[Population Decline Hits Industry] "Crisis is Opportunity"... K-Food Craze Seeks 'Mouths' Beyond Borders

Rapid Growth in Overseas Sales of Snacks, Ice Cream, and Convenience Foods Over 10 Years
Swift Measures Taken Amid Domestic Market Saturation and Declining Consumer Base
Ramen Also Enters Second Golden Age Through Global Markets
"Additional Measures Needed Such as Strengthening Premium and B2B Sectors"

Nongshim's 'Meoktaekkang,' launched in June last year, surpassed cumulative sales of 20 million packs as of the end of March this year. After exceeding 10 million packs just five months after its release in late November last year, another 10 million packs were sold within four months. Similarly, Lotte Wellfood's 'Oing Nogari Chip Cheongyang Mayo Flavor,' which has a similar taste and ingredients, surpassed 10 million packs in cumulative sales within about four months of its launch in September last year, and has since sold nearly 5 million more packs in two months, accelerating its growth. Nongshim and Lotte Wellfood are currently running their production lines at full capacity to meet demand.

These products have pioneered a new market known as 'adult snacks,' contributing to increased company sales and sparking competitors to release similar snacks. While this is a welcome achievement for food companies, the underlying reality is not entirely rosy. Due to the low birthrate, the number of children?the main consumers of snacks?has decreased, leading to 'snacks for drinking' targeting adults with purchasing power emerging as an alternative. A confectionery industry insider said, "The perception that 'snacks are products for children' is increasingly showing its limitations in the domestic confectionery market."

Birthrate at Risk Even at 0.7... Snacks and Ice Cream Find Breakthroughs Overseas

According to Statistics Korea, the country's total fertility rate last year dropped to a record low of 0.72. The domestic population growth rate is expected to decline from an average annual rate of -0.26% between 2025 and 2035 to -0.44% by 2042. It is also projected that Korea's population, which peaked at 51.84 million in 2020, will shrink to 37.66 million by 2070.

With the domestic market already saturated and the population consuming food expected to decline, a sense of crisis has intensified across the food manufacturing and distribution industries. An industry insider noted, "Even if products are produced, the 'mouths (population)' are decreasing, and sales volumes are falling, placing manufacturers and sales channels in a cycle of simultaneous decline."

The food industry, where survival has become a key issue, is seeking new opportunities by developing products targeting adults instead of children and turning its attention to overseas markets with large populations and growth potential, achieving results.

On the 27th, Asia Economy analyzed the last 10 years of business reports from major manufacturers producing snacks, ice cream, frozen foods, and ramen. The results show that companies with overseas sales proportions increasing by an average of 2 to 3 times, up to nearly 10 times, of their total annual sales support this trend. Some manufacturers have even shown more remarkable overseas performance than domestic.

For example, Orion has maintained an overseas sales ratio of over 60% annually since 2018 after transitioning to a holding company structure in 2017. Orion has established local subsidiaries in four countries?China, Vietnam, Russia, and India?and operates 11 factories. Last year, these overseas subsidiaries generated sales of 1.8547 trillion KRW, accounting for 63.3% of the total sales of 2.9124 trillion KRW. This success is attributed to popular products like Choco Pie and fresh potato snacks.

Lotte Wellfood also operates eight overseas subsidiaries in seven countries, including India, Kazakhstan, Pakistan, Belgium, Russia, Singapore, and Myanmar, generating profits from a diverse product lineup including Choco Pie, Pepero, candy, biscuits, chocolate, and ice cream. Its overseas confectionery sales increased by about 30%, from 570.3 billion KRW in 2014 to 800.5 billion KRW last year.

After Lotte Confectionery merged with Lotte Food in 2022, the overall overseas sales ratio of Lotte Wellfood dropped from the 20% range to the high teens due to the sluggish food business previously handled by Lotte Food. However, confectionery sales alone saw overseas sales rise to 31% of the total last year. The company aims to improve performance through overseas subsidiaries and increase the overseas sales ratio to 30-50% by 2027. It plans to focus on targeting India, the world's most populous country. In January, it selected India as the first overseas production base for Pepero and invested 2.1 billion rupees (about 33 billion KRW) in new facilities at the Haryana plant of its local subsidiary, 'Lotte India.'

