Korea's food industry has been cutting jobs one after another since last year. With sluggish domestic demand and rising costs creating a double bind, and the government's price-stability stance making it hard to raise prices, the move is seen as an attempt to reduce fixed costs such as labor.
According to the industry on the 10th, major domestic food companies have launched workforce restructuring through voluntary retirement programs. In the past, such programs mostly targeted older employees at the Director General level and above, but recently the scope has widened to include those in their early 40s, such as assistant managers and Directors.
Lotte Wellfood implemented voluntary retirement for the first time since its founding in April last year and accepted additional applications this year. It targets executives and employees born in 1981 or earlier (age 45 and older) with at least 10 years of service. The company offered up to 24 months of salary in addition to statutory severance pay, along with reemployment support payments and children's tuition assistance.
Analysts say performance trends influenced the decision. Lotte Wellfood posted a record-high revenue of 4.216 trillion won last year, but operating profit fell 30.3% year over year to 109.5 billion won. The company cited higher prices for key materials and supplies such as cacao and dairy products and rising expenses across the board.
Binggrae also carried out voluntary retirement in January. Including staff from Haitai Ice Cream Co., this was the first time in about four years since 2021 that it covered all employees. Binggrae is proceeding with organizational integration ahead of its merger with Haitai Ice Cream Co. in April.
Binggrae's revenue in the past year inched up to 1.4896 trillion won, but operating profit fell 32.7% year over year to 88.3 billion won. Like Lotte Wellfood, its high share of frozen treats left it exposed to shifting market conditions. With costs mounting, a declining birthrate has also shrunk the consumer base.
Voluntary retirement is also spreading in the franchise sector. Paris Croissant, which operates Paris Baguette and Pascucci, recently implemented a voluntary retirement program for staff at Director level and above. It was the first in about two years since November 2023.
Coca-Cola Beverage, a subsidiary of LG H&H, implemented voluntary retirement late last year. It was the second restructuring since LG H&H acquired the company. This time, not only sales and logistics but also management functions such as HR and strategic planning were included.
Tight management is spreading across the food industry. CJ CheilJedang has also begun overhauling its organization and overall business structure to strengthen fundamentals. In a recent message to employees, CEO Yoon Seok-hwan stressed that "disruptive change and innovation are needed." The industry largely sees this as a de facto emergency management declaration.
Industry officials cite structural changes in the food sector as the backdrop to the spread of voluntary retirement. With prices for materials and supplies, logistics, electricity, and labor all rising at once, corporations are facing heavier expense burdens, yet it is difficult to offset them through price hikes. As the government maintains a price-stability stance and consumers become more price-sensitive, companies face a continued environment where raising product prices is hard.
Changes in the population structure are also having an impact. Consumption of major food categories such as snacks, dairy, and beverages is affected not only by the economy but also by demographic shifts. With the low birthrate and aging population advancing, the shrinking size of key consumer groups is cited as a long-term headwind.
The same trend shows up in economic indicators. According to the corporations business survey index (BSI) released by The Federation of Korean Industries, the March outlook for all industries exceeded the baseline of 100, but food, beverage, and tobacco stood at 94.7. It was the only one of 10 manufacturing sectors to fall below the baseline.
An industry official said, "This is not just a temporary reduction in headcount because of a weak economy; it strongly reflects a push to reorganize into a smaller, more efficient structure suited to the changed market environment," adding, "For corporations with a low export share and high reliance on domestic demand, pressure to restructure headcount to cut fixed costs is likely to persist throughout the year."