On the 21st, the food aisle at Asung Daiso Co.'s Poi intersection store in Yangjae-dong, Seoul, was packed with a tight display of various foods such as snacks, seasonings, and ready-to-cook items made by CJ CheilJedang(097950) and Daesang(001680), Dongwon F&B, and OTOKI(007310). Snacks were 1,000 won or 1,500 won; seasonings and sauces were 2,000 won or 3,000 won; and ready-to-cook items were 5,000 won, with the shelves arranged to match each fixed price band. Products were arranged by price band rather than by type. Food companies said they develop separate products by reducing the volume of existing items or changing packaging and configuration according to the prices requested by Asung Daiso Co.. According to Asung Daiso Co., first-half sales in the food category this year rose 30% from a year earlier.
On the 26th, the industry said that as high inflation continues, the food sector's "ultra-low price" strategy is spreading beyond one-off promotions to lowering prices from the product planning stage. At convenience stores, more ultra-low price products co-planned with manufacturers are appearing. At CU, a convenience store chain run by BGF Retail, the "Deuktem series" includes 990-won samgak gimbap, 990-won hot bars, and 880-won cup ramyeon, and this year 18 new Delaffe items priced in the 1,000-won range were also launched.
Ultra-low price products that have grown mainly through fixed-price and low-price channels such as Asung Daiso Co. and convenience stores are now expanding into regular products in general distribution networks. Instead of discounting existing products, food companies have begun choosing a method in which they first set a target price and then design the product to match that price.
Namyang Dairy Products(003920) last month released the stick coffee "French Cafe Daily Americano" at a minimum of 99 won per stick. Compared with the usual stick coffee price around 200 won, the product halves the burden. Namyang Dairy Products also unveiled the 900-won-range cup coffee "French Cafe Devil's Temptation 200 mL" last month. Instead of lowering the price of the existing 250 mL product, the company launched a new 200 mL product and is selling it alongside the existing one.
Paris Baguette in June launched four new breads priced in the 1,000-won range. Earlier in February, it introduced "bite-size bread" as part of the regular lineup, pricing three snack breads at 990 won and two sandwiches at 1,990 won.
The industry is focusing on so-called "psychological price bands" such as 990 won, 1,000 won, and 1,990 won. With high inflation making consumers more sensitive to expenditure, companies judge that the absolute price actually paid, rather than the discount rate, influences purchase decisions.
A food industry official said, "Spending in 990-won, 1,000-won, and 2,000-won units seems to be increasing compared with before," and added, "When ultra-low price products appear at a time when there is little you can buy for 1,000 won, they can prompt purchases of items people otherwise would not have bought."
However, the industry views it as difficult for ultra-low price competition to expand to every product category. That is because the burden of costs such as materials and supplies, labor, and logistics remains. Accordingly, more cases are expected in which companies manage cost by adjusting volume and configuration and improving production efficiency to meet target prices.
Another food industry official said, "If a product was previously sold in the high-1,000-won range, there are cases where it is artificially matched to 1,000 won and the product is made to fit that," adding, "It means first setting a price point at which it is likely to sell and then designing the product."