Producers and distributors want consumers to pay more, but retailers refuse to cooperate.

Retailers are resisting moves by beer producers and distributors to raise prices.

The ferment began in January, when four major domestic beer brewers stopped giving rebates to wholesalers.

The rebates, awarded according to sales volume, have been used to compensate wholesalers for lowering their prices in the aggressive sales campaigns of recent years.

Wholesalers responded to the withdrawal of subsidies by trying to raise their prices-a move that has run into strong opposition from major supermarket operators.

Large retailers say consumers won't pay more for beer at a time when brewers are posting record profits.

The revolt is now picking up a head of steam as other retailers are set to defy wholesalers.

The fracas in the beverage industry has underscored how deflation and price-cutting have shaken up the country's once rigid distribution system.

Under the price-inflating scenario concocted by producers and distributors, the retail prices of regular beer and happoshu low-malt beer were supposed to rise in January by 200 yen to 300 yen for a carton of two dozen 350cc cans.

But large retailers have refused to play ball.

Aeon Co., operator of the Jusco supermarket chain, rejected wholesaler requests point blank and left its prices unchanged.

Ito-Yokado Co. followed suit by shelving a price hike.

This defiance has emboldened smaller retailers and liquor shops that have already complied with wholesaler requests.

``We will call on our wholesalers to lower prices to previous levels,'' says one shop owner.

Now, a war of words has broken out between brewers and retailers. Brewers claim they are acting in the interests of wholesalers, who have been struggling to cope with intensifying competition.

The entry of mass discount outlets and deregulation in the liquor retail business since the 1990s have hurt the profit margins of wholesalers.

Over the past decade, the number of wholesalers has nearly halved to about 900.

The rebates, which were originally introduced to expand sales, were seen as a liability, used by retailers to demand lower prices from their suppliers.

Beer producers decided that the subsidies had to go even at the risk of losing customers.

They expect higher prices will trim demand by 3 to 4 percent this year, but are still determined to get their way.

An official at a large wholesaler said he wanted major supermarket operators to compromise and approve a price hike from the start of their new business year in March.

Retailers don't appear to be listening.

Aeon President Motoya Okada said his company can't justify price rises to customers on the grounds that wholesalers are in trouble, not when consumption is sluggish, at any rate.

Hiroshi Kawashima, chairman of the Japan Chain Stores Association and president of Tokyu Store Corp., said beer drinkers will not take kindly to shelling out more for a tipple when brewers are making money hand over fist.

The rise in prices has already affected sales.

Combined sales of regular beer and happoshu products at five domestic brewers plunged by 18.9 percent in January from a year earlier, although this is partly due to shoppers stocking up the month before.

The Fair Trade Commission, while supporting the scrapping of subsidies to wholesalers, is skeptical on the rationale for price hikes.

``It's hard to understand why abolishing rebates should entail a hike in prices,'' said Akinori Uesugi, the FTC secretary-general. ``The supply-demand balance has not changed, and costs have not increased.''(IHT/Asahi: February 24,2005)