Domestic Coffee Bean Distribution Prices Fall... 'Coffee Prices Stay the Same?'

A franchise coffee shop in Seoul / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Sejong=Reporter Son Seon-hee] As part of the government's price stabilization measures, the value-added tax exemption and the application of a 0% tariff quota on coffee green beans have led to a decline in the prices of green beans distributed domestically since June. However, the price of coffee sold in the market has rather increased, indicating a gap in the effect being felt by consumers.

According to the Ministry of Agriculture, Food and Rural Affairs on the 8th, the domestic import price of green beans continuously rose from January (5,785 KRW per 1kg) and peaked in May (7,284 KRW), then declined consecutively in June (7,249 KRW) and July (7,221 KRW). This is interpreted as the effect of the government's exemption of value-added tax on coffee green bean imports starting June 28 and the application of tariff quotas on all coffee bean imports from July 20. The government explained that the effect of the tariff quota will become more pronounced from this month, further expanding the price decline.

The Ministry of Agriculture, Food and Rural Affairs stated, "Five major green bean import and distribution companies supplying green beans to coffee specialty stores (supplying about 60% of green bean distribution volume) began expanding the items and extent of price reductions from August 1," adding, "We plan to further increase the applicable items and reduction extent as existing inventory is depleted."

Despite the government's efforts to induce a decrease in coffee bean prices, the actual coffee prices that consumers can feel are still on the rise. According to the Consumer Price Index published monthly by Statistics Korea, the coffee (dining out) price index in July was 105.14 (2020=100), continuing the upward trend since last year. In other words, although the cost has decreased, it has not been properly reflected in consumer prices.

Kwon Jae-han, Director of the Food Industry Policy Office at the Ministry of Agriculture, Food and Rural Affairs, urged, "We request active cooperation from the coffee industry so that the benefits from the value-added tax exemption and tariff quota measures, through the expansion of green bean supply price reduction items and reduction extent, can also be passed on to consumers."