Snow Brand Food Co (SBF), a 65%-owned subsidiary of scandal-ridden dairy giant Snow Brand Milk Products Co (SBMP), admitted earlier today [Wednesday] that it has been repackaging Australian meat as domestic produce in a bid to abuse a government subsidies system introduced during the recent BSE scare.

The case came to light after Yoichi Mizutani, the president of warehousing firm Nishinomiya Reizo, which stores SBF beef, decided to reveal it to the public. The Mainichi Shimbun national newspaper reported that SBF asked Nishinomiya to let it secretly repackage Australian beef into boxes for domestic meat last October.

Mizutani said he accepted SBF’s requests because it was an important client, but alleged: “I asked Snow Brand Food a couple of times to stop these procedures on the phone at the end of last year, but it declined.”

Speaking at a press conference in Tokyo hastily arranged to address reports in the local media, SBF President Shozo Yoshida confessed to the deception, commenting: “I deeply apologize for this kind of occurrence while meat markets are facing severe conditions.”

“I must say our efforts in risk management, quality guarantee, ethical and compliance matters weren’t sufficient at all,” he added.

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Yoshida said that he had discovered earlier that day that the repackaging of 13.8 tons of Australian beef was also being carried out in November at Kansai Meat Center, an SBF facility in Itami, Hyogo Prefecture.

The head of this centre, Tetsuaki Sugawara, admitted to fraud and said that he acted on his own judgment and without the involvement of top management personnel. Yoshida said that Sugawara was likely to have been under a great deal of psychological pressure at the time, as meat inventories rose after Japan’s first case of BSE was discovered in September.

Abusing the subsidies system

The Japanese government launched the subsidy system as part of a series of measures designed to help dairy farmers, retailers and wholesalers affected by falling demand for beef after the BSE scare. The beef backlog emergency storage project enabled meat industry groups to gain government subsidies to purchase domestically processed beef before 18 October 2001. A total of 12,600 tons of beef was kept off the market and incinerated at the expense of the farm ministry.

Once its Australian meat had been repackaged, SBF submitted a total of 280 metric tons of beef to the government through a cooperative association. The company was due to receive ¥1,114 (US$8.3) per kilogram of beef through the buyout program. For the total 13.8 tons SBF was planning to sell through the scheme this would amount to ¥15.4m, and the company had already received ¥9.7m.

Yoshida told reporters that SBF will return the money it received unfairly, and said that he is due to visit the Ministry of Agriculture, Forestry and Fisheries and the related industry association in order to apologize for his company’s conduct.

Japanese Prime Minister Junichiro Koizumi responded by telling reporters that SBF has broken the law: “This is illegal. It hurts not just Snow Brand’s name but [also] the public.

“We need to thoroughly investigate.”

Chief Cabinet Secretary Yasuo Fukuda added that SBF’s deed was inexcusable, and threatened to heighten the public’s fears.


A ministry official from Japan’s Agriculture, Forestry and Fisheries Ministry revealed that an investigation into SBF’s dubious handling of imported beef has been launched. “It has been feared this kind of incident would occur since the government scheme to purchase beef started. If [the fraud allegation] is true, it is an extremely regrettable act by a food company,” he said.

The Hyogo prefecture police have also started investigating the company on suspicion of fraudulent use of the state subsidy scheme.   

One scandal too many?

The incident could prove critical to the Snow Brand parent group. Still struggling to restore consumer confidence after causing the worst food poising case on record in Japan, with contaminated milk products poisoning more than 13,000 people in the summer of 2000, SBMP saw its shares tumble 21.9% on the Tokyo Stock Exchange (TSE) as the news was revealed. Falling to a low of ¥169, SBMP logged the steepest drop among stocks on the TSE’s first section.

SBF’s shares finished down 21.74% from Tuesday at ¥72, after reaching a new lifetime low of ¥64 since it was established in 1950.

Traders had mixed reactions to the share pressures. Some said that the low prices were likely to remain, as investigators sought to establish how much Snow Brand management knew of the cover-up. Others believed that buying the shares now was a good investment, as long as the companies weather the storm.