As the June 3 local elections wrap up, the food industry is cautiously toying with consumer price hikes. With instability in the Middle East persisting, international oil prices show no sign of falling, and the won-dollar exchange rate has climbed into the 1,500-won range and is seen as settling there. Food companies have been under heavy pressure from raw material costs, but they have reluctantly frozen prices due to the government's strong price controls. Now that the elections are over, they expect the government's influence to ease somewhat and are considering raising consumer prices.
According to the retail industry on the 7th, coffee franchise company Mega MGC plans to raise prices by 200 won for three items in its "Hal-Mega Coffee" series starting on the 19th. Hal-Mega Coffee, which had been 2,100 won, will be sold for 2,300 won, up 9.5%, and King Hal-Mega Coffee will be sold for 3,400 won, up 6.3% from the previous 3,200 won. Another low-cost coffee franchise brand, The Venti, raised prices of major menu items by about 100–500 won on the 29th. The standard price of beverages, excluding the Americano categorized as a basic drink, has now entered the 3,000-won range.
Prices of processed foods mainly supplied to convenience stores also rose on the 1st, just before the local elections. According to the convenience store industry, prices of some processed food items sold at major convenience stores were raised by around 10% on the 1st. Sajo Daerim's "Spicy Skewer" and "One-Bite Skewer," which had been 2,700 won, are now being sold for 3,200 won, up 18.5%. In confectionery, prices of major items such as Pringles Original rose about 5%.
In the fried chicken sector, Goobne Chicken effectively raised prices. It tightened its belt by reducing the weight of its boneless drumstick product from 800 grams to 700 grams. Lotteria, operated by Lotte GRS, also raised prices for 22 burger à la carte items by 2.8%.
This is due to prolonged instability in the Middle East. With the Iran war dragging on and disruptions in the Strait of Hormuz, U.S. inventories—long the "final safety net" of the global oil market—have fallen to their lowest level in 22 years. The Financial Times (FT) reported on the 3rd (local time), citing U.S. Energy Information Administration (EIA) data, that U.S. crude oil and petroleum product inventories last week fell by 10.6 million barrels from the previous week to 1.57 billion barrels. This is the lowest level since 2004. Some warn that if Middle East instability continues, international oil prices could temporarily surge to $200 per barrel this summer.
Park Mi-seong, head of the Food Economy Research Department at the Korea Rural Economic Institute (KREI), said, "The rise in international oil prices due to instability in the Middle East is a structure that simultaneously drives up logistics costs, manufacturing energy expense, packaging prices, and materials and supplies prices."
In neighboring Japan, food prices are already rising. According to a report by the Sankei Shimbun citing data from analytics company Teikoku Databank, 1,078 food items in Japan announced price hikes this month, and 2,269 items have signaled price hikes for July. All are management decisions driven by materials and supplies cost pressures tied to international oil prices.
In Korea's food industry, voices are growing that the government's tough stance on stabilizing everyday prices and all-around pressure has become overwhelming. Price hikes have been virtually taboo, but now that the elections are over, there is strong hope for a brief easing.
A food industry official said, "In February to March, the government strongly pointed to collusion in sugar and flour prices and pushed a strong price stabilization policy," adding, "With no elections for a while, the push may be weaker, so we are considering slightly raising prices for items that can no longer be held down."
An official at a processed food company said, "We have endured by reducing stock-keeping units (SKU) to offset expense, but we can no longer freeze prices. We will likely raise them in line with the rise in materials and supplies prices." Attention is now on whether consumer prices, which had been kept down, will rise again.