Recently, the milling and sugar industries cut prices of key food materials and supplies such as flour and sugar. But in the dining-out sector, cutting or even holding prices steady is proving difficult.
According to related industries on the 12th, amid the government's price-stability stance and the fallout from a collusion probe, major companies including CJ CheilJedang, Samyang Corporation, and Daehan Flour Mills lowered flour and sugar prices by an average of 4% to 6%. In the dining-out sector, the view is that the perceived impact of price cuts is limited. The main reason cited is that flour and sugar do not account for a large share in the cost structure of restaurant menus.
In the dining-out sector, there have even been cases of price increases. Burger King raised prices on some items, including its flagship "Whopper," starting today. The Whopper rose 200 won from 7,200 won to 7,400 won, and the Whopper Junior also increased from 4,800 won to 5,000 won. Coffee Bean Korea on the 5th of last month raised the small size of drip coffee from 4,700 won to 5,000 won, and the regular size from 5,200 won to 5,500 won, up 300 won each. Budget coffee brand Bruda Coffee will raise the price of an Americano 30% from 1,000 won to 1,300 won starting on the 1st of next month. Banafrésso also raised the takeout price of an iced Americano from 1,800 won to 2,000 won starting on the 1st of last month.
Industry officials in dining out say the key costs that drive consumer prices are imports of materials and supplies, labor, rent, and delivery fees, which are largely fixed expenses. A franchise official said, "Flour prices have fallen, but their share of total costs is not large, and with the strong dollar continuing, the burden of imported materials and supplies such as meat, cheese, and sauces remains heavy." The official added, "In particular, labor and rent have also kept rising, and once these costs go up, they are structurally hard to bring down."
Another dining-out industry official said, "Flour prices have fallen, but since we do not bake bread ourselves and instead buy it for use, it is hard to feel a direct price cut," adding, "If bread manufacturers cut prices, we could feel the impact, but it looks like it will take time."
In the franchise sector, concerns persist about deteriorating franchisee profitability due to platform expenses. As the burden from delivery fees and the like piles up, it is hard for headquarters to lower prices, and they are instead in a position to consider increases. A related industry official said, "The dining-out business is broadly in a slump, and with some franchisees already experiencing profitability deterioration, it is hard to consider menu price cuts."
Lee Jong-u, a professor of business administration at Ajou University, said, "For the government to achieve its policy goals, an approach that considers the complex expense structure of labor, rent, and delivery platforms together is needed." He added, "If only the pressure to cut prices is strengthened, it could instead lead to worsening profitability across the dining-out sector. Some support measures should be pursued in parallel for consumers to feel price stability."
Meanwhile, according to the January consumer price trends released by the Ministry of Data and Statistics (MODS), the price index for the purpose of food and lodging expenditure within consumer prices rose 2.8% year over year, outpacing the overall consumer price index increase of 2% in the same period.