Food Inflation... Price Increases So Far Are Just a Preview

Food and Beverage Price Increase Relay Continues
Now Extends to the Bakery Industry
Pouched Mackerel and Saury Cans Jump 42%
Restaurant Industry Also Raises Prices One After Another

[Asia Economy Reporter Seungjin Lee] #Housewife Kwon Jinyoung (38, pseudonym) was recently surprised while grocery shopping. She put some side dishes, beverages, and instant rice in her cart as usual at the mart, but the receipt showed an extra 10,000 won. Kwon said, "A month ago, my grocery bill was around 80,000 won, but suddenly it jumped over 90,000 won, which shocked me," adding, "I often buy bread as snacks for the kids, but bread prices have also risen, so I think I need to cut back on expenses significantly going forward," sighing deeply.

Since the beginning of the new year, prices of agricultural, livestock, and marine products have surged sharply, and now prices of grains and processed foods are also fluctuating. Price increases have started from basic side dishes like tofu and bean sprouts, extended to the bakery industry, and continued to instant rice, milk, and imported meat, threatening grocery basket prices.

Nothing Has Not Increased

According to the food industry on the 19th, Paris Baguette will raise consumer prices for 95 items, accounting for 14.4% of its 660 products, by an average of 5.6% starting today. CJ Foodville’s Tous Les Jours raised prices of about 90 products by an average of approximately 9% before the Lunar New Year holiday, citing rising raw material costs.

CJ CheilJedang will increase the price of Hetbahn instant rice by about 100 won (6-7%) from the end of this month. This is the first price hike for Hetbahn since February 2019, two years ago. Ottogi raised the price of Ottogi rice by about 7% at the beginning of the year, and Dongwon F&B’s Sen Cook also raised prices by 11%, causing the instant rice market to rise sharply.

Pulmuone raised prices of tofu and bean sprouts by 10-14%. Sempio Foods raised prices of 12 canned side dish products by an average of 35% on the 5th of last month, and on the 18th of the same month, increased prices of four canned mackerel and saury products by an average of 42%.

The ripple effect of processed food price hikes is spreading to the dining-out industry. McDonald’s announced that from the 25th, it will raise prices of 30 items, including 11 types of burgers, by 2.8%. This decision was made because major raw material prices surged 20-30%, and labor costs increased due to the minimum wage hike, making it difficult to delay price increases. Earlier, Lotteria also raised prices of 25 products, including burgers and desserts, by about 1.5%.

The chicken industry is also considering price hikes due to the prolonged impact of avian influenza (AI). Currently, supply of chicken parts is disrupted, making some menu items unavailable. The chicken industry stated that if the current situation prolongs, they may consider raising chicken prices.

Price Increases Are Just the Beginning

The distribution industry forecasts that price hikes in processed foods and dining-out sectors have only just begun. With international grain prices soaring, prices of snacks and ramen, which have not yet increased, as well as imported meat due to rising feed costs, are expected to surge.

According to the Korea Rural Economic Institute’s Overseas Grain Market Information, soybean prices traded on the Chicago Board of Trade (CBOT) on the 17th were $508 per ton, up 55% from a year ago. Wheat rose 13% to $237 per ton, and corn increased 44% to $218 per ton. Feed prices, which mainly use soybeans and corn, are also soaring, so prices of beef and pork are expected to rise sharply soon.

In August, due to demands from the dairy industry, raw milk prices are expected to rise from 1,034 won to 1,055 won per liter, an increase of 21 won (about 2.3%). Due to the impact of COVID-19, consumption of dairy products has decreased as school meals and other services were suspended, making price hikes inevitable for dairy producers. A dairy industry official explained, "When raw milk prices rise, prices usually increase within 1-2 months, so price hikes are expected as early as September."