Additionally, CJ CheilJedang, the top domestic food company, saw its overseas food business sales centered on its flagship brand 'Bibigo' increase about eightfold from 674.8 billion KRW in 2018 to 5.3861 trillion KRW last year. The overseas sales ratio also grew from 12.8% to 47.8%, earning nearly half of its total revenue from overseas. Binggrae's exports, including refrigerated and frozen products, tripled from 46 billion KRW in 2014 to 125.3 billion KRW last year, raising its overseas sales ratio from 5.6% to 10.5% over ten years.

'K-Food Vanguard' Ramen Also Bets on Global Expansion

The ramen industry is also losing its main consumer base of people in their teens and twenties due to population decline. According to the Korea Agro-Fisheries & Food Trade Corporation (aT) Food Industry Statistics, total ramen sales at domestic retail stores last year amounted to 2.1623 trillion KRW, down 7.3% from the previous year. Despite major manufacturers raising ramen prices in the second half of 2022 due to increased raw material costs such as flour, sales declined. As ramen is known as a 'recession-proof' product, the decrease in consumer population likely had a greater impact on domestic sales than the economic downturn.

The ramen industry has actively pursued overseas market expansion to secure new consumer bases. Particularly, ramen has led the popularity of K-food driven by the K-content wave, successfully capturing overseas consumers in a short period. The increased demand for convenience foods during the COVID-19 pandemic and the global economic downturn were also major factors boosting K-ramen's popularity.

As a result, Samyang Foods dramatically increased its overseas sales ratio from 7% in 2014 to 68% last year, led by 'Buldak Bokkeum Myun' (Hot Chicken Flavor Ramen). Exports grew nearly 40 times from 22.3 billion KRW to 809.3 billion KRW during this period. With Buldak Bokkeum Myun becoming synonymous with spicy ramen, Samyang Foods transformed from struggling with sales around 200 billion KRW to a representative export company. Nongshim, known for Shin Ramyun and the 'Jjapaguri' (a mix of Chapagetti and Neoguri) featured in the movie 'Parasite,' also rapidly expanded its overseas sales ratio from 19% (377.8 billion KRW) in 2014 to 37% (1.2515 trillion KRW) last year.

They plan to prioritize expanding their overseas market share going forward. Kim Jung-su, Vice Chairman of Samyang Foods, set a goal this year to enter the top 100 global food companies. Lee Byung-hak, CEO of Nongshim, expressed ambitions to become the number one in the U.S. market by 2030. Ottogi, considered one of the top three domestic ramen companies alongside Nongshim and Samyang Foods, still has an overseas sales ratio below 10%, but is actively targeting overseas market expansion this year. Ottogi Chairman Ham Young-jun stated in his New Year's address, "Let's advance to become a global Ottogi that is 'a more advanced company with more advanced food.'" To this end, Ottogi recruited Kim Kyung-ho, former Vice President of LG Electronics BS Europe Business, who is Chairman Ham's in-law, as the head of its Global Business Division (Vice President).

Experts positively evaluate domestic food manufacturers' swift overseas market development and growth momentum in response to the inevitable population decline but emphasize the need for follow-up measures considering internal and external variables. Professor Lee Young-ae of Incheon University's Department of Consumer Studies said, "Korean foods introduced through K-content have stimulated overseas consumers' curiosity and gained popularity due to competitiveness in price and quality," but added, "The product lineup from various manufacturers is so competitive that it is difficult to distinguish superiority, and due to the nature of B2C (business-to-consumer) products that require low-margin, high-volume sales, profitability limits may soon be faced overseas as well."

She continued, "It is necessary to strengthen premium strategies that differentiate taste and ingredients or develop alternative foods, and diversify unique products through collaboration with verified restaurants or products," adding, "It is also worth referring to recent cases of food companies strengthening B2B (business-to-business) businesses such as food ingredient distribution or entering different industries like biotechnology."