Namyang Baekmidang Raises Prices Up to 500 Won on 34 Menu Items
Coffeebean, Paul Bassett, Ediya, etc. "No Plans to Raise Prices"
Price Increase Factors Accumulate... Industry Closely Watching
Low-Cost Brands and Small Self-Employed Businesses Hit Hard
Due to the increase in milk prices, coffee specialty stores selling lattes, shakes, ice cream, and more are facing pressure to raise their prices.
Milk is displayed on the dairy shelf at a large supermarket in Seoul. Photo by Jinhyung Kang aymsdream@
According to the food and beverage and franchise industry on the 4th, Namyang Dairy’s Baekmidang raised the selling prices of 34 menu items, including coffee and ice cream, by 200 to 500 won starting from the 26th of last month. This price increase comes about a year after the last one in September of last year.
Baekmidang announced on its website, “We have been using good ingredients such as organic milk, organic coffee beans, and seasonal domestic ingredients while refraining from raising prices as much as possible,” adding, “However, due to the continuous price pressures from recent increases in raw milk prices, labor costs, and logistics costs, we have been forced to raise prices.”
This price increase is interpreted as a result of the adjustment in raw milk prices this year. Previously, the Dairy Promotion Board decided to raise the raw milk price for white milk by 88 won per liter to 1,084 won, and processed milk by 87 won per liter to 887 won. Accordingly, Seoul Milk Cooperative raised the wholesale price of its white milk product, Na 100% Milk (1ℓ), by 3% at major discount stores starting this month, while Namyang Dairy and Maeil Dairies raised their white milk product prices by 4.6% and 4-6%, respectively. Dongwon F&B also increased dairy product prices by an average of 5%.
For now, major coffee specialty franchise brands such as Coffee Bean, Angel-in-us, Ediya, Twosome Place, SPC Group (Shake Shack, Dunkin’, etc.), Paul Bassett, and Tom N Toms have drawn a line by stating that they “have no plans to raise prices yet.”
However, due to the nature of the industry that uses a large amount of milk in products like lattes, shakes, and shaved ice, they cannot help but be sensitive to milk prices.
Last year’s milk price increase led to price hikes in coffee franchises and ice cream wholesale prices. Coffee Bean Korea raised the prices of milk-containing beverages by 200 won each in January this year, and Twosome Place also raised the prices of 21 items among 54 coffee and beverage products in the same month due to increases in coffee bean and milk prices.
Because of this, there are concerns that the ripple effects of this milk price increase may gradually prompt additional price hikes at coffee specialty stores after a time lag of several months.
The impact on small independent business owners is relatively much greater. Unlike franchise companies that purchase in bulk through B2B contracts with milk suppliers and thus are not immediately affected by retail milk price increases, individual caf? owners are more vulnerable to price hikes because they receive small quantities through milk manufacturer dealerships or buy directly from supermarkets.
Mr. A, who runs a private caf? in Jung-gu, Seoul, said, “Our caf? is known as a ‘latte specialty shop,’ and we have been spending over 1 million won a month just on milk, but the burden has already increased since milk prices rose this month. Even if we try to stock up on cheaper products in advance, the suppliers say their stock is already sold out. Moreover, if we switch to cheaper milk, the taste changes, and customers quickly notice, which could cause us to lose regulars and get bad word of mouth.” He added, “For now, we ended coupon promotions last month to try to endure, and next month, we plan to raise latte prices by about 200 to 300 won.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
