With the conclusion of tariff negotiations between Korea and the United States, the food industry is busily preparing countermeasures. On the 31st, mutual tariffs were set at 15%, prompting food companies with insufficient local production facilities to consider raising prices. The tariffs will take effect starting on the 1st of next month.
According to the food industry, Samyang Foods has determined that raising the price of its popular spicy chicken ramen, which is sold in the U.S., is inevitable with the confirmation of the tariff increase. Previously, under the general tariff of 10%, the company had not implemented a price hike by optimizing logistics costs, but now it believes that without raising prices, profitability will not be achievable. Samyang Foods' overseas sales accounted for 77.3% of its total sales of 1.728 trillion won last year, with U.S. subsidiary sales at $28 million (approximately 38.68 billion won), making up about 28% of that total.
Samyang Foods is currently not considering alternatives such as renting local production facilities. A representative from Samyang Foods noted, "While we will have to compare profits and losses, considering the expertise related to the spicy chicken ramen sauce, renting local production facilities in the U.S. is not easy."
The level of local price increases has not yet been determined. A representative from Samyang Foods stated, "For now, we believe the result (15%) is better than the worst-case scenario," adding, "We will decide on the extent of the price increase after consultations with local distributors and taking competitor trends into account."
Currently, the consumer sale price of spicy chicken ramen at Walmart in the U.S. is $1.40 each. On Amazon, it ranges from $1.80 to $2. A person running a Korean grocery store in the Midwest commented, "While the demand for Korean grocery stores, limited to Korean customers, may decrease with a price increase, demand at larger retailers like Walmart may remain stable."
There is also a possibility that the price of Pepero sold by LOTTE Wellfood in the U.S. will increase. Currently, all Pepero sold in the U.S. is produced in Korea. Since the factory in India began operations in July, exports have yet to commence. A representative from LOTTE Wellfood stated, "While we may not pass on the full tariff to consumers, there is a high possibility that we will resolve this by discussing with distributors to pass on some of the costs to consumer prices."
Dae Sang, which exports kimchi under the brand name Jongga to the U.S., is also facing challenges. While Dae Sang owns a local factory in Los Angeles, the export volume is currently greater. The export volume to the U.S. is reported to be double the local production level. A representative from Dae Sang stated, "We are trying to decide on price increases based on the situation of distributors and competitors."
Meanwhile, the impact of the tariff is causing more significant concerns for small food companies compared to large corporations. They are more likely to turn their attention to markets in Europe and Southeast Asia rather than the U.S. An unnamed corporation that has been working hard for over 10 years to expand to the U.S. market has reportedly had to revise its strategy, which had previously focused on supplying wholesale to mid-range accommodations to build brand recognition.
A representative from a small food company remarked, "Small businesses that have not built brand recognition will inevitably have to compete on price in the local market, and this aspect has been rendered ineffective." He added, "For the time being, we are considering looking for opportunities in alternative markets like Southeast Asia rather than the U.S. confectionery market."