March 31, 2011

Dairy products still lack in Japan's east

Scarce packaging materials such as paper cartons hinder production in eastern Japan resulting in a supply shortage of dairy products.

Yogurt output, for example, cannot keep up with demand due to Tokyo Electric Power Co.'s scheduled power cuts, and supplying products from western Japan is not practical because milk is highly perishable.

Major dairy producers like Meiji Dairies Corp. and Morinaga Milk Industry Co. have seen shipments in the Kanto region decline to 40-50% of their pre-quake levels. While the packaging shortage is expected to ease starting in early April, it is unclear whether other bottlenecks will be cleared by then.

Retail outlets are not getting enough products from manufacturers, said a spokesman at Seven-Eleven Japan Co. Restaurants operated by Skylark Co. and Royal Holdings Co. have been forced to take dishes with yogurt off their menus.

One major reason for the dairy squeeze is that three Nippon Paper Pack Co. plants in Saitama and Ibaraki prefectures were shut down by the quake. Nippon Paper Pack holds a 30% share of the domestic market for paper cartons. The three factories are back online, however, and will likely return to full-scale production by early April. Milk producers' plants are also getting back on track. According to a leading dairy company, if the carton shortage is resolved as expected next month, shortages should ease.

Yogurt is hardest for customers to lay their hands on because companies such as Meiji Dairies are placing priority on milk production in the Kanto area. Because yogurt requires fermentation and other processing it usually takes more than half a day to produce, making it more vulnerable to power outages. So it may take awhile for production to return to normal.

The ban on shipments of raw milk from Fukushima and Ibaraki prefectures due to radioactivity in excess of legal standards has further constrained supplies. Ibaraki, in particular, had been a major supplier, accounting for 15% of raw milk production in the Kanto area, and several Meiji Dairies and Megmilk Snow Brand plants are located in the quake-hit area. Milk producers are responding switching to suppliers elsewhere, but a prolonged cutoff from its traditional sources would be a serious blow. It will probably take some time before supplies return to normal.