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South Korea Food and Drink Report Q4 2011
Business Monitor International, Nov 2011, Pages: 84
Business Monitor International's South Korea Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Korea's food and drink industry.
BMI View: Strong retail sales growth and the Bank of Korea’s loosening monetary stance suggest a strong cause for optimism in the South Korean near-term consumer outlook. Retail sales growth for supermarkets and large discount stores has continued to climb higher in recent months, suggesting positive momentum in domestic consumer spending. Our expectations of moderating price pressures in the coming quarters, coupled with the central bank’s decision in September to keep its interest rates on hold for the third consecutive month, should prove demand supportive as well. However, it cannot be denied that the food and drink sectors in South Korea are fast approaching saturation. As a case in point, the domestic mass grocery retail market is increasingly consolidated, and legislative measures aimed at curbing large-scale store openings will only frustrate domestic retailers’ expansion plans. As such, domestic retailers are likely to take on a more aggressive approach to overseas expansion.
Headline Industry Data
- 2011 per capita food consumption = +4.4%; CAGR forecast to 2015 = +5.4%
- 2011 alcoholic drink value sales = +4.1%; CAGR forecast to 2015 = +5.0%
- 2011 soft drink value sales = +4.9%; CAGR forecast to 2015 = +5.4%
- 2011 mass grocery retail sales = +9.6%; CAGR forecast to 2015 = +8.6%
Key Industry Trends & Developments
Mass Grocery Retailers Face Hurdles In Pursuing Domestic Growth: Competition concerns about the crowding out of independent retailers attracted political attention, and South Korea’s parliament passed a bill in November 2010 that supermarkets could not open within 500m of traditional markets and familyrun stores, which was subsequently widened to 1km in July, without seeking approval from the local authorities and small business associations. Generally perceived as direct competitors to the traditional retail stores, larger-scale supermarket retailers are facing the greatest pressure amid these tighter retail regulations. After opening 164 large-scale supermarkets over 2009 and 2010, Lotte Shopping has opened only 10 large-scale supermarkets since the bill was introduced. Similarly, Samsung Tesco has set up only 20 large-scale supermarkets so far in 2011, representing a slowdown from its opening of 120 stores over the past two years.
Opening Up Its Agricultural Doors: Despite outbreaks of bovine spongiform encephalopathy in Canada over the last decade, South Korea has decided to reverse its ban on imports of Canadian beef, which was first introduced in 2003. The South Korean government will also temporarily withdraw import tariffs on continues to struggle with elevated food prices and recovers from a severe outbreak of foot-and-mouth virus among domestic livestock.
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