Rising Fiercely When Increasing... The Food Service Industry Ignores Price Cuts

Chicken, Pizza, Coffee Businesses Still Silent
"Labor and Rent Costs Remain High," Express Reluctance

After the government recommended a 'ramen price reduction,' ramen, bread, snacks, and flour milling companies have gradually lowered their product prices, but franchise companies such as chicken, pizza, and coffee remain steadfast. The reason is that, compared to the reduction in raw material costs for food and beverages sold, other expenses such as labor costs, rent, and logistics costs remain high, making it difficult to lower product prices.

Price Increase Notice Announced on the Pizza Hut Website.
Photo by Pizza Hut Website

According to the dining industry on the 7th, both of the country's two major bread franchises, SPC Paris Baguette and CJ Foodville Tous Les Jours, have joined in lowering product prices, but pizza franchise companies, which mainly use flour as an ingredient, have been lukewarm about lowering prices so far.

A pizza industry official said, "Pizza contains various toppings besides flour, and the burden of raw material costs for these toppings remains," adding, "It is difficult to consider price reductions in many ways."

There were also places that raised prices abruptly. Pizza Hut announced on its website on the 28th of last month that it would raise prices on some menu items, but since there was no separate announcement at the time, it was criticized as a 'blind notice.' The menu items with price increases included nine types of pizza such as Don Mahawk, Topping King, Super Supreme, and Bacon Potato, with large sizes increasing by 1,000 won and medium sizes by 600 won. Pizza Hut emphasized that it was unavoidable to raise prices on some menu items due to external factors such as rising raw material prices and labor costs.

Chicken franchises also use flour in batter, but they are reluctant to lower prices, citing that the cost-saving effect from the flour milling companies lowering prices is only about 1% of the total. An industry official said, "The increases in labor costs, rent, oil prices, and chicken prices, which have been burdensome across the industry since last year, are still not sufficiently offset," adding, "On the contrary, there are many factors pushing prices up."

With coffee bean prices and exchange rates both falling, whether domestic coffee shops will lower prices is also a matter of interest. According to the Korea Customs Service's export-import performance by item, as of the end of last month, the import price of green coffee beans was $4,323 per ton, down 21% from the highest price recorded in July last year ($5,472 per ton).

Previously, domestic coffee shop brands such as Starbucks, A Twosome Place, Coffee Bean, Hollys, and Tom N Toms all raised coffee prices last year, citing increased manufacturing costs. The price of a cup of Americano averages between 4,000 and 6,000 won. It is known that the cost of coffee beans accounts for about 10% of the price of a cup of Americano at coffee shops. The remaining 90% consists of store rent, labor costs, and other raw material costs.

An industry official said, "Although coffee bean prices have decreased in the last two to three months, they are still high compared to last year," adding, "Labor costs, rent, other material costs, and logistics costs, which have a higher proportion, remain high, making it difficult to lead to an actual price reduction."

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