Confectioner Company Scandal Rocks Japan

Japanese retailers were scrambling to pull candy and chocolate from scandal-tainted Fujiya off their store shelves Tuesday after the prestigious confectioner acknowledged using old milk and filling in its products.

Japan was stunned to learn late Monday about the sloppy safety standards at the cake-maker long known for its trademark girl mascot "Peko-chan."

But the smiling life-size dolls were nowhere to be seen at some 800 Fujiya franchise cake stores around the nation. Instead, their shutters were down, with signs posted apologizing for the embarrassing scandal.

Even the prime minister was alarmed.

"After all, this concerns a maker of candy that our children eat," Prime Minister Shinzo Abe told reporters. "The company must be accountable in taking food safety seriously."

The dubious practices surfaced in November last year during a plant visit by a company team whose mission was to turn around lagging cake profits, said Fujiya spokesman Fumio Shimada.

The team happened to see milk that was about to expire Nov. 7, the day the team visited the plant. When they returned the following day, the milk was gone.

When they asked what had happened to the milk, the team was told it had been used to make cream puffs, Shimada said.

They started asking questions and found out old ingredients had gone into products in the past, including apple pie and pudding.

Fujiya failed to go public with that finding until Jan. 10, after an internal memo about the investigation popped up in Japanese media reports - possibly the work of a whistle-blower, although that has not been confirmed, according to Shimada.

An internal investigation by Fujiya Co. found 18 cases over the last seven years in which its cream puffs and other products contained expired ingredients, including milk, cream, eggs, blueberry jam and apple filling.

Although cookies, candy and other Fujiya products carried at supermarkets and convenience stores were not affected by the safety problem at the cake stores, the major chains ordered the company's products off their shelves, starting Monday, to disassociate themselves from the tarnished manufacturer.

"The decision reflects our responsibility over the products that we offer," said Kaori Watanabe, spokeswoman of Aeon Co., which does 2 billion yen ($16.6 million) in business with Fujiya a year and runs 3,000 stores nationwide.

The products won't reappear until their safety can be properly ensured, she said Tuesday.

Seiyu, which is 53 percent owned by Wal-Mart Stores Inc., also ordered its nearly 400 stores nationwide to stop carrying Fujiya products.

Tokyo-based Fujiya records 27 billion yen ($224 million) in sales a year at the franchise cake stores. It also does 42 billion yen ($348 million) in business with nationwide supermarkets, convenience stores and other retailers, such as Seiyu.

President Rintaro Fujii announced Monday he will step down to take responsibility for the scandal. He has acknowledged the problem was systematic, including cover-up efforts. Fujiya said it detected bacteria levels exceeding legal limits in products at another plant.

Japanese media coverage was dominated by the Fujiya news.

"A blow to Peko-chan," said a headline in Tuesday's editions of the Mainichi newspaper. "Sloppy monitoring was systematic," the top business daily Nihon Keizai Shimbun said.

The chief government spokesman promised authorites will work with Fujiya to make sure it follows food safety laws, takes preventive measures and makes ethical decisions.

The news alarmed many Japan because the memory of a similar scandal at Snow Brand Milk Products Co., in 2000, is still fresh in people's minds. Snow Brand's use of old milk sickened more than 14,000 people, the country's worst outbreak of food-poisoning. There have been no reports of illness or food-poisoning related to the Fujiya troubles.

Fujiya shares, which tumbled by about 18 percent since reports first surfaced last week, rose 3.7 percent to 199 yen ($1.70) Tuesday.

About 100 restaurants operated by Fujiya remain open, and the company is hoping to reopen its cake stores by February, Shimada said. The company has promised to check safety standards at its plants and strengthen quality controls.

"What we have done is terrible," Shimada said.
By Yuri Kageyama