Food industry employs low-key price hikes to avoid gov’t pressure

Seoulmilk Products on Sale at a convenience store in Seoul. [Photo by Yonhap]

Prices of manufactured house staples are quietly rising as food companies employ tactful pricing mechanisms that shift away from their previous stances to comply with governmental pressure to curb price hikes and stabilize prices.

While maintaining the prices of their signature items, food companies significantly increase the prices of their non-signature items. Alternatively, they sell their new products with only minor enhancements compared to existing products, at prices up to 50 percent higher than the existing items.

According to industry sources on Monday, Seoul Dairy Cooperative will increase the price of its 1-liter white milk sold at convenience stores to 3,200 won ($2.4) from the current 3,050 won starting in October. The 4.9 percent increase may not seem significant, but the dairy maker is also planning to raise the price of its 1.8-liter milk product to 6,200 won from 5,550 won, or a substantial 11.7 percent surge. The dairy company’s 200-milliliter milk product will also see a price hike of 9.1 percent to 1,200 won from the previous 1,100 won.

Prices for flavored, processed milk products and yogurt are also set to see significant hikes. The price for a 300ml processed milk is expected to increase by a considerable 11.1 percent to hit 2,000 won from 1,800 won, while its topping yogurt product will be sold for 2,300 won, a 27.8 percent increase from 1,800 won. While the dairy maker minimized the price hike for 1-liter milk, which is on the government’s list for price stabilization, it raised prices for its other products by 10 percent or more.

At the end of August, the Korea Dairy Committee confirmed the proposed price hike for basic raw milk during its board meeting, following their temporary agreement in July. The confirmed price for raw milk for drinking purposes has risen by 8.8 percent to 1,084 won per liter, an increase of 88 won per liter. The raw milk price for processed use has also increased by 10.9 percent to 887 won per liter, an increase of 87 won per liter. Amid a 10 percent increase in raw milk prices, the price of Seoulmilk’s 1-liter product rose only three percent, apparently in response to government pressure. The dairy maker stated that the 1-liter milk would be sold for under 3,000 won at big box stores.

Amid rising food prices ahead of the Chuseok holiday in late September, the government organized a price stability meeting with 22 food and dining industry players last week. However, Seoulmilk did not participate in the meeting. The dairy maker had announced the three-percent price increase plan before the meeting.

The instant noodle industry is also attempting to increase their product prices, discontinuing their previous involvement in the government’s efforts to curb price hikes since June. The strategy the industry is employing involves introducing new products with slight modifications to existing ones but with a significant price surge.

One example is Nongshim Co., which released a new instant noodle, Shin Ramyun The Red in mid-August. The new product was priced at 1,500 won, which is 57.9 percent higher than the regular Shin Ramyun, priced at 950 won. Similarly, Ottogi Corp. also released Mayeol Ramyun, a modified edition of its popular noodle, Yeol Ramyun, and the latest product was set to be sold for 1,500 won, a 57.9 percent higher price than the existing Yeol Ramyun, which is sold for 950 won. Samyang Food Co. has also set the price for its new noodle product 42.9 percent higher than its signature noodle product.

“Most recent releases of instant noodles have only added some additional ingredients or enhanced spiciness compared to existing products. The government‘s excessive price control is ultimately causing food companies to raise prices in unconventional ways,” an unnamed industry insider said.