Domestic food companies are moving one after another to establish local subsidiaries overseas. Riding the wave of K-food, exports are growing quickly, but companies judge that simple exports alone have limits to growth. They are building systems that handle local sales, marketing, and research and development (R&D) to strengthen their push into global markets.
According to related industries on the 8th, major food companies have recently been creating new overseas subsidiaries or expanding investment in local infrastructure. In the past, they focused on selling food produced in Korea abroad, but now they have begun shifting their overseas business strategies toward building sales, distribution, and product development functions locally.
Behind the food industry's acceleration in expanding overseas business is the limit to profitability in the domestic market. In an era of high inflation and a strong dollar-won exchange rate, cost burdens from Middle East–driven geopolitical risks have piled up, so the food industry says it needs to adjust prices after the June 3 local elections. But with the government prioritizing stabilization of grocery prices, steep hikes are not easy.
A food industry official said, "The burdens of materials and supplies, packaging, and logistics keep growing, but because food is a category where consumers are highly sensitive to prices, we have no choice but to be cautious about adjustments," adding, "After the local elections, the industry as a whole is closely watching the situation."
This environment is also cited as a reason food companies are working harder to expand overseas. In the domestic market, they must consider inflation and consumer burdens, which restrict price increases, while in overseas markets they can pursue more flexible pricing in line with local competition and demand.
Accordingly, food companies are speeding up the establishment of overseas subsidiaries. Beyond securing pricing power, they aim to create bases to build local distribution and sales networks. Nongshim established a European subsidiary in Amsterdam, Netherlands, last year and plans to launch a Russian sales subsidiary this month. The Russian unit will not only target the local market but also serve as a base to expand its sales network into Commonwealth of Independent States (CIS) countries such as Kazakhstan and Uzbekistan.
Binggrae established an Australian subsidiary last year. The move is aimed at shifting away from a direct-export-centered structure to strengthen locally embedded sales and marketing capabilities. Through this, the company plans to develop Australia into a key base for targeting the Oceania market over the long term.
Industry analysts say K-food has entered a localization competition stage beyond export growth. Even if awareness of K-food has risen, consumer preferences and food cultures still differ by country. The ability to respond quickly to local consumer needs and develop products suited to local markets has become more important.
OTOKI established a local subsidiary in Tokyo in the past month. The Japan unit, which will go into full operation starting in September, plans to sell ramen, sauces, and sesame oil while also pursuing development of products tailored to local tastes. Samyang Foods set up a sales and logistics subsidiary in the Netherlands to target the European market and recently built an R&D base as well. Through this, the company plans to strengthen research on plant-based foods and functional foods.
A food industry official said, "If in the past overseas business focused on increasing export volumes, recently the capability to directly manage local consumers and distribution networks has become more important," adding, "Overseas subsidiaries are taking root as key bases not just for sales organizations but also for brand building and local product development."
Lee Jong-woo, a professor in the Department of Distribution and Marketing at Namseoul University, said, "K-food's entry through the establishment of overseas subsidiaries has moved into localization, the next step after expanding exports," adding, "Localization is essential to raise added value in overseas markets. Going forward, food companies' competitiveness will depend on how deeply they can put down roots in local markets."