Korean food industry sees soaring growth last year driven by inflation

[Photo by Lee Chung-woo]

Korea’s domestic food manufacturers posted sales surpassing 100 trillion won ($78 billion) for the first time last year. The sales figure represents a 12.7 percent increase compared to the previous year and is more than double the average annual growth rate of the past five years between 2017 and 2021, which stood at 5.5 percent.

The recent growth of the domestic food industry has been steady, driven by an increase in the number of companies and product diversification. Additionally, the significant increase in consumer prices that occurred last year further contributed to the substantial expansion of the industry. As a result, the food industry’s contribution to the country‘s Gross Domestic Product (GDP) has now exceeded 5 percent.

On Thursday, the Ministry of Food and Drug Safety and the National Food Safety Information Service released the 2022 domestic food industry’s production performance data. The total production value of the domestic food industry last year was 105.11 trillion won, accounting for 4.9 percent of the GDP. While the food industry’s contribution to GDP increased to 4.5 percent in 2021 from 4.4 percent in 2020, the figure jumped to 4.9 percent last year. Looking at the manufacturing sector’s GDP alone, the food industry’s share jumped to 19.1 percent in 2022, from 17.8 percent in 2021 and 17.6 percent in 2020.

The high growth rate of the domestic food industry last year is not unrelated to the global inflationary trends. The food producer price index increased by 8.9 percent compared to the previous year, surpassing the recent five-year average growth rate of 1.6 percent. The producer price index is a comprehensive measure of price fluctuations for goods and services supplied to the domestic market by producers. In other words, food manufacturers raised their selling prices due to the increase in costs of ingredients and raw materials, as well as labor expenses, which significantly impacted the growth of the production value.

This effect was most evident in processed foods that rely heavily on imported raw materials. The production cost of flour and vegetable oils increased by 43.6 percent and 33.3 percent, respectively, leading to price increases in various processed foods such as instant noodles and bread. Meanwhile, certain product categories showed continued growth due to changes in consumption trends, contributing to the increase in the production value of processed foods. The production value of home meal replacement products increased by 14.1 percent compared to the previous year, and particularly, the production value of meal kits skyrocketed by 228.3 percent due to increased demand caused by rising dining-out costs.