"Operating Profit Increased but Chicken Prices Rising Again?…Consumer Group Points Out Insufficient Grounds for Hike"

Chairman Yoon Hong-geun "It Should Be Around 30,000 Won" Continues
BBQ Chicken Price and Raw Material Supply Cost Increase
Association "Isn't This Just to Increase Franchise Headquarters' Profit?"

Fried chicken. The photo is unrelated to specific expressions in the article.

[Asia Economy Reporter Kim Jeong-wan] Following the statement by Yoon Hong-geun, chairman of the famous franchise chicken brand BBQ, in March that "(the price of chicken) should be around 30,000 won," chicken franchise companies have been raising their chicken prices one after another. However, consumer groups have raised concerns that the justifications presented by these companies for the price hikes are insufficient.

On the 18th, the Price Monitoring Center of the Korea Consumer Organization Council analyzed the financial statements and chicken prices of the top five domestic chicken franchise brands. The results showed that over the past five years, from 2018 to last year, the average sales per square meter of franchise stores of the top five brands generally increased.

The headquarters' sales and operating profits also increased over the five years. In terms of sales, all five franchise headquarters, including Goobne Chicken with an 8.8% increase, saw more than a 10% rise. The average annual operating profit increased by more than 12% for all five companies, including BBQ with a 33.8% increase.

The council stated, "The average operating profit margin of chicken franchise headquarters over the past five years is about 5.7 times higher than the average for wholesale and retail industries in 2020," adding, "The analysis shows that sales and operating profit margins have been on the rise, indicating a stable profit structure that does not necessitate price increases."

The council also reported that the average annual market price of chicken, based on size 9 to 10, fell from 3,297 won in 2015 to 2,865 won in 2020, then rose to 3,343 won last year. They added, "It is difficult to understand the franchise headquarters' claim of price increases using chicken prices as an excuse, given that they receive stable chicken supplies on a 6-month to 1-year basis."

Earlier, on March 24, Chairman Yoon said on YTN Radio's "Wise Radio Life," "When eating pork belly, 150g costs about 15,000 won, so eating about 1kg costs around 100,000 to 105,000 won. A serving is only 150g, but chicken is 1kg," and added, "In short, I think the price should be about 30,000 won, not 20,000 won now." He implied that considering the price of chicken prepared for consumption, the cost of imported frying oil, logistics costs, and the price of auxiliary materials, selling at 20,000 won leaves no profit.

As a result, BBQ raised the price of all chicken menu items by 2,000 won starting from the 2nd of this month and significantly increased the supply prices of raw and auxiliary materials. Major adjusted items include fresh meat, olive oil, chicken radish, and carbonara sauce. The price of fresh meat rose from an average of 5,404 won to 5,692 won per chicken, olive oil increased by 40,000 won from 120,000 won to 160,000 won per 15kg container, chicken radish rose from 17,000 won to 19,000 won per box (50 pieces), and carbonara sauce increased from 16,400 won to 17,800 won.

The council expressed skepticism, stating, "Although chicken franchise headquarters claim that price increases are for coexistence with franchise stores, considering the price hikes of products supplied to franchise stores, there is suspicion that the price increases are for the sole benefit of the headquarters." They urged the disclosure of raw and auxiliary material prices supplied to franchise stores.