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SUPERMARKETS DEFY BREWERY PRICE HIKES

TOKYO (FNS) -- With a rallying cry of support for consumers, Japanese supermarket chains have set off a wave of beer price discounting that is challenging the nation's pricing system taboo.In April the four major supermarket chains, Daiei Inc., Ito-Yokado Co., Jusco Co. and Seiyu, announced one after another that they cut prices on beer and some other alchoholic beverages. Several of them declined

TOKYO (FNS) -- With a rallying cry of support for consumers, Japanese supermarket chains have set off a wave of beer price discounting that is challenging the nation's pricing system taboo.

In April the four major supermarket chains, Daiei Inc., Ito-Yokado Co., Jusco Co. and Seiyu, announced one after another that they cut prices on beer and some other alchoholic beverages. Several of them declined to follow the breweries' price increases, which went into effect May 1.

Following a recent increase of about 6.5%

in the liquor tax, major breweries, including Kirin Brewery Co., Asahi Breweries, Sapporo Breweries and Suntory, announced they would increase suggested retail prices.

For example, the suggested price of the 633 milliliter bottle of beer rose from Y320 ($3.14 at current exchange rates) to Y330 ($3.24). The 500-milliliter can was up from Y285 ($2.79) to Y295 ($2.89), and the 350-milliliter can, which was Y220 ($2.16) before, is now Y225 ($2.21).

All four breweries suggested the same retail prices. Until now, said Kunihiro Oishi, an analyst at the Research Institute on the National Economy, "the retail price of beer was practically controlled by a sequence of action of the price leader and the followers, although the Fair Trade Commission could not prove a hidden cartel."

In the past, the beer makers were assumed to have cut off any retailer that dared to offer reduced prices instead of their standard ones. "However, this time the balance of power to decide retailer prices has shifted to retailers," Oishi added.

"Through this movement, consumers come to know what a proper retail price is. Now it is not decided by the makers, but by each retailer," he said.

Daiei, the nation's giant supermarket chain, announced in April it reduced the price of the 350-milliliter can by 7% to Y198 ($1.94) from its already reduced price of Y213 ($2.09). And recently it started to sell the 350-milliliter can for Y189.58 ($1.86), 15.7% off the suggested price, and the 500-milliliter can for Y258 ($2.53), 12.5% off, when bought in a case of 24 units.

Daiei's price cuts helped fuel a doubling of sales of all alcoholic beverages including beer from April 14 to April 25, compared with the same period a year earlier, said Toshiuki Mori, the company's spokesman.

Ito-Yokado, a big supermarket chain that sells beer in 47 stores, first reduced the retail price of beer on April 14 to Y197 ($1.93) from the maker's suggested price of Y220 ($2.16) for the 350-milliliter can. Then on May 1 it raised the price to Y203 ($1.99), following the rise in the tax. However, it is still cheaper by about 10%, compared with the suggested price of Y225 ($2.21).

"We have got the backing of consumers," said Kazuko Itakura, an Ito-Yokado spokeswoman. "So far, beer at reduced prices has been selling pretty well," she added.

Among Jusco's 180 stores, 24 deal in beer. There again, "after the price reduction was announced, sales doubled," said Hideaki Yajima, spokesman at Jusco. "In 1993 sales of beer were Y800 million ($7.8 million) at retail level, and sales will increase in 1994," he added.

Added Yajima, "Finally the time has come when we can talk about freedom of pricing. This should have come earlier. But supermarket stores have always been on the consumers' side."

Oishi of RINE said the chains chose a most effective time for the cuts. "In this recessionary time, consumers become more conscious of value and price," he said, observing that the chains announced the reductions right before the makers' suggested prices were raised to cover the increase in the liquor tax.

The sheer power of the retailers is also a factor. Mori of Daiei said his company gained scale advantages through a recent acquisition. "Among a total of 359 shops, we now have 161 which have licenses to deal in liquors, 1.4 times as many as before the merger," he explained. "We have achieved a more efficient distribution system and become able to reduce various costs enough to reduce beer prices."

Yajima of Jusco added, "We will cut more expenses through some measures, including closing of unprofitable stores, revitalizing existing stores and opening new ones."

According to an anonymous official of a major supermarket chain, the wholesale price of the 350-milliliter can of beer is Y176 ($1.73), and the profit ratio dropped from 17% to 13% following the reduction of the retail price of beer at its stores.

According to the four major companies, although the share of beer sold at supermarkets is only about 3% of their entire sales, the impact of their price reduction is profound.

A spokesman for Kirin, whose share is about 50% of the nation's beer market, said that even though the supermarket share is small now, "sales from one supermarket store are much bigger than a small liquor shop, and the number of supermarket stores will be increasing more and more when the government deregulates laws regarding large-scale stores."

He added, "Retailers may be talking with wholesalers to reduce wholesale prices, but that discussion will soon become the one between wholesalers and us."

According to the spokesman, all the beer makers were opposed to the increase in the liquor tax before it became law. But now they had to raise the suggested retail price to pay the tax, which could not be accepted by retailers, "although of course we know the makers have no right to intervene in their decision of retail prices."

For about 150,000 small liquor shops around the country, price reductions by large-scale stores, including supermarket chains and convenience stores, is a crucial matter. Oishi of RINE said some small retailers have formed cooperatives to buy beer at cheaper wholesale prices so that they can compete with supermarket chains and discounters.