Food and beverage market in South Korea

South Korea, the 13th largest economy in the world, relies on imports and is New Zealand's sixth largest export destination for food and beverage products. South Korea is one of the most affluent populations in Asia and its people appreciates the clean, green image of New Zealand but know only a few of its brands.

Market structure

  • Of South Korea's 48 million population, 80 percent live in urban areas. Korea has a number of large cities besides the capital, Seoul, which has 22 million people. Busan, Inchon, Daegu, Daejeon, Gwangju and Ulsan and Suwon have populations between 3.7 million and 1 million.(i)
  • Grocery retail sales totalled US$57.1 billion in South Korea with hypermarkets dominating the market taking a 44 percent share, followed by supermarkets, independent small grocers and convenience stores. The leading hypermarkets are E-mart, Homeplus, Lotte Mmart and Costco. The supermarket chain stores are Hanaro Mart, Homeplus Express, Lotte Super and GS Supermarket.
  • Hypermarkets and supermarkets are the major retail channels for imported food and beverage products in South Korea. Department stores are the main channel for high end imported food and beverage products. Korean retailers rely on specialised importers and distributors for imported food products.
  • Grocery retailers are the main distribution channel for the US$21.84 billion packaged food market which consists of dried processed food products, diary, bakery, noodles and ice cream. (ii)
  • Mass grocery retail sector is reaching saturation point in the popular areas of urban cities. The convenience retail sector, with operators such as Family Mart, GS25, Seven Eleven, Buy the Way and Mini Stop, is relatively immature and expected to be the top performer in mass grocery retail growth.
  • Food and beverage internet retail sales totalled US$759 million in 2011, slightly hindered by the fact that some products such as wine are prohibited from internet sales. Hypermarkets and supermarkets are becoming more involved in internet retailing.(iii)
  • The foodservice market in South Korea was valued at US$61.5 billion in 2011 and a number of large franchise restaurant groups are showing rapid growth. Western-style food is increasing in popularity.

Growth drivers 

  • The highest growth in packaged food sales is in meal replacement products for slimming and convalescence products.
  • Affluent young South Korean professionals are buying non-essential food items especially those with health and functional benefits.(iv)
  • Consumers generally base their purchasing decision on competitive price, taste, quality, brand and country of origin though sustainability, carbon footprint, environmental issues and traceability are becoming more important. Koreans are drawn by products that offer well-being, safety, convenience and value.
  • South Korea's food and beverage per capita consumption is forecast to grow by a compound annual growth rate of 5.1 percent up to 2016.(v) The biggest area of growth in the fresh food market is expected to be fruit, nuts and meat.

Import trends

  • South Korea was New Zealand's sixth largest export destination for food and beverage products in 2011 with exports totalling US $553.53 million (vi). Dairy, meat, prepared foods, fruit and seafood were the main exports.
  • South Korea imported a total of US$23.4 billion worth of food and beverage products in 2011, the bulk coming from the US, China and Australia.
  • South Koreans imported 24.8 million litres of wine in 2010, the majority of it from Chile, Spain, Italy and France.

Market entry and development

Market entry strategies

  • The best way to enter Korea is through a reliable importer who can advise on the complex regulations and market information. It is not unusual for Korean importers to ask for exclusive rights to your brand.
  • Korean retailers expect New Zealand brands to hold in-store promotions and tastings. A reference list of successful sales in other markets such as Japan or the US can be a useful marketing tool and help Korean buyers differentiate your product from others.
  • New Zealand companies should be prepared to talk to their South Korean importer partners about a clear marketing plan. It is also recommended that New Zealand companies actively manage their relationships with importers creating short term or long term business plans, reviewing performance and visiting major customers regularly.
  • To ensure business success in Korea, it is important to build personal relationships with business contacts, personal visits to offices, drink meetings after work. Be prepared for numerous questions from Korean businesses and considerable ongoing communication.
  • South Korean customers are price conscious, though becoming more interested in quality. New Zealand companies should prepare for a lengthy negotiating process.
  • Social media based strategies are becoming the most popular form of advertising with a smartphone market which has increased by 750 percent during 2010.

Regulatory information

To find the correct tariff rate, New Zealand companies need to use the harmonised system (HS) code. For information on tariffs, go to the Korean Customs Office.

As well as tariffs, other taxes may be applicable, for wine, for instance.

South Korea has free trade agreements with Chile, Norway, Switzerland, the EU and the US which impact on New Zealand's competitiveness especially in areas like wine.

Food and beverage import regulations vary by product. To ensure the product meets standards and specification, New Zealand companies should file an inquiry to the governing body through their importer/distributor.

For processed food import regulations see the Ministry of Food and Drug Safety.

For livestock meat and dairy regulations see National Veterinary Research and Quarantine Service.

For fruit and vegetable regulations see Animal and Plant Quarantine Agency website.

All food and beverage imports must be labelled in Korean. Labelling standards and import requirements can frequently change in Korea, be advised by Korean representatives.

Market resources and contacts

Government

Korea Customs Service 

Ministry of Food and Drug Safety

Korea Food Industry Association 

Industry 

Korea New Zealand Business Council

Korea International Trade Association

Trade events

Seoul Food and Hotel 

Food Ingredients Korea 

Sources

(i)New Zealand Trade and Enterprise Seoul
(ii)Euromonitor International, 29 November 2011, Packaged Food in South Korea
(iii)Euromonitor International, 28 February 2012, Internet retailing in South Korea.
(iv)Business Monitor International, January 2012, South Korea Food & Drink Report, Q1 2012.
(v)Business Monitor International, January 2012,South Korea Food & Drink Report Q1 2012
(vi)Global Trade Atlas

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