With the Lunar New Year holiday next month and the government doubling down on price stability, tension is spreading across the food industry. Along with the Ministry of Agriculture, Food and Rural Affairs urging tighter control of food prices, a prosecutorial probe into alleged price collusion for sugar and flour is raising expectations that not just specific items but food materials and supplies across the board could come under management.
According to industry sources on the 27th, the government plans to inspect the entire process from production at the source to wholesale and retail distribution and preemptively respond to items with unstable prices. It is preparing a comprehensive Lunar New Year holiday plan that includes releasing reserve stocks, expanding discount events, and strengthening oversight at distribution stages.
It will also expand its approach to managing processed foods. On the 22nd, Vice Minister Kim Jong-gu held a meeting with major food companies ahead of the holiday to stabilize processed food prices. They discussed easing the burden of processed food prices, voluntary cooperation measures by the food industry to that end, and the government's policy support direction. The ministry said it will consider additional policy tools if the need for price stabilization grows.
Probes by judicial authorities are also spreading across the food sector. As the prosecution's investigation into alleged flour price collusion expands across the milling industry, companies are on edge.
Prosecutors are focusing on whether companies discussed in advance the timing and scale of flour price hikes and shipment volumes. Earlier, on the 22nd, prosecutors sought arrest warrants for four senior executives, including current and former CEOs of Daehan Flour Mills and Sajo Dongaone, but a court rejected the request. Regardless of arrests, the investigation will continue. Potential criminal penalties and Korea Fair Trade Commission (FTC) sanctions are being discussed.
Earlier, President Lee Jae-myung in September last year at a Cabinet meeting called on authorities to respond to collusion. Sugar was the first target of investigation. Prosecutors indicted CJ CheilJedang and Samyang employees on charges of long-term collusion on sugar prices. The probe found collusion amounting to 3.2715 trillion won over about four years.
The food industry is watching whether the probe will extend beyond sugar and flour to major food materials and supplies such as sugar, grains, and oils. The government is pointing to monopolies and oligopolies in the materials and supplies market and the price-setting structure as structural drivers of inflation.
Amid rising raw material costs from a strong dollar and mounting labor and logistics expenses, added risks from regulation and investigations are prompting the industry to reassess overall pricing policies and management strategies.
A food industry official said, "Recently the cost burden and worsening profitability are deepening," adding, "But with government pressure through collusion probes and regulations, it is hard to consider price hikes. For now, we are absorbing the pain internally and holding on, but if price controls drag on, the burden will grow."
Another food industry official said, "Until court rulings and Korea Fair Trade Commission (FTC) decisions come out, corporations will keep watching and waiting."
Lee Jong-woo, a professor of business administration at Ajou University, said, "The economy is currently very weak and consumption is sluggish, so government intervention to stabilize prices is necessary," adding, "The burden on the food industry is increasing, but there is a chance the second half of this year will provide some breathing room."