In South Korea, fried chicken is the latest sign of inflation woes

Hong Kong/Seoul
CNN Business

Clark Park, a 35-year-old YouTuber, is one of many people in South Korea who are fed up with high food prices.

That’s why he grabbed his camera and joined a crowd of shoppers clamoring for cheap fried chicken one August morning at Homeplus, a hypermarket chain that had just slashed 12% off its already deep-slashed prices.

“There were already over 50 people lined up,” Park told CNN Business, adding that many arrived early and waited well over an hour. “We all ran to the grocery store together as soon as it opened. That’s when I got the fried chicken craze.

Fried chicken has long been a consumer favorite in South Korea – and now it also highlights the country’s inflationary woes, with food prices across the board weighing more on wallets lately.

The average cost of fried chicken in South Korea rose 11.4% in August from the same month a year ago, outpacing price increases of other popular dishes such as Kimchi beef stew or barbecue, according to government data.

Consumers could feel an even bigger pinch, depending on how restaurants or supermarkets pass on their costs: In some cases, retail prices for chicken have ‘increased more than 50%’ in the past two years , according to Jeong Woo Park, a South Korean economist at Nomura.

People around the world have faced similar hardship in recent months as global food prices soar – and scenes like the chicken coop at Homeplus are a reminder of how households are adjusting to wider inflation, which has reached 5.7% in South Korea. They also shed light on how the country depends on other nations for much of its food.

Fried chicken is a huge cultural touchpoint in South Korea, similar to British fish and chips, which has also become more expensive this year. Many people consider it a go-to snack at sporting events, and it’s not uncommon for customers to pick it up several times a month.

Anyone visiting the country is bound to stumble upon a local chicken and beer, or chimaque“, cut. That’s because one in 20 restaurants is a chicken restaurant, according to the government.

South Korea is the world’s third-largest market for fried chicken, second only to the much more populous United States and China, according to data from market research provider Euromonitor International.

Crispy chicken “can be called a national food in South Korea, like kimchi, bulgogi, and bibimbapsaid Clark Park, the content creator, referring to other staples locals cherish.

Like other cultural favorites, it’s also serious business: Korean chicken restaurants recorded $7.9 billion in revenue in 2021, according to Euromonitor.

This kind of devotion has created an enigma for stores, which need to care about their bottom line without alienating customers.

“All fried chicken costs are rising very rapidly,” said Nomura economist Jeong Woo Park, adding that suppliers are being hit by soaring costs for oil, rent, labor, delivery services and even chicken feed. In response, he added, some restaurants have started using robots to reduce labor costs.

Sellers have taken very different approaches to the situation in recent months. Major chicken chains have raised menu prices by an average of 2,000 Korean won ($1.50), according to Yunjin Park, senior food and nutrition research analyst at Euromonitor, citing the “higher prices of ingredients “. This caused the price of fried chicken to rise by about 10 to 15 percent, she added.

Although the difference may seem small, it could easily mean that customers will have to shell out almost $22 for a simple meal, Yunjin Park told CNN Business: “Chicken, which was once a comfort food for Koreans, is not is more of an easy-to-eat dish. -command menu [item] without hesitation.”

On the other hand, local hypermarkets go the other way. The August sale Clark Park attended at Homeplus was for what the channel called “Dang Dang chicken”, a promotion of fried chicken for about a third of the price offered by most retailers.

Other stores feel compelled to follow suit, even if only for short periods. In August, emart, another major supermarket chain, launched a week-long promotion to sell fried chicken at almost 50% off – and sold all 60,000 pieces.

Not everyone can afford to cut prices, however, and some smaller outlets may be forced to close until their costs come down again.

A Homeplus employee is selling buckets of fried chicken.  The hypermarket has created pressure on other stores to follow suit with its popular discounts.

“If you look at how these chain companies are able to sell at these low rates, it’s basically due to economies of scale,” said Barsali Bhattacharyya, head of industry briefing at the Economist Intelligence Unit (EIU ).

“They can buy more products and therefore demand a better price from their suppliers. Now, your little mom-and-pop stores won’t be able to take advantage of that, which means they’re seeing their costs go up a lot more.

One of the reasons South Korea faces such problems is that it imports nearly half of its food, according to the EIU.

It is one of the Asian economies most exposed to soaring prices in the world, as it depends on other countries for many types of food, Nomura economists warned in a June report. Singapore, Hong Kong and the Philippines are also considered vulnerable.

Global food prices have soared this year, largely due to Russia’s invasion of Ukraine. Both countries are generally big exporters of essential goods like wheat and sunflower oil.

The worst may have already passed: in August, the United Nations food price index fell for the fifth consecutive month, and in Korea, headline inflation also fell more than expected.

But things are not expected to improve significantly anytime soon. “We believe inflation is now past its peak, but it will likely remain above 5% for the rest of the year,” wrote Min Joo Kang, ING’s senior economist for South Korea and Japan, in a note to customers.

Other food staples are also becoming more expensive elsewhere in Asia.

Last month, Thailand – where the government sets prices for some staple foods – raised the prices of instant noodles for the first time in 14 years. A packet of a popular brand rose there by the equivalent of 3 to 20 cents, threatening to disproportionately harm low-income families.

“Food inflation is a tricky problem for Asia,” Bhattacharyya said.

Because incomes in most of the region are in the low or middle range, food typically makes up a large share of total consumer spending — in some cases as high as 30% to 40%, she said. .

She concluded: “It was, I think, only a matter of time before the global food price crisis hit Asia.”

–— CNN’s Gawon Bae in Seoul and Kocha Olarn in Bangkok contributed to this report.