Eating-Out Market Slightly Recovers... Food Ingredient Costs Hit Record Highs

A dense area of restaurants in Myeongdong, Seoul. Photo by Yonhap News Agency

[Asia Economy Reporter Moon Hyewon] The dining-out industry’s performance in the fourth quarter of last year showed some improvement due to the government’s phased daily recovery policy. However, with the spread of the COVID-19 Omicron variant and the increase in critically ill patients since last month, it is expected that the recovery trend will not be sustained easily.

According to the '2021 4th Quarter Dining Industry Business Outlook Index Report' published by the Korea Agro-Fisheries & Food Trade Corporation (aT) on the 18th, the dining industry business index for the fourth quarter of last year recorded 70.34.

This index rose from 66.01 in the first quarter of last year to 69.84 in the second quarter, then dropped to 65.72 in the third quarter before rebounding in the fourth quarter. The dining industry business index is calculated by surveying the sales and business sentiment status and outlook of the dining industry over the recent three months (current) and the next three months (future) compared to the same period of the previous year. A value above 100 indicates business improvement, while below 100 indicates the opposite.

By sector, compared to the third quarter of last year, the business index in the fourth quarter rose in most sectors, including Korean restaurants, Chinese restaurants, and pizza, hamburger, sandwich, and similar restaurants.

The research team stated, "Due to the government’s phased daily recovery policy implemented in October to November last year, restrictions on private gathering sizes and business hours were eased, resulting in a temporary recovery in the industry." They added, "Although the dining industry showed a gradual recovery trend in 2021, the spread of the Omicron variant and the increase in COVID-19 confirmed cases since December are expected to negatively impact future business recovery."

Separately from business recovery, the cost level of ingredients in the dining industry reached an all-time high. The dining industry ingredient cost index for the fourth quarter of last year recorded 141.40, rising for four consecutive quarters since the fourth quarter of 2020 (114.50). This index indicates the cost level of ingredients compared to the same period of the previous year, with values above 100 meaning costs have increased.

The research team analyzed, "Due to the prolonged rainy season last year, African Swine Fever (ASF), and labor shortages in rural areas caused by COVID-19, prices of items mainly used in the dining industry such as pork, eggs, and rice increased."