Small Change Adds Up

   I've been noticing small changes in the prices of everything lately. The prices of drinks sold from vending machines also went up yesterday.

   A bottle of Oronamin C (bottom row, second from the right) cost ¥110 in the morning. By the afternoon, it was selling for ¥120. The price of a bottle of Ribobitan D (blue and white bottle at the bottom right) shot up, from ¥150 to ¥160.

   As I put in an extra ten yen into the machine, I couldn't help feeling that the numbers weren't adding up.   

   If the price of a bottle of Oronamin C, excluding tax is roughly ¥105, the new price including 8% sales tax should be about ¥113 rather than ¥120.

   Perhaps, the drink makers were taking into account that the consumption tax is going to be raised to 10% next year. Well, even with a 10% consumption tax, a bottle of Oronamin C would still cost only ¥115. What this means, of course, is that the vendors of Oronamin C are pocketing an extra seven yen in revenue for each bottle they sell through their machines. 

   The same is true for Ribobitan D. Before the consumption tax increase, a bottle cost ¥150. Today, ¥160.
The actual price of a bottle of the drink, excluding sales tax, comes to ¥143. With a sales tax of 8% a bottle should cost ¥154, not ¥160. Even with the sales tax doubled to 10% a bottle would sell for ¥157. So, with each bottle of Ribobitan D or similarly priced item, the distributor is making an extra six yen in revenue. 

   It seems that while many companies have balked at the idea of increasing the consumption tax, many of them are using this as an opportunity to bolster the bottom line. 

   Later . . . 

   A friend took issue with my claim that Japanese companies were using the tax hike to increase profits (I wrote "revenue", but profit was what I was really getting at), arguing that the vendors have been operating on "wafer thin margins" for years.

   That got me thinking. Were these vending machine operators really just scraping by? If they were, I doubt for one that there would be so goddamn many vending machines out there. Anyone who visits Japan will be surprised by not only how ubiquitous drinks machines are, but by how well maintained, new, and increasingly high-tech the vending machines are. The companies are clearly earning enough money to put some of it back into developing or purchasing new "hardware" on a regular basis. 

   And what, I wondered, did a bottle of Oronamin C actually cost the distributor. Although O.C. now sells for ¥120 at most vending machines, I discovered that at one of the universities where I teach, O.C. was still selling for only ¥100. The local supermarket down the street sells bottles of the energy drink for as little as ¥84. At ¥84, the cost of a bottle of O.C. minus consumption tax is ¥77.3. Assuming that O.C. is not a loss leader and the supermarket has a flat profit margin of, say, 2-3% on all of its products like Costco, then a bottle of Oronamin C really costs about ¥74. Or possibly even less than that. (A can of Dr. Pepper at Costco, for instance, only costs about ¥60 per can if you buy a case of 24.)

   I also looked into Otsuka, the maker of Oronamin C, to see how many bottles of the energy drink it produces every year. Would you believe that 25 BILLION bottles of the stuff was consumed in 2000 (the latest year for which I could find reliable stats)? With production levels so high, I doubt the pharmaceutical company and the distributors who sell its products are hurting all that much. A company that big and profitable probably knows what it's doing. 

The Nation at Their Feet

   "Some grade school kids these days don't know how to tie their shoes," Shizuko, a woman in her late seventies, grouses.

   I love it when the older members of the class get self-righteous: it gives me the perfect opportunity to playfully goad them: "Well, considering all the shoes with Velcro today,” I say, “I'm not surprised. But then, what about yourself, Shizuko? Could you . . . ? Sorry to ask a stupid question, but did you even wear shoes when you were young?"

   A number of them, including Shizuko, giggle, which I take as a no.

   Another woman, this one in her early eighties, tells me about the shoes she used to wear, how they didn't have laces. She draws me a picture of a simple rubber and canvass slip-on. Several of them concur: they wore the very same kind of shoe.

   A woman in her fifties says that parents today have to prepare three or four pairs of shoes for their children: the shoes they wear to school, the shoes they wear in the school facilities, the locker room slippers, and so on.

   I ask what to me seems to be the most reasonable question to ask, "Why?"

   "Why what?"

   "Why do you think the kids have to prepare so many different shoes for school?

   "I don't know," she replies.

   As expected, no one does. And why would they? Like the well-trained Japanese that they are, they probably never gave it a second thought until day even though four pairs of shoes for a kid who'll outgrow them in no time is quite a lot.

   "Did it ever occur to you,” I say, “that the reason your kids have to prepare four pairs of shoes is because the owner of a major shoe manufacturer and a high-ranking official in the Ministry of Education have been good friends since the time they were classmates at Tôkyô University?"

   I'm only half serious, but considering the way so very little is left to chance in this country, it would seem awfully peculiar if such rules had been made arbitrarily.

   Case in point: Taspo[1].

   While the stated aim for the introduction of the “Tobacco Passport” was to reduce the smoking of cigarettes by minors,[2] the tacit goal was to change the purchasing habits of smokers, moving them away from the vending machines and into convenience stores where the Taspo card is not necessary. The big winners of the legislation were convenience stores such as Lawson and 7-Eleven which had lobbied hard for its passage. The losers: independent mom-and-pop shops which often have cigarette vending machines out front.

   Similarly, a law was passed a few years back re-designating certain drugs such that they could no longer be bought over the counter unless done so by a licensed pharmacist. This rule was pushed by the major drug store chains such as Matsumoto Kiyoshi and Drug Eleven to further put the squeeze on small-time pharmacies.

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[1] Taspo (タスポ), formerly known as Tobacco Card (たばこカード tabako kādo), is a smart card using RFID developed by the Tobacco Institute of Japan (TIOJ), the nationwide association of tobacco retailers (全国タバコ販売協同組合連合会 Zenkoku Tabako Hanbai Kyōdō Kumiai Rengōkai), and the Japan Vending Machine Manufacturers Association (日本自動販売機工業会 Nihon Jidōhanbaiki Kōgyōkai) for introduction in 2008. Following its introduction, the card is necessary in order to purchase cigarettes from vending machines in Japan. The name "Taspo" is a portmanteau for "tobacco passport" (たばこのパスポート tabako no pasupōto). For more, see Wikipedia.

[2] In Japan, you have to be 20 to drink alcohol or smoke cigarettes. This doesn’t really stop minors from doing either.