Beef Bowl Capitalism and Consequences

A gyudon “beef bowl” is a common fast food in modern Japan, a simple dish of beef and onions over rice. For those of you who need more background, read this.

The gyudon industry has faced a major shake-up over recent years. A decade ago, Yoshinoya was the undisputed champion of the business. It was then victim to a chain of unfortunate events. First, in late 2001, a domestic mad cow incident critically damaged beef bowl sales in Japan, for which Yoshinoya was hurt the hardest. In late 2003, Japan suspended imports of American beef due to a BSE incident, cutting Yoshinoya’s main source of beef. This gave rivals such as Sukiya and Matsuya, which got their beef from places such as Australia and Mexico, a key market advantage which they milked for several years.

A key battlefront in this market competition was not just supply but also prices. Gyudon prices dropped significantly (10-30%) during the time of tight supply from 2001 – 2004/2006, but rose back to normal when supplies returned. (You can see a clear breakdown of the price movements on this Japanese article from Wikipedia.) Now with consumers tightening their belts during the post-financial crisis years, the gyudon industry, which has recent experience (and institutional memory) of price wars are back at the game of trying to bring in customers.

Yoshinoya, despite having the most to lose from a price war, is partially responsible for the situation. A year ago, they dropped gyudon prices from 390 yen to 310 to celebrate their 111th year anniversary. Sukiya responded by offering a gyumeshi “poor man gyudon” for a record-breaking price of 240 yen, and the game of offering alternative cheaper gyudon variants took off. Sukiya achieved its low prices by finding cheaper supplies of beef, onions and rice; offering smaller portions; but also through other cost cutting methods such as cutting down staff. Sukiya in particular has a money-saving option in its franchise manual referred to as “wan-ope” (one operator) to have just one member of staff during nightime operations when the trains aren’t running and when customers are scarce.

And here we see a key externality of the gyudon price wars– a rise in robbery attacks on gyudon chain stores during night hours. In 2010, there were 20 attacks on Gyudon chain stores in three prefectures (Aichi, Gifu and Mie). 18 out of 20 targets were Sukiya stores. It almost looks like the convenience store holdups that became an endemic problem in the US during the 1980s. The primary cause is attributed to the “wan-ope” policy.

In reading articles on these events, I was struck by the correct, yet rather Japanese, closing comment of one article:

“Of course the person to blame for a crime is the person who committed it, but criminal sociologists are sounding the alarm for the responsibility owed by companies to protect the safety of their customers and their employees. In trying to win the price wars, it is understandable to push a rationalization of store management, but it is a fact that there are voices calling on companies to demand an environment that prevents crime such as robbery.”

14 thoughts on “Beef Bowl Capitalism and Consequences”

  1. This is great.

    Also note the rise in demand for cheap inferior goods like discount gyudon caused by the massive deflationary pressure from a decade-plus-long drop in incomes. This price-war would not have been necessary if people didn’t feel increasingly impoverished. Same with happoshu etc.: Yes, there was some tax law, but people would drink real beer if incomes were rising.

  2. Wow. Well, sure the cheap gyudon are attractive for people with smaller incomes, but this shouldn’t come at the expense of staff safety. If the gyudon chains had to raise prices slightly to have an extra staff member on night duty, maybe the poor salarymen would start eating more convenience store onigiri or something.

  3. I often find convenience stores staffed by only one person late at night, so can’t help but think that they aren’t much safer…

  4. True, Joe, but convenience stores tend to have better security systems (防犯カメラ), plus they are regularly visited by customers during night hours, and police have them marked as crime hotspots so visit them more frequently. Gyudon shops are visited less frequently during night hours by customers and many don’t have security systems in place.

  5. What if gyudon shops stopped taking cash late-night and early morning? This would eliminate the incentive.

  6. It’s probably good to remember that a major source of retail robberies like this is the employees themselves. The employees can fairly quickly learn how likely they would be to get caught robbing the joint, so if Sukiya doesn’t have the proper cameras or keeps too much cash around, word could spread fairly quickly.

  7. A lesser problem is that being alone for the whole night is pretty much depressing for the lone employee…

  8. Interestingly, the same time period has seen a decline in violent crime such as muggings and store holdups in the US, which is widely attributed to the decline of cash.

    Despite the wide availability of electronic cash in Japan in the form of the “saifu keitai” or RFID based train passes it just hasn’t taken off very much, and low level retail transactions in Japan are still almost exclusively in cash. Compare with say, Hong Kong where when I visited like 6 years ago it was obvious that almost all purchases in 7/11 or from vending machines were via Octopus Card. In the US most retail purchases are done via credit or debit card, with the extras fees or minimum purchase requirements fading fast.

    BTW, one other reason Yoshinoya may be losing market share to these chains is the fact that it has by far the smallest menu of the three. While Sukikya and Matsuya are happy to offer other dishes, like curry rise or bibimbap, Yoshinoya has been very conservative and tried to stick to their roots as much as possible (with a significant exception during the year or so that they ran out of beef due to the aforementioned BSE related embargo).

  9. Another thing I’ve noticed about Yoshinoya is that, at least in Tokyo, they don’t use ticket machines to process payment, whereas the other gyudon chains do.

    Roy, you’re pulling me out on a tangent now, but what the heck — it’s MFT and we do tangents well.

    There are two big problems with electronic cash in Japan: there are too many non-compatible systems in place, and they have completely retarded charging methods. I use Suica and Edy pretty often now, both in the form of chipped credit cards. The Suica is inside a JCB card and automatically recharges itself from the credit card’s line, but only in 3,000 yen increments and only when its balance dips below 500 yen — meaning that I’m screwed if I have only 600 yen left on the chip and I want to buy 650 yen worth of stuff (fortunately it recharges more logically when used for train fare). The Edy is even more poorly designed; the chip is inside a Visa card but is not linked to the card at all, meaning that it has to be recharged manually with cash, and unless you are in one of the very few places that has an Edy charging machine, you have to ask the store clerk to put your money on the card before you can use it.

    It would really be nice if credit cards could be used in more places in Japan. I spent a week in the States around Christmas and only had to use cash for tips and bus fare. From what I understand, CC companies in the US do not allow merchants to charge extra fees or impose minimum purchase requirements for credit card purchases [any more] — it’s a violation of the merchant agreement and can cause the merchant’s terminal to be shut off. I haven’t seen user-end fees for CC transactions in Japan, but my neighborhood supermarket used to effectively give a cash discount by giving out point cards that would only accrue points on cash purchases.

  10. I think Matsuya and Nakau use ticket machines but Yoshinoya and Sukiya don’t. But that could just be the stores closest to me where I actually remember and not the whole chain.

  11. Sukiya seems to be mixed: the one closest to me (cramped location with counter seating) uses ticket machines, but I’ve been in ones where there is mainly table seating where the staff are paid directly.

  12. I was talking with someone recently about the ticket machines. She was saying they were there to cut down on the need to deal with a face-to-face transaction and I said it was more practical, it’s harder to steal the money, especially for employees. She tried to assure me that no Japanese would ever steal money from a shop,especially if they worked there.

    I wonder how the robbery stats diverge between those shops with ticket machines and those who take cash.

  13. 20 robberies in a year in 3 prefectures could be one person taking advantage of this policy who accidentally hit a couple of non-sukiya gyudon places while inebriated.
    The problem with crime statistics in Japan so often is that they are not substantial enough to be statistically significant. Not a bad problem to have for a society to have, but it creates a lot of potential for irrational panic based on weak statistical evidence.

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