Government Pressure... Food and Beverage Industry 'Flustered'
HiteJinro "No Soju Price Increase"
Pulmuone Also Withdraws Bottled Water Price Hike
As the government launches an investigation into the liquor industry and directly intervenes to curb price hikes, a sense of crisis is growing across the entire food and beverage sector, including the liquor industry. With the government interpreted as taking full-scale action in response to the ongoing trend of food and beverage price increases since last year, competition among companies to gauge each other's moves is expected to intensify.
According to the industry on the 27th, HiteJinro, the number one soju company, officially announced that it will not raise soju prices. In a statement on the 27th, HiteJinro said, "We plan not to increase soju prices for the time being," adding, "Although it is true that there are factors driving price increases, this decision was made to ease the burden on consumers and small business owners amid the current difficult economic situation."
Earlier, the government announced that it would launch a comprehensive investigation into the liquor industry, including factors behind price increases and profit margins, after detecting movements to raise liquor prices again this year following last year. While externally framed as an investigation, the industry perceives it as a form of discipline enforcement. Under these circumstances, raising the ex-factory price is practically difficult. Lotte Chilsung Beverage also drew a line by stating it is not considering raising soju prices. Regarding beer, although a price increase has become a foregone conclusion following the upcoming liquor tax hike in April, OB Beer, the industry leader, firmly stated that it has no plans to raise product prices for the time being.
Since last year, the government has consistently requested companies to refrain from raising prices. It has held monthly meetings with food and dining industry officials to discuss measures for price stabilization. In addition, direct pressure like this has recently continued. As a result of this measure, companies that planned or were about to implement price hikes are expected to enter a phase of cautious observation.
In fact, Pulmuone's affiliate Pulmuone Samul completely withdrew its plan to raise bottled water prices starting next month(Refer to Asia Economy’s February 22 article '[Exclusive] Pulmuone Samul Also Raises Prices... Bottled Water Follows Processed Foods in Domino Effect'). Pulmuone sent an official letter to distributors canceling the price increase plan. Pulmuone explained that this decision was made after internal discussions considering the increased burden on consumers amid the ongoing high inflation. However, some interpret this as a preemptive move prompted by the government's continued pressure to halt price hikes. It is unusual to announce a price increase and then withdraw it.
On the other hand, there are many concerns. Such silent pressure could be seen as the government directly intervening in the market. This is also interpreted as contradicting the government's policy emphasizing free market competition, drawing strong criticism.
An industry insider said, "We fully understand the difficulties caused by rising prices, but government intervention in pricing policies could lead to further market distortions," adding, "Price increases are largely due to external factors such as rising raw material costs, and these should not be unconditionally passed on to companies."
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