tison reports that the original company that produced the branded caps is now back in operation after several months of recovery.

Tea suppliers and importers were not the only ones facing challenges. Argo Century, Jackson, Fla., imports specialty products such as miso, yuzu juice, sesame oil and bonito flakes from Japan for use in its Tonton sauce line. With many of these items sourced in the south, the company experienced no immediate shortages, but the weak dollar compared to the rising yen has been cause for concern. “We have seen a 2 to 5 percent price increase in many items,” says Mayumi Burnham, vice president of marketing. “Importing products is expensive, but it can get difficult to raise prices for our customers. The lesson is to always keep your options open and find a secondary or third place to source ingredients. You can’t always rely on one area.”

Similarly, Toshiki Hiroaoka, vice president of Daiei Trading Co. Inc., College Pt., N.Y., an importer of frozen Japanese seafood products and other foodstuffs, has noticed significant price hikes. “Prices are doubling for items like frozen eel,” he says. “We are looking to find local sources here in the U.S. and are importing some more products from China now.”

Immediately following the quake, JFC International, a large distributor of Asian brands such as Nishiki, Pocky and Morinaga, faced some restrictions importing food from Japan. Tetsu Mogi, category manager, says that limitations were put on products such as pickled vegetables from the Ibaragi prefecture. “They were put on publicly announced FDA alert,” Mogi recalls. Although some sake from Fukushima was not on the FDA alert, JFC voluntarily withheld product as a precaution. “Obviously there were products from factories that were damaged from the quake that became unavailable to us, as well,” Mogi adds. “But overall the restrictions JFC faced were very limited.”

Retailer Challenges

U.S. retailers experienced expected though sporadic out-of-stocks in many Japanese categories, due mainly to manufacturing disruptions or importers initially rationing what retailers could purchase. Some predict price hikes in the future on items such as rice.

“Because of impending shortages, I am expecting rice prices to double in the upcoming months,” says Tony Wilson of Global Foods Market, Kirkwood, Mo. Wilson was already seeing price increases about one-third of the normal range in mid-October.

“It’s a tough time dealing with product availability in categories like confections and canned goods as well as delayed containers,” says Joe Slavic, specialty food buyer for Foods of All Nations, Charlottesville, Va. “But we are not discontinuing anything and we’re being patient with products as the Japanese economy recuperates. Sales are steady and we are still selling items like tea, seaweed and sauces.”

At Jungle Jim’s International Market, Fairfield, Ohio, there were no product recalls, but out-of-stocks occurred with Japanese candies and cookies, such as Glico Pocky Sticks, as well as Ramune Soft Drinks, miso pastes and frozen nattos (fermented soybeans). “Products like Ramune and some frozen goods only became available in quantity recently, and the market is still experiencing some out-of-stocks in various categories,” says Jim Beckett, Jungle Jim’s international manager, who posts signs reminding customers of potential problems procuring Japanese products.

Jungle Jim’s has offset sales decreases by ordering Japanese-style foods from the U.S. or bringing in other Asian food products. However, other retailers have opted to hold out for authenticity—even if it means more holes on the shelves in the short term. At the Pacific Mercantile Company in Denver, categories such as rice crackers, confections and nattos were still experiencing out-of-stocks in October. But owner Kyle Inai says he will not source from other countries. “People want Japanese products especially in these categories,” he explains. “They understand the quality.”

In some cases stock shortages have been addressed by Japanese companies moving production to other locations. “Many Japanese manufacturers have diversified themselves and are using manufacturing facilities in other countries like Thailand,” says Gustavo Caraballo, operations manager for Asianfoodgrocer.com, an importer, distributor and online food grocer.

Abating Fears

The tsunami affected Japan’s nuclear infrastructure, causing U.S. consumers to fear radiation contamination in the food supply. In many cases, manufacturers’ quick responses helped keep fears at bay. At Argo Century, Burnham requested letters from all of her suppliers stating the safety of their products. Ito En, meanwhile, initiated its own testing of raw-materials production and distribution on top of meeting FDA and Japanese Ministry of Health, Labor and Welfare requirements. The company’s analysis covered tea leaves as well as ready-to-drink teas, where levels of iodine and radioactive cesium were tested.

