Korea’s largest food and hospitality exhibition, Seoul Food and Hotel 2022, kicked off yesterday! Hosted across four days, the event will see over 50,000 visitors and over 1,500 exhibitors from over 40 countries. It’s also wonderful to see many Australian companies supported by Investment NSW, showcasing their products to buyers from Korea and beyond.
So, why South Korea?
One of Asia’s Economic Powerhouses
South Korea is Asia’s third-largest economy after Japan and China. This creates a powerful economy! GDP per capita is amongst the highest in Asia at US$31,497, which is unsurprising given total GDP surpasses the trillion-dollar mark at US$1.81 trillion. While the pandemic certainly dampened economic growth and purchasing power, consumer confidence has held up strong, with the economy making a strong recovery over the past few months.
Australia As One of Korea’s Reputable Trading Partners
Korea’s Ease of Doing Business rank of 5th globally creates minimal barriers to entry for exporters. Despite expanding local food manufacturing sectors, Korea remains reliant on imports to fulfil its food and agriculture needs.
Australia is already a major exporter to Korea, with Korea being Australia’s fourth-largest two-way trading partner. Demand for Australian goods is strong as well amongst heightened food safety concerns, given Australia’s reputation for providing fresh and premium F&B products due to our clean and green environment. As such, Australia is already renowned in Korea for its beef, wheat, cheese, wine and dairy products. With that being said, there’s huge untapped potential for Australian agribusinesses, especially those offering premium products! Australian food and beverage exporters also have much to gain from the Korea Australia Free Trade Agreement (KAFTA). Signed in 2014, the agreement is set to reduce tariffs on up to 99.8% of goods exports by 2033, and 300% of agricultural exports, including beef, wheat, dairy, wine and seafood.
A Shrinking and Ageing Population
South Korea’s population is currently almost double that of Australia, with 51.83 million residents. This creates significant potential for Australian exporters who have a large consumer base to target in South Korea! However, it should be noted that the population isn’t growing quickly, and is in fact, declining at a rate of -0.04%. The population is also ageing, with a median age of 43.7 years and the United Nations predicting that Korea will have one of the oldest populations globally within a mere few decades.
Convenience, Quality and Ethics Win Over Consumers
Convenience remains an important driving factor for eating habits in South Korea, which becomes evident when we explore the foodservice sector later on. This is largely driven by a highly urbanised population. Consequently, ready-to-eat and easy-to-cook meal innovations are highly sought after. They’re also seeking high-value and high-quality foods, with the latter especially popular as rising disposable incomes drive demand for diversified and sophisticated foods. Home-indulgence was common in 2020 as the pandemic took hold, leading to higher than usual growth rates for categories like wine, which was the top choice when it came to home drinking. Exporters particularly benefited from this trend as Korea’s wine imports grew 27% in 2020 to a record $330 million.
So, what else is influencing the South Korean consumer? Firstly, purchases are mainly made for image and status reasons, and so consumers gravitate towards major brands that design very detailed packaging. Brand loyalty is low, and changes quickly as consumers place a great degree of value on online product reviews and feedback. Meanwhile, ethical consumerism is on the rise, with consumers concerned about their environmental footprint. And while the population has certainly become more mindful of their spending after the pandemic, the shift towards lower priced products hasn’t significantly affected the F&B sector where spending rates remain stable.
Western Influences Taking Hold
When visiting South Korea, it’s easy to see that global food trends are reflected in the culture. It’s a fast-paced market, and people are willing to accept new ideas and trends. The South Korean population, and especially younger populations are increasingly influenced by trends in the Western world, creating exciting impacts in the food and beverage space. Consumers are opting for exotic blends of cuisines and fusion foods, and industry operators are taking note! We can see this in the foodservice sector, where restaurants across the country are becoming increasingly varied in their offerings, from American-style fast-food chains to traditional, family-owned and local establishments.
Functional Foods See Pandemic-Related Growth
As the pandemic boosted health concerns around the world, South Korean consumers sought to take control by buying functional food products. Specifically, immune-boosting products became popular as people sought to strengthen their defences against COVID-19. This generally benefited products such as red ginseng, seeing a 263% sales increase in 2020, as well as biotics and vitamin D, which saw a 192% and 212% increase in sales, respectively. South Korean consumers see diet as an important way of ensuring good health, and so products such as green tea, black bean and black sesame have risen in popularity.
A Vibrant and Thriving Cafe Scene
South Korea is home to a strong variety of both domestic and international quick service chain operators, including Starbucks and McDonald’s. But one of the most important foodservice trends to note is South Korea’s vibrant coffee culture. In fact, Seoul houses over 18,000 cafes! And, this figure is only expected to grow as cafes and bars are projected to witness significant growth in coming years.
The rise of home delivery is set to benefit quick-service operators and cafes alike, as they capitalise on the trend by forming partnerships with online delivery platforms like Woowa Brothers. This is in line with rising consumer demand for online meal delivery services, which have seen growth of 46% during the pandemic according to a USDA report, as well as growth in years prior when single-person households began growing at a rapid pace. In particular, operators have focused on developing more convenient and healthier food delivery options. This has given rise to a growing number of meal replacement kit services, which are popular because of their convenience, affordability, good taste and time-saving capabilities!
Categories to Watch
A large economy requires a large food and beverage industry! So it’s no surprise that Korea’s industry is valued at US$102.24 billion.This figure is set to experience strong growth towards a value of US$125.01 billion in 2026, which will be driven by growth in alcoholic beverages and food. South Korea’s high urbanisation level is certainly having an impact on growth categories, with busy lifestyles fuelling growth in categories including frozen foods and prepared meals. A recent survey from the South Korean government has also revealed a significant shift towards buying processed foods more frequently, once again reflecting the preference for convenience. As aforementioned, functional health foods also remain a space to watch as consumers focus on health improvement and disease prevention, which is driving 80% of households to actively purchase health foods.
South Korea is a powerful economy, following China and Japan. An economy as large as Korea requires a large food and beverage industry! That being said, it’s no surprise that Korea’s F&B industry is set to experience strong growth towards a value of US$125.01 billion in 2026, which will be driven by growth in alcoholic beverages and food.
Strong category trends are forecasted for alcoholic beverages, functional foods and convenience meals with exotic blends of cuisines and fusion foods also becoming increasingly popular.
It’s easy to see that global food trends are reflected in the culture. It’s a fast-paced, vibrant market and people are willing to accept new ideas and trends, especially within the F&B space. Australia is already a major exporter to Korea, with Korea being Australia’s fourth-largest two-way trading partner. And with an attractive free trade agreement between the two countries. it’s definitely an export market worth exploring!
We hope you’ve found these insights on the South Korean market helpful. As always, if you’ve got any questions or want to discuss export opportunities for your company, feel free to drop us a line at Export Connect – we’d love to hear from you.