In South Korea, fried chicken is the latest sign of inflationary problems



Hong Kong/Seoul
CNN business

Clark Park, a 35-year-old YouTuber, is one of many people fed up with high food prices in South Korea.

That’s why he took the camera and joined a large number of buyers one August morning asking for cheap fried chicken at Homeplus, a hypermarket chain that had just reduced prices by 12%, which already had many discounts.

“There were already more than 50 people lined up,” Park told CNN Business, adding that many arrived early and waited more than an hour. “We all ran together as soon as the deli opened. That’s when I felt the fried chicken craze.”

Fried chicken has long been a favorite among South Korean consumers, and now it’s also underscoring the country’s inflationary woes, with rising food prices weighing more on wallets of late.

The average cost of fried chicken in South Korea rose 11.4% in August compared to the same month a year ago, outpacing price jumps at other popular eateries such as kimchi stew or barbecue beef, according to government data.

Consumers may feel even more so, depending on how much restaurants or supermarkets pass up their costs: In some cases, retail chicken prices have “increased by more than 50%” in the past two years, according to Jeong Woo Park, a South Korean economist at Nomura.

People around the world have faced similar struggles in recent months as global food prices have soared, and scenes like the Homeplus chicken race are reminders of how families are adjusting to wider inflation, which has reached 5.7% in South Korea. They also point out how dependent the country is on other nations for much of its food.

Fried chicken is a big cultural touch in South Korea, just like British fish and chips, which have also become more expensive this year. Many people see it as a must-have snack at sporting events, and it’s not unusual for customers to pick it up several times a month.

Anyone visiting the country will stumble upon some local chicken and beer, or monkeys,” joint That’s because one in 20 restaurants is a chicken joint, according to the government.

South Korea is the world’s third-largest market for fried chicken, outstripping the much more populous United States and China, according to data from market research provider Euromonitor International.

Crispy chicken “can be called the national food of South Korea, for example kimchi, bulgogi, and bibimbap” said Clark Park, content creator, referring to other products that locals appreciate.

Like other cultural favorites, it’s also serious business: Korean chicken restaurants are expected to make $7.9 billion in 2021, according to Euromonitor.

This kind of devotion has created a conundrum for stores, which must take care of their bottom lines without alienating customers.

“All costs related to fried chicken are rising very fast,” said Jeong Woo Park, a Nomura economist, adding that vendors are facing rising costs of oil, rent, labor, delivery services and even chicken feed. In response, he added, some restaurants have started using robots to lower labor costs.

Dealers have taken very different approaches to the situation in recent months. Major chicken chains have raised menu prices by an average of 2,000 Korean won ($1.50), according to Yunjin Park, senior food and nutrition research analyst at Euromonitor, citing “rising ingredient prices.” This led to a 10% to 15% increase in the price of fried chicken, he added.

Although the difference may seem small, it could easily mean that customers will have to pay almost $22 for a simple meal, Yunjin Park told CNN Business: “Chicken, which was a comfort food for Koreans, is now not easy. -order menu [item] without a doubt.”

On the contrary, local hypermarkets go in the other direction. Clark Park’s participation in Homeplus was for the August sale what the chain called “boil chicken,” a promotion for fried chicken for a third of the price most retailers offer.

Other stores feel pressure to keep up, even if only in the short term. In August, emart, another large supermarket chain, launched a week-long promotion to sell fried chicken at nearly 50% off, selling all 60,000 pieces.

Not everyone can afford to cut prices, and some smaller stores could be forced to close until costs come down again.

A Homeplus employee selling fried chicken cubes.  The hypermarket has put pressure on other stores to follow its popular discounts.

“If you look at how these chain businesses are able to sell at these low rates, it’s basically due to economies of scale,” said Barsali Bhattacharyya, manager of industry information at the Economist Intelligence Unit (EIU).

“They are able to buy more products and, as a result, demand a better rate from their suppliers. Now, your small mom-and-pop shops won’t be able to enjoy that advantage, which means you’re going to see much higher costs.”

One reason South Korea faces such problems is that it imports almost half of its food, according to the EIU.

Asia is one of the world’s most exposed to price rises because it depends on other countries for many types of food, Nomura economists warned in a June report. Singapore, Hong Kong and the Philippines are also seen as weak.

Global food prices have risen this year due to Russia’s invasion of Ukraine. Both countries are typically major exporters of essential goods such as wheat and sunflower oil.

The worst may already be over: In August, the United Nations Food Price Index fell for the fifth month in a row, and in Korea, headline inflation also eased more than expected.

But things are not expected to improve significantly anytime soon. “We believe inflation has passed its peak, but is likely to remain above 5% for the rest of the year,” Min Joo Kang, chief economist for South Korea and Japan at ING, wrote in a note to clients.

Other grocery items are becoming more expensive in other parts of Asia as well.

Last month, Thailand – where the government sets prices for some foods – raised the price of instant noodles for the first time in 14 years. A package of a popular brand has increased by the equivalent of 3 to 20 cents, threatening to disproportionately affect low-income families.

“Food inflation is a sticky issue for Asia,” Bhattacharyya said.

Because incomes in most regions fall into the low to middle range, food typically accounts for a large portion of total consumer spending, in some cases reaching 30% to 40%, he said.

He concluded: “I think it was only a matter of time before the global food price crisis hit Asia.”

-— CNN’s Gawon Bae in Seoul and Kocha Olarn in Bangkok contributed to this report.