Domestic Soy Sauce Market

1254th Commissioners’ Meeting (2015)

Case:

FTC initiated an ex officio investigation into the competition and current condition of the domestic soy sauce market

Keyword(s):

soy sauce made with genetically modified soybeans, industrial survey

Reference:

Fair Trade Commission Decision of November 18, 2015 (the 1254th Commissioners’ Meeting)

Industry:

Manufacture of Seasoning (0896)

Relevant Law(s):

Articles 14 and 15 of the Fair Trade Law

Summary:

1. The public has learned to value food safety increasingly. After the Ministry of Health and Welfare enforced a new system of labeling of food products using genetically modified ingredients since December 31, 2015, major soy sauce producers in the country made plans to switch to non-genetically modified soybeans for soy sauce material gradually to meet consumers’ demand. At the same time, the FTC also received complaints from private citizens about different brands soy sauce running out of stock in stores and therefore initiated an ex officio investigation to look into competition in the soy sauce market to see whether the price adjustments made by soy sauce producers involved concerted practices.

2. Findings of the FTC after investigation:

   (1)	Questionnaires mailed to major soy sauce producers to conduct an industrial survey: There were over 200 soy sauce producers all over the island and the market share for the four top businesses together accounted for 60% of the market. All the products of the leading producer were made with genetically modified soybeans and it had no plan to change its material for soy sauce in the near future. The second large soy sauce producer only produce a small amount of soy sauce made with non-genetically modified soybeans. The third large producer planned to adopt non-genetically modified soybeans to make all of its products but would raise the prices to reflect cost increase. The fourth large producer was still in the stage of trial fermentation and assessment of soy sauce made with non-genetically modified soybeans. The remaining businesses accounted for less than 1% of the market share accordingly and targeted different customer groups from that of the four top businesses. Some of them either used non-genetically modified soybeans completely or adopted black beans, more expensive than non-genetically modified soybeans, to make soy sauce. The results of the survey indicated that a complete shift to the use of non-genetically modified soybeans in soy sauce production would increase the soybean cost by 28% to 40% and the production cost would go up 7% to 10%.
   (2)	Interviews with distributors and retailers: Soy sauce could be divided into business soy sauce and household soy sauce and manufacturers made market segregation accordingly. General consumers purchased household soy sauce (less than 2 liters each bottle). Soy sauce manufacturers usually signed supply contracts with hypermarkets and household soy sauce was given priority in their production scheduling. The main clientele of business soy sauce (5 to 6 liters per jug) includes restaurants, small eateries, shops in the food courts of department stores, and so on. Manufacturers signed contracts with distributors for them to make deliveries in their distribution areas. Each box of soy sauce weighed 20 to 25 kilograms. Therefore, labor was required to move the boxes and it is usually difficult to find workers to do it. Some distributors sold different brands of soy sauce and none of the distribution areas demarcated by each soy sauce maker was under exclusive agency. The fierceness of inter-brand competition was obvious. Soy sauce makers provide distributors with suggested prices for their soy sauce products but never interfered with their actually selling prices. If there were several distributors in the same area, consumers would make price inquiries and market information was transparent. The FTC visited 14 retail stores in the areas where private citizens complained about certain brands of soy sauce being out of stock but there was no household soy sauce being out of stock.
   (3)	So far, only one soy sauce maker has made price adjustments after using non-genetically modified soybeans. The other businesses have no plan to adjust their product prices. Furthermore, an examination of the purchasing and selling records of soy sauce producers and their distributors since 2015 indicates that the supply of soy sauce has been steady and the amounts distributors purchase and sell are consistent. Therefore, there is no evidence showing that soy sauce producers or their distributors have violated the Fair Trade Law.