[Consumerwide_Jinil Kang Reporter / Yohan Bok Reporter]  The price of wheat went down, yet relevant food prices won't go down. Korean bread and snack manufacturers are taking a step to bring prices down, centering on flour and Ramyeon products due to government demand, recently. However, it seems to be tiny from the customer's point of view. (photo: ConsumerwideDB / Above photo is not directly related to this report.)

The price of wheat went down, yet relevant food prices won't go down. Korean bread and snack manufacturers are taking a step to bring prices down, centering on flour and Ramyeon products due to government demand, recently. However, it somehow stopped at the minimum level, considering any possible cost we may count. Thus, the change is probably felt tiny from the customer's point of view.

On the 26th, according to the global price of raw material data provided by the Korea importers association, the price of wheat futures went down to 7.39 dollars per bushel, which was a 4% (7.7 dollars) decline from the end of 2021, during the CME transaction in US on the 22nd. The world price of wheat peaked at 14.25 dollars per bushel during March, which doubled from its current status, right after the Russia-Ukraine War in Feb 2022. However, the price recovered back to the regular price after July. Between August and October 2022, at the time point when the wheat which manufacturers purchased at a high price was used for production, Ramyeon/bread/snack manufacturing businesses raised sales prices. This can be easily understood considering that usually it takes about six months till the actual wheat price is applied to the product, considering the nature of trading futures. Nevertheless, it doesn't make sense that Ramyeon, bread, and snack businesses are still hesitant in lowering prices even after one year of wheat price recovery.

Furthermore, some food businesses are having improvements in their sales performance because they pay less than what is supposed to pay for raw materials while raising prices. For instance, the sales income rate of Nongshim was 6.2% during the first quarter this year in domestic areas, which is a twofold increase from the sales income rate (3.1%) in 2021 before the high rise in raw material costs. This is probably the reason that the media criticize the way businesses set up prices on account of raw material costs recently. Businesses are rather hesitant about lowering prices, whereas they are rapid when raising the price. They all say that it is inevitable to maintain prices because of sugar, corn, and yellow bean prices being highly raised differently from the wheat price. However, these businesses are taking a step to bring the price down, centering on flour and Ramyeon products due to government demand, which is good news. The issue lies in whether the change is felt from the customer's point of view. Besides, the government is pressing on the price of dairy, ice cream, coffee, and drink products. In particular, the price of coffee ingredients has fallen over 20% since the beginning of 2022. Yet, the price of a coffee refill product, which is one of the representative products of Dongsuh foods corporation, was raised by 17.6% over January and December last year. These businesses will eventually participate in government policy. However, the focus is on the level of increase. Popular food restaurants are not free from price issues either, as they have been constantly raising the prices, having an excuse for the price raise of ingredients.

According to "Cham-ga-gyeok" (Real price), which is a price information portal facilitated by the Korea consumer agency, the price for the typical budget food menu has raised over 40% for the last 5 years from 2018 in Seoul, in which cases include Kimbab (46%), Jajangmyeon (40.5%), and Nengmyeon (24.6%) menus. Since then, food prices have remained the same even after wheat prices fell. Rather, it's getting more expensive. After all, a surprise attack is from elsewhere. Sugar prices have risen over 30% in the last year and a half.

We have got to watch closely whether current government policy on the market will have a practical impact on high inflation in the Korean food market, and further steps of businesses, which include Ramyeon, bread, snack, dairy, ice cream, coffee, and drink product businesses.