Health and Wellness Series – Organic packaged food trends In South Korea

Market overview

In 2021, South Korea was the sixteenth largest organic packaged food market in the world, and the third largest in Asia, behind China and Japan. Total sales of organic packaged food totalled US$326.8 million, and sales grew at a CAGR of 9.4% from 2017-2021. Growth was particularly strong in 2018, which saw year-over-year growth of 15.0%, while 2018-2021 saw a CAGR of 7.7%. Growth is expected to slow from 2022-2026, with the market expanding at a CAGR of 3.7% over the period. By 2026, it is expected that South Korean sales of organic packaged food will total US$399.0 million. By this time, the South Korean market is expected to be twentieth largest market globally.

In 2021, organic packaged foods in South Korea made up 1.1% of all packaged food sales, up from 0.8% in 2017. Organic packaged food sales are expected to reach 1.2% of all packaged food sales by 2026. From 2017-2021, total packaged food sales grew at a CAGR of 3.0%, slower than the rate of organic packaged foods, which grew at 9.4%. From 2022-2026, packaged foods are expected to grow at a CAGR of 2.4%, slightly below organic packaged foods' CAGR of 3.7%.

South Korea has experienced consistent economic growth since the Asian Financial Crisis and is expected to continue to see strong growth. GDP grew at a CAGR of 2.9% from 2017-2021 and is expected to grow at a CAGR of 4.2% from 2022-2026. Consumer expenditure grew at a CAGR of 2.3% from 2017-2021, experiencing a decline in 2020 and rebounding in 2021. Consumer expenditure is expected to grow at a CAGR of 4.1% from 2022-2026.

South Korea had been successful at pursuing a covid zero policy and experienced a relatively modest economic shock from the coronavirus pandemic, registering positive GDP growth in 2020. However, in 2022, South Korea saw a dramatic rise in cases, with daily confirmed case counts sometimes exceeding 1% of the population and a test positivity of over 50%.^{Footnote 1}

Consumer characteristics

As of 2021, South Korea had the lowest fertility rate of any country in the world, with an average of 0.85 children born per woman, and it is an increasingly cemented cultural norm for parents to have only one child. In 2020, 79.3% of households with children had only one child. South Korea is also a country which features relatively long working hours and high disposable incomes. Consequently, South Korean parents have significant amounts of money to spend on few children and are willing to pay a premium for products considered of higher quality for their children, and there is strong demand for organic baby food. Demand for organic baby food enjoys greater demand than organic food of any other variety, and growth in this category is expected to be stronger than for any other category. Organic milk is also popular among parents, although some of this has to do with the popularity of the 110 ml packaging in which it retails.

Meanwhile, in South Korea, health and wellness are concerns that are increasingly on the minds of consumers, and many South Koreans are keen to purchase products that are healthy or aid in weight loss. However, South Korean consumers who purchase organic goods are often not motivated by the organic label specifically, but rather other labels such as antibiotic free. Top concerns among many South Korean consumers include finding products that aid in weight loss and do not have high levels of salt.

South Korean organic market shares

The South Korean market for organic packaged foods is relatively consolidated. In 2021, the largest company enjoyed a 50.5% market share, while the top 5 companies collectively held 71.9% of the market, up from 68.6% in 2017. The largest player was Maeil Dairies Co Ltd, a player in both organic dairy and organic baby food. Maeil Dairies Co Ltd had a 50.5% market share, down slightly from 51.9% in 2017. In 2021, Maeil Dairies Co Ltd had a 46.0% market share in organic baby food, down from 67.5% in 2017, and an 80.8% market share in organic dairy, up from 72.2% in 2017.

The second largest player was Hipp GmbH & Co Vertrieb KG, which by 2021 accounted for 10.0% of the organic packaged foods market after a period of explosive growth. Hipp GmbH & Co Vertrieb KG accounted for 29.2% of organic baby food sales. The third largest player was National Agricultural Cooperative Federation, with a 6.5% overall market share and a 32.8% share of organic rice, pasta, and noodles.

