Nongshim(004370)·Paldo Co.·OTOKI(007310) and other food companies are reportedly weighing price hikes in the second half. Due to the government's Chuseok price-control policy, large-scale holiday discount events are keeping prices in check around the holiday, but the possibility of increases after the break is being raised. If realized, consumers' perceived inflation burden is expected to grow.
According to related industries on the 8th, under the government's "Chuseok livelihood stabilization measures," Nongshim, OTOKI, CJ CheilJedang(097950) and other major food conglomerates have launched their own discounts. OTOKI is offering up to 50% off 392 products, including labor-intensive holiday ingredients such as instant noodles, instant rice, noodles, curry, and sauces. CJ CheilJedang is discounting up to 50% on 1,256 products, including canned goods such as Spam typically used for holiday gifts, instant rice (Hetbahn), frozen ready meals, and processed meat products. Samyang Foods(003230) has released a limited-edition premium ramen gift set, "Samyang1963 X Jjareureu Wooji."
Dongwon F&B and Daesang(001680) (Chung Jung One) are holding discount promotions focused on canned gift sets such as tuna and ham and on processed food categories. Pulmuone is running an event on its official online mall through the 25th, offering up to 55% off Chuseok holiday gift sets.
These holiday discount events were jointly planned by the government and the food industry. When prices have been shaken by external factors such as international affairs, it has been customary for the government to hold meetings with food companies and urge price stability. Recently, the Ministry of Agriculture, Food and Rural Affairs reportedly asked food corporations to refrain from raising prices around Chuseok as much as possible.
The Ministry of Agriculture, Food and Rural Affairs said 19 food companies are participating in this year's Chuseok price stabilization events to discount a total of 4,755 items, and large retailers are applying discounts of up to 70%. However, the prevailing view is that despite such large-scale discount events by the food industry, consumers are not feeling a large discount.
That is because some food companies have already sharply raised prices of flagship products. Nongshim, which leads the instant noodle market, on Aug. 1 raised prices by 6% on 18 cup noodle products including Yukgaejang Cup Noodles, while second-ranked OTOKI raised cup noodle prices by 5.5% and 6.7% starting the previous day. OTOKI also raised the price of instant rice sold at convenience stores starting on the 1st.
The problem is that as the uptrend in international raw material prices continues to be unstable, the food industry appears to be entering a game of timing for additional price hikes after Chuseok. The industry says wheat prices, which account for more than 50% of instant noodle materials and supplies, have surged, and cost burdens such as the strong dollar have accumulated, making price hikes inevitable.
In fact, with instability in international supply chains compounded by supply-demand disruptions from the Middle East conflict, the international average transaction price of wheat (flour) in July rose 14.5% to $228.7 per ton from $199.6 in June. The price of naphtha, the materials and supplies for cup noodle containers for which companies preemptively raised prices, jumped 18% in July to $864 per ton from $732 the previous month.
A representative of an instant noodle company said, "War, sharp exchange-rate swings, and high oil prices—every external variable is pointing toward price increases," and noted, "We somehow held out through the first half, but we can no longer delay price hikes." The person added, "However, with consumer sentiment deteriorating due to recent price increases and instant noodles being a representative price-control item, we are deliberating."