“Is this not deception?” Food Labeling Stirs Controversy in Japan; Hotel, Department Store and Restaurant Chains in Japan Are Making Disclosures About Food Labeling, From Shrimp to Spinach to Cream. “There was the mentality to make things look better, more delicious, more luxurious.”

Food Labeling Stirs Controversy in Japan

Hotel, Department Store and Restaurant Chains in Japan Are Making Disclosures About Food Labeling, From Shrimp to Spinach to Cream


Nov. 7, 2013 11:24 p.m. ET

TOKYO—An executive from one of Japan’s high-end department store chains faced an hour-long grilling Thursday afternoon, sipping tea and wiping his mouth with a handkerchief as reporters repeatedly said he was speaking too quietly. “Is this not deception?” one asked. “From the customers’ point of view, it might look that way,” said Yoji Honda, corporate executive officer at Daimaru Matsuzakaya Department Stores Co. “There was the mentality to make things look better, more delicious, more luxurious.”The specific transgression: Daimaru had served imported Whiteleg shrimp in some of its restaurants, even though the menus had described the fare as Japanese-cultivated Shiba shrimp. What’s more, the dessert page said the Mont Blanc “lavishly used only French chestnuts,” when in fact the swirled purée—which was indeed made with French chestnuts, designed to look like a snow-capped mountain—was topped with a chestnut of Korean origin.

Mr. Honda lowered his head in apology for five seconds, both at the beginning and the end of the ordeal.

Daimaru wasn’t the only Japanese company in the hot seat Thursday for what the media has come to brand the “deceitful labeling” scandal.

Throughout the day, at least five major hotel and restaurant chains came forth in news conferences or issued statements to confess to similar sins. The venerated Hotel Okura issued a nine-page news release disclosing that some tomatoes described on restaurant menus as organic had been grown using pesticides, while they mixed up two different kinds of snow crabs.

Komeda Coffee, a Nagoya-based chain of 500 cafes, posted a notice on its website apologizing for passing off orange juice as more expensive Japanese mikan juice, masquerading a whipped cream-vegetable oil hybrid as fresh cream and touting purchased chocolate cream as homemade.

“They’ve surfaced one after another, and this inappropriate labeling has resulted in the loss of trust among consumers,” Prime Minister Shinzo Abe’s chief spokesman Yoshihide Suga told reporters Thursday, as he announced he had ordered the consumer protection agency to hold an emergency meeting with the health ministry and other relevant authorities. “These are clearly coverups,” said Mr. Suga, the chief cabinet secretary.

Thursday’s activity capped a two-week media feeding frenzy, the near-daily revelations of new restaurants, hotels or department stores engulfed in controversy splashed across front pages and dominating evening newscasts.

The menu mania took off Oct. 28 when the president of Osaka-based Hankyu-Hanshin Hotels resigned in apology after revealing that from April 2010 through this past July, the chain of 17 hotels and 111 restaurants had mischaracterized 47 different food items, including portraying a caviar garnish as coming from red salmon, when it fact it came from flying fish.

The resignation came four days after a nationally televised news conference—where the president announced a 20% pay cut for himself and 10% for other executives—failed to quell the furor. Instead, it prompted more than a dozen competitors from around the country to rush forth with admissions before an increasingly aggressive press threatened to expose them.

Previous Japanese food scandals had more serious consequences. This time, there is no sign any consumer fell ill or faced any health threat from the misnomers—or could even taste the difference.

Take, for example, Shiba shrimp and Whiteleg shrimp, commonly used in Chinese restaurants mixed with chili sauce. Shiba can be nearly 50% more expensive than Whiteleg, but “they look very similar and there aren’t that many people who can tell the difference in taste,” said Masatomo Ohshima, an official at shrimp importer Ebino Daimaru Co.

Still, the revelations have transfixed a country that has prided itself on what it claims is world-class culinary culture and a high level of hospitality and service—known in Japanese as “omotenashi,” a word invoked prominently in the country’s successful September bid to win the 2020 Summer Olympics. “The omotenashi that Japan boasts to the world has been shaken,” declared the Japanese business daily Nikkei. An editorial in the Fukui Shimbun newspaper ran the headline: “Japan’s proud food culture in tears.”

Why did so many top-line establishments get themselves in hot water?

Yen-pinching during an extended period of intense deflation appears to have played a role. Black tiger shrimp can cost as little as 20% of the price of Kuruma shrimp, for which it was often switched. Other times, the mixed items cost virtually the same, but restaurants were eager to portray their ingredients as domestic, rather than imported, even when Japanese ingredients were a rarity. Japan-made Shiba make up less than 1% of the shrimp sold in Japan.

Whatever the cause, the practice appears to have gone on for quite some time. Daimaru Thursday admitted mislabeling dating back to 1993. “It has been going on for 20 years,” Mr. Honda said. “How embarrassing.”

The practice remained unexposed until this past May, when a sharp-eyed diner at a Prince Hotel in Tokyo noticed the dish described as “scallops” was actually Itaya shellfish, which is similar but slightly smaller and cheaper. The diner posted the discovery on a restaurant reservation website, prompting the Prince chain to launch an investigation of all its restaurants around Japan.

The three-page report released June 17 said 3,596 customers in April and May of this year had been exposed to the faux scallops. A follow-up six-page document issued June 24 went on to detail incorrect menu descriptions for 55 products at 32 Prince restaurants and facilities stretching back to 2005. Those included spinach grown in the northeastern Pacific coast prefecture of Ibaraki that was described as coming from the lush, mountainous Shinshu region about 200 miles away.

Prince Hotels has so far refunded around $1.1 million to customers who have come to claim they ate mislabeled dishes. The hotel compiled an internal manual to set rules for when around 70 different adjectives can be used.

While the Prince mea culpa didn’t draw much attention, it did spark the investigation at the Hankyu-Hanshin chain, whose October confession put the issue on the front burner. Now, companies are bending over backward to avoid being caught up in the controversy. The Westin Tokyo recently removed from its home page the description of its bread as “fresh-baked” even though it bakes 16 types of bread. The reason, according to a spokeswoman: the concept of “fresh” varies for each person and the bread may not be deemed “fresh” by some if it turns cold by the time customers eat it.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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