Grocery Prices Rise Since Early Year... Next Target is 'Milk'

Rising Crude Oil Prices Spark Price Hike Discussions
Coffee Ice Cream Domino Effect Expected
Food Ingredient Prices Also Soaring
Fears of Worst 'Chuseok Price Crisis'

[Asia Economy Reporter Lim Hye-sun] The rise in grocery prices that began early this year is expected to continue into the second half. Products scheduled for price increases next month include snacks and milk. Haitai Confectionery will raise the prices of five snack items by an average of 10.8% starting from the 1st of next month. These include Home Run Ball, Butter Ring, Ace, and Matdongsan. This is the first price increase for these products in eight years since 2013.

Double-Digit Increase in Milk Prices Expected

According to the Dairy Promotion Board on the 8th, the raw milk price will increase by 21 KRW per liter starting from the 1st of next month. This is a 2.3% increase from the current 926 KRW to 947 KRW. As raw milk accounts for more than 50% of the total raw material cost, the consumer price of milk is also expected to rise. Previously, the Dairy Promotion Board decided to freeze raw milk prices last year considering the consumption contraction due to COVID-19, but decided to raise prices this year. A dairy processor explained, "When raw milk prices rise, consumer prices are adjusted upward with a lag of one or two months," adding, "Since Chuseok falls in September, there is a high possibility that prices will be raised before then." Dairy processors are closely monitoring the moves of Seoul Milk Cooperative, the leading company in the sector. The Seoul Milk Cooperative stated, "We are currently discussing the price increase plan."

If milk prices rise, a domino effect will occur with price increases in bread, coffee, and ice cream. In 2018, when raw milk prices rose by 4 KRW, consumer milk prices increased by about 3.6% to 4.5%. Subsequently, prices at coffee shops, bakery franchises, and ice cream also rose one after another.

Will Ramen and Chicken Prices Also Rise?

The atmosphere in the ramen and chicken industries is also tense. Ramen prices have been frozen for several years, but the prices of raw materials such as wheat flour and palm oil have surged. The price of wheat flour per bushel (27.2 kg) has increased by more than 30% in a year. Palm oil prices have jumped over 70%. Ottogi attempted to raise the price of Jin Ramen for the first time in 13 years earlier this year but withdrew the plan after five days. Nongshim and Samyang Foods have kept prices frozen since their last increases in 2016 and 2017, respectively. As cost burdens continue to grow, the three ramen companies will likely have to consider price increases this year to improve profits. A food industry official said, "There is a possibility of raising prices next year, but if raw material prices keep rising, it will be difficult to maintain current prices."

With the soaring prices of soybean oil and other ingredients, chicken prices are also likely to rise. Chicken prices have remained unchanged since BBQ raised major product prices by up to 2,000 KRW in 2018. A chicken industry official said, "Labor costs, as well as prices of cola, radish, and oil, have all increased, making it difficult for franchise owners," adding, "Since chicken is a product with strong consumer resistance, we are discussing the matter cautiously."

From this year, grocery and dining-out companies have been raising product prices citing rising raw material costs and labor expenses. Since January, there has been no product whose price has not increased, including instant rice, tofu, beverages, seasonings, bottled water, beer, bread, pizza, and hamburgers. With food ingredient prices also soaring, concerns are growing that the worst 'Chuseok price crisis' may occur.

This content was produced with the assistance of AI translation services.