South Korea Country Profile

Market Overview:

Euromonitor reports that the South Korean (hereinafter referred to as “Korea”) economy is growing at a moderate pace. Increasing public spending, along with the possibility of reduced geo-political tensions on the Korean peninsula, should improve prospects. Moderate gains in private consumption and exports are other drivers. The present administration is pursuing a demand-driven strategy complemented by increased government spending and redistributive policies. Annual rates of growth in real Gross Domestic Product (GDP) are expected to gradually fall to around 2.2% by 2025.

  • GDP rose by 2.6% in 2018, after gains of 3.1% in 2017.
  • Private final consumption (in real terms) rose by 2.6% in 2017 and growth of 2.9% is expected in 2018.
  • A scheduled increase in the minimum wage will support consumer spending.
  • Korea's household debt - which presently exceeds 160% of household income, is a drag on the economy.
  • The jobless rate was 3.7% in 2017 and it will rise to 3.8% in 2018 - However, the low number of unemployed is deceiving since Korea's birth rate and its female workforce participation rate are also among the lowest in the world

Inflows of foreign direct investment (FDI) have been gradually trending downward. One reason is that China, Taiwan and Japan have been all able to attract funds previously destined for Korea. Another is that the government has made little headway in its attempts to deregulate markets. 

South Korea's population is rising slowly and amounted to 51.4 million in 2018 (CIA World Factbook Est). The country will add only about 1 million more inhabitants between 2017 and 2030. Perhaps the most important population shift which is occurring is a large increase in the number of those over 65 years. In 2017, this group made up 14% of the total and it will account for 24.3% by 2030. Long-run projections by the United Nations (UN) suggest that South Korea could have one of the oldest populations of any country in the world by 2050. The fiscal impact of ageing will be great, given the rapid pace of demographic change. 

Korea has joined 16 free trade agreements since 2003 and expects negotiations with Vietnam to be concluded soon. In March 2018, Seoul and Washington agreed to revise their free trade agreement - The agreement will improve US access to Korea's automobile market and require Korea to curb its steel exports to the U.S. in return for an exemption from higher US steel tariffs. The pact must still be formally approved by both countries

The U.S. remained the leading exporter of food and agricultural products to Korea with 25.5% market share. Despite escalated competition from export-oriented competitors, consumer-oriented American products continued to lead the expansion of the export market in Korea, which reflected Korean consumers’ increased demand for better value, quality and diversity. The Korea-United States Free Trade Agreement, (KORUS) implemented in 2012, coupled with on-going evolvement of the Korean food market, should generate greater export opportunities for American products in Korea in the coming years.

Imports of American consumer oriented food products into Korea in 2018 are in a tremendous growth mode. They totaled over US$4.5 billion, an increase of 20% from the previous year at the same time and the highest total on record. Korea now ranked 4th as an overall destination for these products. Korea is also a top market for U.S. processed food exports, which totaled over US$2.6 billion in 2018 and grew 6% over the same period in the previous year. Korea is also the 4th largest market for U.S. processed foo

Top U.S. exports of processed foods in 2018 included:

  • Food Preparations
  • Prepared/Preserved Seafood
  • Processed/Prepared Dairy Products
  • Fats and Oils
  • Non-Alcoholic Beverages
  • Processed/Prepared Vegetables and Pulses
  • Prepared/Preserved Meats
  • Chocolate and Confectionery
  • Snack Foods 

Food consumption trends in Korea, which reflect on-going socio-economic shifts among the general Korean public, include a rise of affluent consumer groups, retirement of baby boomers, more women in the labor market, downsizing of the family, well-traveled/educated young generations, urbanization, and adoption of information technologies. As a result, products and businesses that offer good value, high quality, health/nutritional benefits, new and diversified tastes, and convenience are showing strong growth in the market.