Having moved years earlier to an organic green-tea farmer in southern Japan, in a cultivation zone that turned out to be the southernmost point from the disaster, Rishi Tea was protected by a low risk for contamination. But the company, still facing customer fears, instituted precautions. Rishi has been conducting independent testing at a U.S.–based lab on every container that comes in from Japan.

Retailers who took the time to educate customers about their inventory were able to minimize concerns. “It was important for us to explain the quarantine zones and let our customers know that most of our inventory was already here in the U.S., so it had no chance of being contaminated,” Asianfoodgrocer.com’s Caraballo says.

Pacific Mercantile’s Inai also encountered initial concerns over radiation. “We still have a couple of customers ask about the safety of products, but we see much less interest now,” he notes. Inai posted paperwork on store shelves for his customers to read that he received from the FDA and Japanese companies declaring the products safe. He also used in-store signage to indicate “pre-tsunami” inventory.

Although worries have mostly abated, Jetro’s Shin Hirota suggests companies still dealing with questions and uncertainties from customers regarding product safety contact his offices for assistance or visit jetro.org.

Optimistic Outcome

One unexpected positive effect of the catastrophe is that consumer interest in Japanese products has been piqued. “Sales have only been deterred by out-of-stocks,” says Jungle Jim’s Beckett. “Otherwise, the earthquake caused awareness and we have seen steady sales growth in the Japanese category overall.

Rishi Tea has experienced a whopping 35 percent jump in Japanese green tea sales in 2011, and Kaiser notes that the country’s green tea exports to the U.S. were up 20 percent overall. “It’s a strange anomaly that has come out of this disaster,” he says, noting that Rishi has recently added two new green teas from Japan to its line: Genmai Matcha Organic and Super Green Organic.

The Future: Flavored Kit Kats, Artisan Cheese and the Miracle Noodle

With awareness for certain Japanese specialty products flourishing among U.S. consumers, Caraballo cites confections as an upcoming hit. He points to Kit Kat bars in once-exclusive Japanese flavors such as Sakura Matcha Latte (cherry blossom and green tea) and Caramelized Sweet Potato. Shirotaki noodles (a.k.a. The Miracle Noodle) are poised to be the next big thing, he adds. Made from konnyaku (konjac) yam, Shirotaki noodles are a calorie- and carb-free favorite with a high soluble-fiber content that is said to slow digestion and prolong the feeling of fullness.

In Japan, as western luxuries like wine become more common, specialty artisan cheesemakers are budding. Last year, the Japan Dairy Council estimated that the country had about 170 artisanal cheesemaking studios. In October 2011, the Wall Street Journal reported that Signature, a French restaurant in the Mandarin Oriental hotel in Tokyo, offered for the first time an all-Japanese cheese platter. The selection included a bold semi-hard Hokkaido that matured while marinating in red miso, and a blue cheese from Sarabetsu Studio in Hokkaido.

To help promote Japanese foods, Jetro has been ramping up its social media efforts on Twitter, Facebook and YouTube as well as hosting events. Last May, Jetro Chicago, along with the Consulate General of Japan at Chicago and the Sake Export Association of Japan, sponsored a sake promotional event featuring tastings and pairings for Chicago’s food and beverage community. Participants included two breweries, Nanbubijin Inc. and Okunomatsu Sake Brewing Co., from the impacted Tohoku region.

At the Winter Fancy Food Show in San Francisco this year, nearly 30 specialty food producers are exhibiting products such as miso, sake, soy sauce and the konjac root, several of which are from the Tohoku region, notes Kris Miller, project coordinator for Jetro, Los Angeles.

“The message we want to pass on,” Miller says, “is that the Japanese food industry is still strong and recovering well.” |SFM|

Nicole Potenza Denis is a contributing editor to Specialty Food Magazine.

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