Poor weather and lower catches have combined to drive up prices of tuna, an essential ingredient of sushi © Bloomberg
Bad weather and lower catches have pushed tuna prices up, hitting every part of Japan’s sushi sector, from luxury Michelin-starred bars to value-for-money chains as well as the conveyor-belt segment.
It has also had other effects. Permira, the UK private equity group, may have rising tuna prices to thank, as it successfully exited its investment in a leading Japanese conveyor-belt sushi chain.
The deal, where Akindo Sushiro, backed by Permira, merged with smaller rival Genki Sushi, announced last week, comes as fish prices are rising, squeezing profit margins in the industry.
“The increase in the amount of fish we buy will raise our negotiating power,” said Sushiro’s chief executive Koichi Mizutome, as he announced the transaction last week.
Higher prices for tuna have hit players in the conveyor-belt sushi segment hardest of all. Offering small plates of sashimi and nigiri at ¥100, ($0.88), they are largely unable to raise retail prices because of tough competition.
With prices of bigeye and yellowtail tuna and cheaper cuts of non-fatty tuna on the rise, Mr Mizutome said he was offering sushi through “gritted teeth”.
Although stagnant growth has hit Japan’s restaurant sector because of years of low wage growth, conveyor-belt sushi chains have expanded over the past decade thanks to cheap plates of tuna, squid and sea urchin, traditionally a luxury meal in Japan.
Thin margins have meant that Sushiro has made a speciality of cutting out wholesalers in Japan by going directly to fish farmers and other suppliers around the world.
However, the recent rise in tuna prices has been tough on the sector. “Sushi is all about tuna,” said Takashi Morio, analyst at Fuji-Keizai, a marketing research firm, who adds that it is almost impossible to cut down on the amount of tuna if restaurateurs want to keep their clientele happy.
The average wholesale price of frozen bigeye tuna is about a third of the cost of the bluefin tuna and has long been substituted for the more expensive variety in conveyor-belt sushi chains and supermarkets. The cost of yellowtail tuna, another conveyor-belt sushi favourite, is also higher.
The average price of bigeye tuna in Tokyo’s Tsukiji fish market in August was ¥1,276 a kilogramme, up almost a third from a year ago, according to the Tokyo Metropolitan Government. Monthly volumes going through the market fell about 10 per cent. Yellowtail prices have risen 22 per cent in the same time.
There are also worries about the long-term trend. “Pacific bluefin have been fished down to just 2.6 per cent of the species’ historic size, and catch limits have been ineffective at ending overfishing,” note researchers at the Pew Charitable Trusts. They also warn that chronic overfishing of both juvenile and adult fish has meant that bigeye tuna stocks are now depleted to “danger zone” levels.
With sushi increasingly becoming a favourite meal overseas, including countries such as China, demand for tuna is likely to grow, further increasing pressure on fish stocks.
Production of salmon, another sushi favourite, has also been hit by sea lice and toxic algae. Prices have fallen to about NKr52.70 a kg, down from record highs of about NKr80 earlier this year, but the price volatility is hitting profits.
The Sushiro-Genki Sushi deal will offer the merged company the ability to procure good quality ingredients such as tuna at lower prices, said Mr Morio.
But Ryozo Minagawa, analyst at Nomura, warns that being big has its downside. “There are demerits of being a big buyer,” he said, noting that a large purchaser can push the price up for itself. “Conveyor-belt sushi chains have to offer a large repertoire, and there are some species of fish and seafood whose price can easily be pushed up by one big buyer.”
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