Advantages For U.S. Suppliers of Food Products in the Korean Market Include: 

  • Korea is a fast paced market where new ideas and trends are eagerly tried and accepted.
  • Local processing, retail, and food service industries continue to expand as consumers. generate more diversified and sophisticated demand for food as their income level continues to rise.
  • Korea depends heavily on imports to satisfy its food and agricultural needs.
  • Consumers maintain strong attention to new international food and consumption trends as they are further exposed to foreign food culture.
  • Korean consumers maintain elevated concerns the value, quality and safety of food that they consume.
  • Many consumers recognize the United States as a trusted origin of quality agricultural products.
  • Implementation of the KORUS FTA generates new opportunities for American suppliers by reducing tariff and non-tariff barriers.

Challenges for U.S. Suppliers of Food Products Include: 

  • Korean consumers are generally biased toward locally produced agricultural products.
  • Many consumers still maintain an idea that local products are superior in quality and safety over imported products.
  • The high cost of shipping, documentation, inspection and labeling erodes price competitiveness of imported products.
  • Recent economic challenge has heightened value concerns among the general Korean consumers.
  • American products face elevated competition in Korea from both old and new competitors who are deploying aggressive export promotions targeting Korea.
  • Imported products are subject to complicated labeling and food safety standards in Korea, which change frequently with limited lead time.

Retail Sector Highlights:

According to Euromonitor, retail sales in the packaged food market in Korea had been estimated to reach nearly US$27.3 billion in 2018. That represents an increase of 10.5% or US$2.6 billion since 2014. Korea is now the 6th largest packaged food market in the Asia Pacific region and is the 17th largest market in the world. By the year 2023, the retail sales in the packaged food market in Korea is expected to increase 11.4% to US$31.3 billion, or US$3.2 billion. High growth products in the forecast include: 

  • Soups
  • Ready meals
  • Processed meat and seafood
  • Breakfast cereals
  • Baked goods
  • Sweet spreads
  • Sauces, dressings and condiments
  • Confectionery
  • Processed fruit and vegetables
  • Savory Snacks 

Sales of all food products in the Korean retail industry totaled about US$76 billion as of 2016, which was 22.8% of overall retail industry sales. Grocery supermarkets were the leading food retail channel, followed by hypermarket discount stores, convenience stores, on-line retailers, and department stores. On-line retailers and convenience stores are likely to lead the growth of food sales in the industry in the coming years as Korean consumers pay more emphasis to convenience and value. At the same time, fast expansion of on-line retailers will force conventional retail channels to restructure space and product strategies to attract consumer traffic.

Grocery supermarkets were the leading retail channel for food products in the sector with an estimated US$28 billion won of food sales in 2016, followed by hypermarkets 23.7 billion. However, in terms of growth, on-line retailers marked the highest, 84% percent growth of food sales between 2014 and 2016, followed by convenience stores (53.5%). Considering increased consumer demand for convenience and value, on-line retailers and convenience stores are likely to lead the growth of food sales in the Korean retail sector in the coming years. 

On the other hand, hypermarkets and department stores are likely to see stagnant food sales growth not only due to escalated competition from on-line retailers but also because of limited room to build new stores in the market. These conventional retail channels are starting to restructure space and product strategies to attract consumer traffic. Small-scale, family-oriented grocers and traditional street markets continue to see reduced food sales.

Euromonitor reports that since the supermarkets channel is maturing, channel players are trying to open different types of outlets to target more specified consumer segmentation. Lotte Super has opened Lotte Premium Food Market, which sells high-quality fresh food and imported premium brands of packaged food items in residential areas where mostly higher-income consumers, who generally have more concerns about and can pay more for higher-quality food, live. E-Mart Everyday opened a wine shop inside of its supermarket as a shop-in-shop type in a certain city with a high population of consumers aged 20-30, as they tend to drink wine more often compared to other age groups.

In addition, supermarkets under big retailers are opening hybrid types of outlets to provide all kinds of shopping from grocery to non-grocery at one time for consumers. Lotte Super opened Lotte Super with LOHB’s drugstore brand, as drugstores are amongst the fast-growing retailing channels in South Korea. GS Supermarket also opened outlets with its drugstore brand, named Lalavla.

