"Ramen Prices Rose Again Even as Flour Prices Fell" ... The Burden Ultimately Increased for Consumers [The Architects]②

How the Price-Fixing Cartel Disrupted Everyday Life

Ramen Prices Rise with Flour Costs

Prices Kept Climbing Even as Raw Material Costs Fell

Rapid Hikes, But Reluctant and Minimal Price Cuts

Editor's NoteThe lighter the color, the higher the grade for "white powder." Wheat flour, once called "jingaru" during the Joseon Dynasty and regarded as a luxury, began to enter the devastated Korean Peninsula in large quantities as an aid item after the Korean War. It helped fill the bellies of the people. Flour, which has become a staple for everything from noodles to ramen, bread, and snacks, is an essential raw material for the food industry. When its price rises, not only do food products made from flour become more expensive, but so do "table prices" and dining-out prices, increasing the cost-of-living burden for ordinary people. The Asia Business Daily has reconstructed the process of designing the 6 trillion won "flour price cartel," based on the prosecution's indictment, and analyzed how this collusion has made life harder for ordinary people over the past six years.

#Nongshim, the leading company in the domestic ramen market, raised the price of its flagship product, Shin Ramyun, from 950 won to 1,000 won at retail stores in March last year. The price of Shrimp Crackers was also increased by 100 won, adjusting it to 1,500 won. This move came as politically turbulent times followed former President Yoon Suk-yeol's proclamation of emergency martial law in December 2024, and as prices of processed foods soared from early last year. Nongshim joined the wave of price hikes. At the time, Nongshim stated, "A price adjustment is inevitable due to rising raw material costs and exchange rates."

Ramen is displayed on the sales shelf of a large supermarket in Seoul.

During this period, the won-dollar exchange rate remained high. However, since 2023, when the international price of wheat (the main ingredient for flour) dropped sharply, Nongshim consistently requested milling companies to lower their supply prices, resulting in a slight reduction in flour costs. As a result, Nongshim's operating profit last year reached 180 billion won, an increase of more than 10% compared to the previous year.

According to the prosecution's indictment on the flour price-fixing case, obtained by The Asia Business Daily on March 11, Nongshim requested a supply price adjustment from its flour suppliers in February last year, prompting the milling companies to lower the flour supply price by 3 to 10 won per kilogram.

Earlier, when the import price of wheat, which had soared to 528,868 won in 2022 due to the Russia-Ukraine war, began to fall in 2023, Nongshim requested a flour price reduction from milling companies. The companies involved in the cartel ultimately lowered the price by about 30 to 50 won per kilogram. When the import price of wheat fell further to 430,441 won in 2024, Nongshim again demanded a supply price adjustment, leading the milling companies to lower the price by another 55 to 75 won per kilogram.

Previously, major companies such as Daehan Flour Mills, Sajo DongA One, and CJ CheilJedang, which supplied flour to Nongshim, significantly raised the price of flour supplied to Nongshim through collusion from 2019. However, as wheat prices declined, the supply price of flour dropped for three consecutive years.

Flour Prices Fell, but Ramen Prices Rose Again

However, when the supply price of flour was rising, Nongshim and other ramen manufacturers successively raised their prices. Nongshim, which was a target of price collusion by major milling companies, increased the price of Shin Ramyun by 6.8% in August 2021. Paldo, which was the target of price collusion by minor companies such as Samyangsa, Daesun Flour Mills, Samhwa Flour Mills, and Hantap, raised ramen prices by an average of 7.8% in September of the same year. Nongshim raised the price of Shin Ramyun again by 11% in September of the following year, bringing it to 1,000 won. Paldo also raised ramen prices by an average of 9.8% in the same month.

This wave of price increases spread to ramen companies not involved in the collusion. Ottogi raised the price of major products like Jin Ramen by an average of 11% in October 2022. Samyang Foods also raised ramen prices by an average of 9.7% in November 2022.

In the first half of 2023, ramen prices fell. After the launch of the Yoon Suk-yeol administration, as public criticism over ramen price hikes intensified, then-Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho publicly called for food price reductions. Nongshim, Ottogi, and two other ramen companies, which were identified as key drivers of "inflation," lowered their ramen shipment prices by 5% (about 50 won). It was the first price reduction in 13 years.

However, even as flour supply prices continued to decline in the first half of last year, the prices of more than 60 processed foods increased again. Ramen companies were no exception. Ottogi raised the price of Jin Ramen from 716 won to 790 won. Paldo also adjusted the price of Paldo Bibim Men from 1,100 won to 1,150 won, and Wangttukkeong from 1,400 won to 1,500 won.

The cost of ramen is not determined by flour alone. Various factors such as palm oil, soup ingredients, packaging materials, logistics costs, labor costs, and exchange rates also have an impact. However, considering that the price of flour, one of the core raw materials, has fallen by about 20% over the past two years, criticism of last year’s ramen price hikes is inevitable.

Improved Profitability After Price Hikes... Ramen Companies’ Operating Margin Increased

After raising product prices, ramen companies saw improved profitability. Paldo's sales increased from 767.8 billion won in 2021 to 1.0389 trillion won in 2022, and recorded 975.9 billion won in 2023. During the same period, operating profit rose from 55.6 billion won in 2021 to 106.9 billion won in 2022 and 126.4 billion won in 2023, more than doubling in just two years.

As a result, the operating margin also rose from 7.2% in 2021 to 10.3% in 2022 and 12.9% in 2023. The cost-to-sales ratio fell from 67.7% to 61.7% over the same period. Profitability improved as the cost-to-sales ratio declined following price increases.

Nongshim and Ottogi showed a similar pattern. Nongshim's sales increased from 2.6629 trillion won in 2021 to 3.129 trillion won in 2022 and 3.4105 trillion won in 2023. Operating profit rose from 106.1 billion won in 2021 to 112.1 billion won in 2022 and 212 billion won in 2023. Notably, 2023 was the year when the government pressured companies to lower the price of Shin Ramyun by about 5%. Despite this, Nongshim's operating margin increased from 3.6% in 2022 to 6.2% in 2023. The cost-to-sales ratio also fell from 71.3% in 2022 to 69.6% in 2023, indicating that the price reduction did not immediately lead to a decline in profitability.

Ottogi's sales steadily increased from 2.739 trillion won in 2021 to 3.1833 trillion won in 2022, 3.4545 trillion won in 2023, and 3.5391 trillion won in 2024. Operating profit was 166.5 billion won in 2021, 185.6 billion won in 2022, 254.8 billion won in 2023, and 222 billion won in 2024. Ottogi's cost-to-sales ratio remained high at about 82% in 2023. Nevertheless, its operating margin improved from 6.1% in 2021 to 7.4% in 2023.

When flour prices rose, ramen prices increased as well. However, even after flour prices fell, the trend of raising ramen prices continued. Companies have repeatedly cited higher raw material costs as the reason for price hikes, but the results show that profitability improved after the adjustments.

Ultimately, negotiations over raw material prices took place between companies, but the burden of higher prices was passed on to consumers. According to the World Instant Noodles Association (WINA), as of 2024, annual per capita ramen consumption in Korea is 79.2 servings. This is why even a small change in the price of ramen, a staple food, has a direct impact on consumer price perception.

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