From Pepero to Seasoned Gim, Everything Goes Up... Prices Increase Starting Today

Price Increase for Lotte Chocolate Products and Dongwon Yangban Gim
"Unavoidable Due to Rising Raw Material Costs"
Criticism That Food Companies with Strong Performance Are Riding Price Hikes

Despite the government's efforts to stabilize prices, on the 1st, prices rose across the board from Pepero to Gim. As the burden of raw material costs such as cocoa and seaweed increased, food companies launched a wave of price hikes. However, some argue that the successive price increases by food companies that recorded strong first-quarter earnings are a strategy to 'raise prices when others do.'

According to the distribution industry on the 1st, Lotte Wellfood, Dongwon F&B, Lotte Chilsung Beverage, and Paldo implemented price increases on major products that day.

First, Lotte Wellfood raised the prices of 17 products, including Ghana chocolate, by an average of 12%. As a result, the price of ABC chocolate increased from 4,780 won to 5,280 won, Ghana chocolate from 1,200 won to 1,400 won, and Pepero from 1,700 won to 1,800 won.

Dongwon F&B's Yangban Gim also saw an average price increase of 15% across all products. Accordingly, the major item ‘Yangban Perilla Oil Gim (20 packs for table use)’ rose from 9,480 won to 10,980 won, and ‘Yangban Sesame Oil Gim (9 packs for table use)’ increased from 4,780 won to 5,480 won. The increased prices apply across all channels, including large supermarkets, convenience stores, and online.

Lotte Chilsung Beverage raised the ex-factory prices of six beverage items, including Chilsung Cider, Pepsi Cola, Gatorade, Hot6, and Del Monte Juice, by an average of 6.9%. Based on convenience store prices, Chilsung Cider (250ml) increased by 100 won to 1,700 won. Pepsi Cola also rose by 100 won to 1,600 won.

Paldo raised the prices of eight popular children's beverages, Pororo drinks, by 6.6%. Accordingly, the price increased by 100 won from 1,500 won to 1,600 won.

All food companies cite rising raw material costs, labor costs, and logistics expenses as the reasons for the price increases. Lotte Wellfood stated that the international price of cocoa, a raw material for chocolate, surged, making it difficult to delay the price hike any longer. Currently, cocoa futures prices had maintained a stable range of $2,000 to $3,000 per ton for over ten years, but due to poor harvests in the main production area of West Africa, prices began rising last year and skyrocketed like a roller coaster from early this year, reaching an all-time high.

Dongwon F&B also explained that the price increase was due to the rising cost of raw seaweed. In fact, the average price of dried seaweed last month exceeded 10,000 won per pack (100 sheets), an 80% surge compared to a year ago. A Dongwon F&B official said, "The price of raw seaweed has nearly doubled compared to the previous year," adding, "This is because global harvests have been poor, reducing supply, while global demand for Gim has increased due to the popularity of K-food."

However, some argue that since the food industry posted strong first-quarter results, the price hikes may be an attempt to profit by riding the recent wave of high inflation rather than solely due to raw material cost burdens.

The Korea Consumer Organization recently released data stating, "Although sugar and cocoa prices have risen significantly recently, major food companies such as Lotte Wellfood showed increased operating profits in the first quarter and a decreased cost of sales ratio," urging, "Instead of raising prices, companies should promptly reduce product prices."

The cost of sales ratio refers to the proportion of cost of goods sold to sales revenue. It includes raw material costs, labor costs, and manufacturing expenses. It is a representative profitability indicator for companies, with a lower ratio indicating better profitability.

An industry insider said, "While it is true that the burden of raw materials has increased, the timing of price hikes varies by company. However, even if it is the same punishment, it hurts less if you get hit when others do, so there is a tendency to coordinate the timing with other companies."