Even 'Gatttugi' Can't Withstand Cost Increases... Prices of 10 Items Raised Up to 20%

Ottogi to Raise Prices on 125 Products from July 1
Average 10% Increase in Supply Prices for Commercial Items Like Sesame Oil
Ramen Price Hike Likely in Second Half of the Year

[Asia Economy Reporter Lim Hye-sun] Ottogi will raise the supply prices of 10 items including sauces, oils, and powders by up to 20% starting July 1. Previously, Ottogi increased the prices of Ottogi rice, cup rice, and canned products by 7-28%. Except for ramen, which had a planned price increase earlier this year but was withdrawn, most food ingredient prices have been adjusted upward.

Price Increase Due to Cost and Labor Burden

According to the industry on the 29th, Ottogi will raise the supply prices of 20 types of premixes by 4.0-10.6% starting next month. The price of pancake mix (500g) and frying powder (500g) will increase from 910 won to 1,000 won, a 9.9% rise. The price of donut mix (500g) will also increase from 1,460 won to 1,610 won, a 10.2% rise, and fresh noodle portions (200g) will go up from 330 won to 365 won, a 10.6% increase. Ottogi explained that the price increase is due to the rise in wheat prices, as well as increased labor and utility costs.

Due to the sharp rise in international perilla seed prices, the supply price of perilla oil is also being adjusted. The price of fragrant perilla oil (160ml) will increase from 3,700 won to 4,030 won, an 8.9% rise. The prices of three types of natto products, including fresh natto made from Jeju soybeans, will increase by 7.6%, and four types of syrups, including sweet cake syrup, will rise by 6.4-11.1%. The prices of 25 types of vinegars will also increase by 9.6-11.5% due to increased manufacturing costs from labor and utility cost hikes.

The price of apple vinegar (360ml) will be adjusted to 760 won. Due to the rise in palm oil prices, the prices of three types of margarine will increase by 9.7%. The prices of 22 types of dressings will be adjusted by 4.9-9.5%. The price of honey mustard sauce (265g) will rise from 1,460 won to 1,600 won. The prices of five types of Bapchingu (rice companions) will also change. The price of Bapchingu Bulgogi (36.3g) will increase from 1,330 won to 1,600 won, a 20.3% rise.

Average 10% Price Increase for Commercial Use Supply

Ottogi has raised the prices of 22 commercial-use items, excluding mayonnaise types, by 10.0%. The price of Gold Mayonnaise (1kg) is set at 3,630 won, and the price of O’Chef Job’s tears tea (1kg) will change from 2,960 won to 3,170 won. The prices of three types of commercial-use sesame oil will increase by 4.6-8.2%. The price of savory sesame oil (18ℓ) will rise from 231,000 won to 250,000 won. The prices of two types of high rice and two types of powdered black bean sauce will also increase by 7.4-8.6%.

The reason Ottogi is implementing these product price increases is due to rising raw material prices and labor costs. Last month, wheat and palm oil prices rose by 27% and 71%, respectively, compared to a year ago. These materials account for over 50% of Ottogi’s raw material purchase costs. Since international grain prices are reflected in company purchase prices with a 3-6 month lag, the burden of cost increases is expected to grow in the second half of the year. The 52-hour workweek system and steadily rising minimum wages are also burdensome.

With most food prices already increased, the remaining focus is on the representative affordable food, ‘ramen.’ Therefore, attention is focused on the timing of price increases for these products. Ramen is highly sensitive to consumer price changes. Ottogi decided to raise the price of Jin Ramen by 9% in February but withdrew the increase due to public opposition. However, due to the recent sharp rise in raw material prices causing product profit margins to drop rapidly, companies are weighing the timing of price increases. A food industry official said, "As ramen price increases have been delayed, the gross profit margin of ramen companies has fallen to 25%, and they will have no choice but to raise prices in the second half of the year."