South Korean bakeries' pricing generating controversy
In South Korea, the prices of baked goods have been a topic of discussion due to perceived high costs. The Korea Fair Trade Commission's analysis of the baking industry has shed light on several factors contributing to the escalating prices.
According to the Commission's report, ingredients account for a significant portion of the cost in the baking industry, with ingredients adding up to 31.6 percent, while personnel expenses stood at 28.7 percent. Selling and administrative expenses, however, account for a substantial 42.4 percent of total production costs in the baking industry, significantly higher than the 8.1 percent average for the food and beverage industry overall.
The report also pointed out structural issues in the baking industry, including the processing and distribution of major ingredients for baked goods. The lack of competition in South Korea's bakery industry, which is dominated by major franchises, is suggested as a key factor determining the price of baked goods. The report from Korea Agro-Fisheries & Food Trade Corp. showed that affiliates of SPC Samlip Group accounted for 83.4 percent of all bread-manufacturing companies in South Korea in 2021.
The steepest on-year increase in bread prices in South Korea occurred in July 2023, with a rise of 8.6 percent. This rise was much faster than the overall increase in the consumer price index for the same period. As of August 2022, the consumer price index in South Korea was 116.45, representing a 16.45 percent increase from the 2020 baseline. The price of bread in August 2022 is 38.61 percent higher than the 2020 baseline.
Industry insiders argue that the criticism of baked goods prices is unfair due to broader price hikes. They point to instances like the pop-up store run by Syuka World, which sold salt butter rolls, bagels, and baguettes for 990 won (71 cents), approximately a third the price of similar items at local bakeries.
However, the search results do not contain specific information about the companies dominating bread production in South Korea or their market shares. The lack of transparency in the industry makes it difficult to determine the extent to which these major players are influencing the prices of baked goods.
The on-year increase for South Korea's consumer price index in August 2022 was 1.7 percent, according to Statistics Korea. The price index for bread in August 2022 was 138.61. The on-year increase in the consumer price index in July 2023 was not provided in the text.
The Korea Fair Trade Commission's analysis of the baking industry also highlighted the role of distribution chain costs and the reliance on imported ingredients in driving up the price of bread. The Commission's findings underscore the need for further investigation and potential regulatory action to address these issues and promote competition in the baking industry.
