"Cooking Oil More Expensive Than Chicken" Small Business Owners Sigh Over Soaring Prices

Chinese Restaurants, Chicken Shops, Bakeries, and Other Food Service Businesses in Crisis... "Second Half Expected to Be Tougher"

Unable to Raise Prices Due to Customer Loss Concerns, Struggling... Enduring Losses Without Countermeasures

As the prices of ingredients such as flour and cooking oil fluctuate wildly, local dining businesses are wearing worried expressions.

[Asia Economy Honam Reporting Headquarters Reporter Park Jin-hyung] Recently, as food ingredient prices have been fluctuating, self-employed business owners who support the grassroots economy are facing a season of hardship.

In particular, the cost of food ingredients, which accounts for a large portion of the average operating expenses of dining establishments, has risen sharply, causing such a burden that it brings tears to their eyes.

However, raising food prices risks losing customers, leaving them unable to do anything. It is truly a case of adding insult to injury.

According to Statistics Korea on the 18th, the consumer price index in the Gwangju area last month was 108.59 (2020=100). This is a 6.3% increase compared to the same month last year.

It is the highest level in 14 years since July 2008, when the financial crisis occurred. In other words, prices are on a 'high-altitude march.'

The price of flour, a major ingredient for dining establishments, rose by a staggering 44.6%, and cooking oil increased by 43.3%.

Among the average operating costs of these businesses, food ingredient costs naturally hold the highest proportion, accounting for about 34%. This is twice as much as labor costs (16%), rent (9%), and taxes (6.8%).

It is not only prices that are rising. Due to consecutive interest rate hikes, including the Bank of Korea's big step (a 0.5%p increase in the base rate), market interest rates have also risen, dampening consumer sentiment compared to before.

Kim (52), who runs a Chinese restaurant in Dong-gu, is distressed by the economic downturn. Customers are tightening their wallets, and the prices of major ingredients such as flour, onions, and cooking oil have all surged, putting him on alert.

He said that the flour supplied through his supplier has recently increased by nearly 30% for a 20kg unit.

Kim said, "Even though the cost of ingredients has risen, I am barely holding on by maintaining the price of jajangmyeon (6,000 won). If prices remain unstable in the long term, revising the menu prices will be inevitable, but I worry that more customers will leave."

Lee Mira (48), who runs a bakery in Gwangsan-gu, recently could not endure the rising flour prices and after much consideration raised prices on some items. However, popular signature menu items such as Choco Brioche and Blueberry Fresh Cream Bread retained their prices.

This is because raising prices on all items might provoke sensitive reactions from customers.

Lee said, "Compared to last year when social distancing was enforced due to COVID-19, net profits have decreased by 20-30%. There are many talks that the economy will worsen in the second half of the year, so I am very worried."

Jang, who runs a private chicken restaurant in Seo-gu, complains, "Cooking oil is more expensive than raw chicken." Since last winter, he has been struggling with the steep rise in commercial cooking oil prices.

Last week, he purchased 18 liters of cooking oil for around 60,000 won, but prices have been increasing by 10,000 won every ten days, causing him to consider closing his business due to difficulties.

Jang said, "I tried to buy cooking oil in bulk to cope with raw material price increases, but even suppliers have shortages, making it difficult to get the desired amount."

Like Jang, most dining establishments are absorbing the price increases without effective countermeasures, enduring losses.

According to a survey conducted by the Korea Foodservice Industry Research Institute of the Korea Foodservice Industry Association from May 18 to 24 targeting 400 foodservice business owners, 82.1% responded with no action in response to the rise in flour prices.

Next were menu discontinuation (9.4%) and switching to lower-cost products (5.2%).

Lee Chang-ryong, head of the Gwangju branch of the Foodservice Industry Association, explained, "When raw material prices rise, they are usually passed on to customers after a certain period. Typically, about 20% of the increase in food ingredient costs is reflected in prices."

He added, "Among local self-employed business owners, 95% are tenants and many have significant loan debts. With the prolonged COVID-19 pandemic, damages have not been recovered, and with rising prices and shrinking consumer sentiment, they are feeling a sense of crisis."

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