Since the hypermarkets growth is slowing, hypermarket retailers are trying to open new types of outlets to attract different types of consumers. Homeplus launched a hybrid type of grocery store, named Homeplus Special; it offers a wide variety of products in sizes ranging from small portions for single-person households to bulk items for family consumers at a lower price. Lotte Mart also has opened a discount supermarket store, named Market D, within its hypermarket outlets as a shop-in-shop type to attract various types of customers.

After few years of rapid growth in terms of both number of outlets and retail value, convenience stores are trying to expand their food service business as the next driver. Convenience stores are expanding the size of outlets to have more dining tables where consumers can have the ready meals such as lunch boxes, sandwiches or some instant noodles, to meet the needs of consumers that would like to have quick but proper meal. This can make consumers stay longer at the stores, which encourages them to spend more.

Best Product Prospects:

The outlook for American food exports to the Korean retail sector is excellent for a wide diversity of products, including: 

  • Beef, Pork And Poultry
  • Seafood
  • Processed Vegetables
  • Fresh and Processed Fruits
  • Nuts
  • Dairy Products
  • Juices
  • Alcoholic Beverages
  • Condiments and Sauces
  • Processed Organic Foods
  • Bakery Goods
  • Snacks Confectionery

Food Service Sector Highlights:

Rapid evolvement of the Korean economy and urbanized consumer lifestyles generate bigger demand for quality, value, and diversity in the Korean Hotel, Restaurant, and Institutional (HRI) Food Service sector. The sector continues to grow as the nation’s socio-economic changes continue to spur consumers’ spending on dining out. When last reported (2016), sales for the sector totaled US$106.1 billion, up 10% from the previous year. Korean households’ monthly per capita spending on dining out has continued a solid growth for several consecutive years, reaching US$123 million in 2017. Per capita, Korean households spent 47.6 % of food and beverage (F&B) expenditures (or 13.3% of total consumption expenditures) on dining out.

Convenience is another key consumer trend as daily lifestyles of Koreans grows busier. Rapid increases of dual-income families and single member households have led to a growing demand for Home Meal Replacement (HMR) products in retail stores as well as take-out meals in restaurants. Delivery service is extremely well developed in Korea as people do not want to waste time in the heavy traffic. The speedy growth of on-line shopping, including home-delivery service by restaurants and bars, is also a result of increased demand for convenience. As these trends continue coupled with expanding HRI business, the sector will generate steadily growing demand for products of innovation, higher value, consistent quality and specifications customized for the industry.

Food-Processing Sector Highlights:

Korea relies heavily on imports to fulfill its food and agricultural needs. The Korean food processing sector is the major user of imported agricultural products for processing use including, wheat, soy, dairy, and value-added processed products. When last reported (2016) the Korean food processing industry generated US$67.8 billion of sales, up 6.4% from the previous year. The rise in single-person households and increase in women's participation in the workforce are influencing food purchasing patterns. Consumer trends include convenient and value-for-money food products as well as healthier and higher quality food options. The home meal replacement (HMR), private label, and café/bakery markets are expected to continue to grow and the processing sector to expand to meet domestic and emerging export market demands.

The Korean market reflects global food trends. The rise in single-person households and increase in women's participation in the workforce are influencing food purchasing patterns. Consumers want convenient and value-for-money food products that suit their lifestyle. Moreover, consumers continue to seek healthier and higher quality food options.

Despite challenges from competitors, the United States is expected to remain the leading supplier of food and agricultural products to Korea for years to come, not only for commodities and intermediate products but also for consumer oriented products. The United States accounted for 23.5% of total Korean imports of food and agricultural products in 2017.

Best Product Prospects: 

Products present in the market which have good sales potential in this sector include:

  • Fresh, Chilled and Frozen Beef And Pork
  • Edible Offals
  • Cheese and Curd
  • Tree Nuts
  • Wheat and Meslin
  • Soybeans and Soybean Oil
  • Chocolate
  • Food Preparations
  • Malt
  • Fruit Juices Including Concentrates
  • Extracts and Essences

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