Amid rising prices for processed foods in the country, analysis emerged that interest in food stocks, which were neglected during last year's stock market rally, is increasing. This is due to growing uncertainties in the stock market caused by tariffs stemming from former President Donald Trump and high exchange rates, which highlight food stocks as defensive stocks.
KB Securities noted in a report on the 12th that "price increases are continuing in the food and beverage sector, including not only Nongshim and CJ CheilJedang but also brands like Tous Les Jours and Paris Baguette." The report pointed out that since the beginning of the La Niña phenomenon (cooling of sea surface temperatures in the Pacific) at the end of last year, the prices of major grains have risen, and given that food products have a high domestic consumption ratio, the burden of exchange rate costs is significant. It projected that additional price increases will happen primarily among corporations with low margin spreads on major materials and supplies.
Nongshim plans to increase the factory price of 17 out of its 56 ramen and snack brands by an average of 7.2% starting from the 17th. This decision is attributed to rising purchasing costs for raw materials, particularly palm oil, starch, and soup ingredients, along with increased overall expenses due to exchange rates and labor costs.
KB Securities expects that this price increase will improve sales and operating profits for Nongshim as a separate entity. Research Institute member Ryu Eun-ae said, "Since the second half of last year, Nongshim's separate operating profit margin has shown significant volatility due to rising material costs and promotional expenses," adding, "It is expected that through this price increase, the heightened cost burden will be alleviated, and even accounting for the temporary decline in sales that often accompanies price increases, improvements in the operating profit margin will be possible."
CJ CheilJedang announced that starting this month, it will raise prices of frozen dumplings and meat products such as ham and sausages supplied to large supermarkets by 5% to 10%. From April, they also plan to increase the prices of products sold in convenience stores.
Earlier, Dongwon F&B raised the prices of 15 varieties of frozen dumplings by an average of 5%. CJ Foodville increased the prices of over 110 Tous Les Jours products by 5%, while the SPC Group raised the prices of Paris Baguette products by 6%.
Research Institute member Ryu stated, "As uncertainties in the stock market rise due to tariffs, exchange rates, and domestic conditions, interest in defensive stocks has increased," adding, "I expect interest in the food and beverage sector, which was neglected during last year's rally, to grow."