Korean confectionaries localize as sales boom in overseas markets

The declining birthrate at home is forcing the snack makers to restrategize.

A consumer looks at the stall filled with Korean-made snacks and cookies at a large retailer in Seoul last year. [YONHAP]

Chung, a 33-year-old, came across a rice snack at a local convenience store in Vietnam, which later turned out to be a product from Korean confectionery manufacturer Orion.

“I have never seen the snack even in Korea and it is surprising to see that Korean snacks are gaining ground in Vietnam,” Chung said.

Consumers’ choices are no longer confined to well-known Korean snacks such as Choco Pies. Today, Korean confectioneries are captivating overseas consumers through localization strategies and niche products. With the young population of the country of origin declining with a plummeting birthrate, Korean sweets manufacturers have turned their eyes to foreign countries with the largest populations.

China, India and Vietnam have become their new blue ocean.

Seoul-based Orion recorded 1.854 trillion won ($1.38 billion) in overseas sales last year, accounting for 63.4 percent of the company’s gross sales.

Lotte Wellfood also posted 800 billion won of overseas sales last year. The figure has risen steadily from 643.8 billion won and 795.2 billion won in 2021 and 2022, respectively.

The companies' performances in the global market boosted their confidence. Korean firms believe their products are competent enough to become mainstream.

The most crucial key to such success lies in “thorough localization.” The companies prioritized overseas consumers’ appetites and cultural norms.

Lotte Wellfood presented the “Lotte Choco Pie — 100 percent vegetarian” to the Indian population, which comprises 80 percent Hindus and 13 percent Muslims. Hindus do not consume beef, while the latter abstain from pork.

The company switched marshmallow ingredients from gelatin made of livestock substances to plant-extracted gelatin.

Lotte’s vegan Choco Pie holds nearly 70 percent of the market share in the Indian choco pie market.

Choco Pie being sold in India [LOTTE INDIA]

The brand’s signature ice cream product, “World Cone,” also became a hit in the Indian market with a chocolate flavor, despite its original popularity in Korea with a vanilla flavor.

“Lotte sources its ice cream to some 72,000 retail vendors and 200 flagship stores across India. The business is likely to grow along with products like 'World Cone' and 'Seolleim,'" said Cho Yo-han, a New Delhi-stationed official at the Korea Trade-Investment Promotion Agency, in the report.

Korean confectioneries invested in R&D to make snacks tailored to foreign countries’ natural environments.

Orion developed authentic jelly-making technology, which enables their products to maintain their shapes and quality even in hot weather. The effort helped the company supply its jelly to 70 percent of local retail channels in Vietnam.

The well-known European jelly, Haribo, is only available in large stores with air conditioning devices installed because it easily melts when stored in higher temperatures.

Through the development, Orion was able to overcome the hurdle that prevented European products from making their way into small mom-and-pop stores in tropical countries.

A heat-resistant jelly developed and produced by Orion [ORION VIETNAM]

“Our jelly is considered to be a cheaper and safer alternative among Vietnamese mothers,” said Lee Dae-sung, a researcher working at Orion’s research institute in Vietnam.

Domestic sweets manufacturers are diving into international markets for their survival.

While the worldwide confectionery market is expanding, the Korean market is moving inversely.

An Ireland-based market research firm forecast the global confectionery industry to reach 306 trillion won by 2028, making a significant leap from last year’s size of 252 trillion won.

The Korean market generates less than 4 trillion won a year.

“In Korea, a country with a nose-diving birthrate, snacks have largely become a side dish for liquor among adults. However, in populous countries like India, children are the main customers of the industry, and such demographics impart higher potential,” an official from Lotte Wellfood said.

India’s confectionery market is estimated to be around 17 trillion won.

Korean firms are making reinvestments based on overseas sales.

Orion Vina Food, Orion’s Vietnamese branch, allotted 110 billion won to its Korean headquarters last year.

A picture of rice snacks available in convenience stores in Vietnam. The snacks are made by a Korean confectionery company, Orion. It is hard to notice the cookies are from Korea unless the consumer recognizes the logo of the manufacturer. [JOONGANG PHOTO]

“The Vietnam-based company has earned a net profit of over 50 billion won annually for the last five years,” an official from Orion said. “The fund from Vietnam will be used to build additional production lines in Jincheon in North Chungcheong and for loan payments.”

Orion utilized its infrastructure in China for its new bio business. The company has been establishing a joint business with China-based pharmaceutical firms.

Lotte Wellfood will bolster its foreign investment by positioning its Pepero, a chocolate-dipped cookie stick, as the brand signature in the global market.

The company plans to market its products and earn revenue in Southeast Asia, while setting up production facilities in India. It aims to stretch its sales capacity to the European market.

Lotte announced the construction of its first-ever foreign production plant dedicated to making Pepero by investing 33 billion won in Haryana, India. The company aspires to operate the factory next year and make Pepero account for 42 percent of all global sales by 2028.

BY LEE SU-JEONG [lee.soojung1@joongang.co.kr]