South Korean Beef Market Report
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Market Overall General With 48.8 million people and GDP growth of 6.2% in 2010, South Korea is the world’s 11th largest economy, the 9th largest exporter and the 13th largest importing country. Major cities include Seoul, Pusan, Taegu, Taejon and Incheon. Significant income growth in the Republic of Korea has led to an increase in living standards and changes in consumer diets to include a higher proportion of meat, particularly beef (Kim et al. 2007). However, beef production in the Republic of Korea has not been able to keep pace with the strong growth in demand because of limited production capacity and rising costs of production. The strong demand for beef, together with a domestic supply shortage, has resulted in a strong rise in consumer prices for beef, especially for those beef cuts which are highly preferred by Korean consumers. The demands of Korean consumers have become very similar to the demand of U.S. consumers: high quality, low cost, healthy and convenient food. Increasing affluence, more women in the workforce and well-travelled younger generation looking for goods with an international flavor are promoting the rise of convenience stores, bulk retail outlets and western style family restaurants. Per capita beef consumption of South Korea is 31LB,which is higher than Japan and lower than the U.S., as showed in figure 1.Beef consumption of South Korea is keep rising from year 2006 to year 2010, as showed in figure 2. Figure 1: Beef and Veal Meat Per Capita Consumption Beef and Veal Meat Per Capita Consumption by Country in LB ( Year of Estimate: 2011) United States 84LB South Korea
31LB
Japan
22LB
Source: Index Mundi Figure 2: Domestic beef consumption from 2006 to 2010
800 600
496
522
536
546
2006
2007
2008
2009
609
400 200 0 2010
South Korean Beef and Veal Meat DomesWc ConsumpWon Unit of Measure: 1000 MT CWE (MT: a unit of weight equivalent to 1000 kilograms CWE: The weight of meat cuts and meat products converted to an equivalent weight of a dressed carcass, includes bone, fat, tendons, ligaments, and inedible.)
Source: Index Mundi
Food Away From home Changes in lifestyle and dietary culture coupled with increased consumer income level stimulated rapid growth in the food service sector in Korea. Each Korean spent 46 percent of his/her food expenditure, or 12 percent of total consumption expenditure on dining out. It is expected that dining out will remain a key part of consumer spending in the coming years as Koreans face ever busier lifestyle with increased number of single-member households and dual-income families. (Source: Korea-Republic of Food Service- Hotel Restaurant Institutional) Foodservice sector has been largely composed of small-scale, family-operated businesses, as evidenced by the fact that 90 percent of restaurants and bars in Korea were small businesses that hired less than five employees (typically family run) as of 2008. Figure 3: Monthly Per Capita Household Spending on Dining-Out
Source: Korea-Republic of Food Service- Hotel Restaurant Institutional Figure 3 shows that dining out trend in South Korea: Per capita spending on dining out keep rising, and in year 2008 per capita has reached 80.000 Won. (68.6 US Dollars)
Retail
Hypermarkets, armed with aggressive pricing, one-stop shopping convenience, and efficient product assortment, have stepped up to the largest retail force in Korea since 2002, replacing the former leader, department stores. Grocery supermarkets were the leading retail channel for food products with an estimated 16.513 million of food sales in 2009, followed by hypermarkets.
Consumer Dynamics Hygiene and safety of beef have been valued most important by Korean customers. Quality factors are also important in the beef purchasing behavior, which in include marbling, texture, flavor, color and tenderness. Korean households prefer chilled and unpackaged beef to frozen and packaged beef, believing it to be fresher and tastier. Due in part to the aging population, there is a heavy emphasis among the general public on healthy eating. Organic and functional foods, among many others, are gaining popularity among healthconscious elderly consumers and young professionals. Figure4: Consumer’s purchase of Hanwoo and imported beef by selected cut, South Korea (By cooking method) Hanwoo beef (%) Imported beef (%) Rib(braised, grilled spare ribs) 18.2 45 Chuck(roast) 12.8 13 Brisket(soup) 29.7 11.2 Loin(grilled, steak) 16.5 8.4 Tender loin(grilled, steak) 11.5 8.1 Other 11.2 14.2 Total 100 100 Source: Leong et al, 2004
Competitive Environment
U.S. and Australia are the two biggest beef exporting countries to South Korea. Among imported beef, grain-fed US beef is usually regarded as a higher quality product than Australian beef, which was until recently mostly grass-fed. The high level of grain content generally results in greater marbling, which enhances the tenderness of the meat and leads to a higher quality grade. Despite its high price, many Koreans prefer Hanwoo to cheaper imported beef as the former is regarded as fresher and of better quality. Hanwoo, refers to a breed of cattle raised in Korea, which may be a hybrid derived from the cross-breeding of ("Bos taurus") and ("Bos indicus"). Its meat is a favored in South Korea.
Challenge and Opportunity
Korea is an emerging market where new ideas and trends are eagerly tried and accepted, leading to greater opportunities for new-to-market products. Consumers are looking for new and international tastes as the income level continues to rise. Local retailers in general lack experience and expertise on international sourcing. As a result, the flow of imported products to the retailer is often participated by multiple layers of middlemen, which adds cost and inefficiency to the supply chain. Retailers are reluctant to carry imported products of short shelf life.