Major bakery companies that cut prices on some products early this year in line with the government's inflation-control stance are raising prices again after half a year. As items that had been reduced at the time are now included in the hikes, some say the price-cut effect led by the government did not last long.
According to the bakery industry on the 25th, major bakery companies such as Paris Baguette, Tous Les Jours, and Samlip have recently raised prices on key products including bread and cakes in succession. Tous Les Jours raised the recommended retail prices of a total of 76 types of bread and cakes by an average of 8.2% starting on the 31st of last month. Dunkin also raised the prices of 39 types of donuts by an average of 6.5% starting on the 2nd of this month. Paris Baguette will raise prices by an average of 5% starting today on 86 types of bread and 41 types of cakes and desserts. Bread prices sold at retail outlets such as convenience stores are also going up. Samlip will raise prices on about 50 bread products by an average of 9% starting on the 1st of next month.
This effectively reverses the first-half price cuts carried out in line with the government's price-stability stance in as little as five to six months. Earlier in March, Paris Baguette cut the supply prices of six types of bread, including red bean bread, streusel bread, and cream puff bread, by 100 won, but recently adjusted them back to 1,600 won, returning to the pre-cut price. However, for the three-slice castella that was lowered from 3,500 won to 2,990 won at the time, the price was raised to 3,150 won this time, keeping it below the pre-cut level.
Tous Les Jours is similar. Among the items whose prices were cut in March, "MAGUMAGU chestnut bread" was included in this round of price hikes. The increase only restored the price to the level before the cut. A CJ Foodville official, which operates Tous Les Jours, said, "MAGUMAGU chestnut bread saw a sharp rise in the price of raw chestnuts rather than flour, so this is a case of reverting to the pre-cut price," and added, "Although the cost burden is higher, it had not been long since we lowered the price, so there was reluctance to raise it sharply again, and we adjusted it only up to the level before the cut."
The industry cited eggs, milk, and fats and oils rather than flour as the key reasons for the latest price hikes. A bakery industry official said, "Flour's share in bread production costs is smaller than you might think," and added, "Eggs, milk, fresh cream, and butter account for a much higher share, and recently the rise in egg prices has been the biggest burden." The official continued, "Packaging costs have risen significantly due to higher global oil prices, and the burden of labor and utility costs is also growing," and added, "There were calls to cut bread prices as flour prices fell in February and March, but that was somewhat out of step with the actual cost structure."
The bakery industry also said franchisee burdens factored into the price adjustments. In bakery franchises, the headquarters presents a recommended retail price, but franchisees set the actual selling price autonomously. A bakery industry official said, "Franchise owners have also faced a growing burden from higher egg and sub-ingredient prices, but when the recommended retail price is maintained, it is hard to raise prices on their own," and added, "Adjusting the recommended price gives owners room to adjust prices according to their circumstances."
◇ "Unilateral demands for price cuts have limited effect"
The latest price hikes are seen as exposing the gap between the government's price-stability policy and corporations' cost burdens. In the first half, companies lowered consumer prices in line with price cuts by milling and sugar firms and the government's price-stability stance, but in the second half, with costs rising in tandem for eggs, fats and oils, and packaging, it became difficult to maintain the lower prices.
Lee Jong-woo, a professor in the department of distribution and marketing at Namseoul University, said, "The first-half price cuts were aligned with the government's price-stability stance, but even then the industry's cost burdens were not fully resolved," and added, "With a strong dollar persisting for a long period and simultaneous increases in materials and supplies such as eggs and butter, as well as oil prices and labor costs, corporations could no longer hold prices."
He added, "If the government wants to stabilize prices, there are limits to simply asking corporations to cut prices," and said, "To sustain the effects of price stabilization, efforts must be made in parallel to ease structural cost burdens such as exchange rates, raw material prices, and logistics costs, and to reflect voices from the field in policy."