Subsector growth

Total retail sales of organic packaged food totalled US$326.8 million in 2021 and grew at a CAGR of 9.4% from 2017 to 2021. A total of 1.0% of the retail sales of packaged foods were organic in 2021. The largest sector of organic packaged food was the dairy market, which saw organic sales of US$140.2 million in 2021. Dairy also saw the fastest growth in retail sales from 2017 to 2021, growing at a CAGR of 11.0%. Baby food was the next largest category, with total sales of US$112.3 million in 2021. Organic baby food also saw rapid growth, growing at a CAGR of 10.1% from 2017 to 2021. Organic baby food accounted for 22.5% of total baby food sales in 2021, far ahead of any other category.

The sector is expected to see more subdued growth from 2022-2026, growing at a CAGR of 3.7%. By 2026, total organic packaged food sales are expected to have risen to 1.1% of all packaged food sales. Organic dairy is expected to make up 2.9% of dairy sales, while organic baby food is expected to make up 24.4% of baby food sales. Organic baby food is expected to see the fastest growth from 2017-2021, growing at a CAGR of 4.0%.

The organic rice and pasta category also saw significant sales, with US$65.1 million in 2021 and expected sales of US$78.9 million in 2026. 1.2% of rice, pasta, and noodles sales were organic in 2021. Sales in this category were made up entirely of organic rice, and 2.2% of total rice sales were organic in 2021. Organic rice saw a significant spike in sales in 2020, due to the pandemic and the increased number of Koreans cooking at home. The organic confectionary sector, meanwhile, was made up entirely of chocolate confectionary in 2021.

Dairy

Organic dairy saw total retail sales of US$140.2 million in 2021, with sales of organic milk accounting for US$100.2 million, or 71.5% or total sales. From 2017-2021 sales of organic milk grew at a CAGR of 17.7%. Organic cheese was the second largest category. Sales of organic cheese saw a significant decline over the historic period, growing at a CAGR of −8.4% and falling from US$30.2 million to US$21.3 million. Organic flavoured milk drinks saw US$18.7 million in sales in 2021 and grew at a CAGR of 16.9% from 2017-2021.

From 2022-2026, organic flavoured milk drinks are expected to see the strongest growth, growing at a CAGR of 7.1% and rising from US$20.9 million to US$27.5 million. Organic milk is expected to grow at a CAGR of 3.6%, while organic cheese sales are expected to remain flat.

IN 2021 sales of organic dairy products were dominated by Maeil Dairies Co Ltd, which enjoyed an 80.8% market share in 2021, up from 69.6% in 2016. The next largest player was Lotte Group with a 3.3% share. While Seoul Dairy Cooperative was third with a 3.3% share. Seoul Dairy Cooperative saw its market share decline significantly over the period, falling from 13.9% in 2016.

Baby Food

Total sales of organic baby food amounted to US$112.3 million in 2021 and grew at a CAGR of 10.1% from 2017-2021. Organic milk formula was the largest subcategory, with US$69.9 million in 2021, or 62.2% of total organic baby food sales. Organic milk formula saw growth at a CAGR of 16.0% from 2017-2021, far above any other category. Organic milk formula is expected to lead growth in the sector from 2022-2026, growing at a CAGR of 5.6% over the historic period. Total sales of organic baby food are expected to grow at a CAGR of 4.0% from 2022-2026. Organic dried baby food saw negative growth from 2017-2021 and is expected to see negative growth from 2022-2026.

The organic baby food sector has become more fragmented from 2016-2021. The largest player, Maeil Dairies Co Ltd, saw its market share fall from 67.9% in 2016 to 46.0% in 2021. The third largest player, Namyang Dairy Products Co Ltd, also registered a decline. However, the second largest player, Hipp GmbH & Co Vertrieb KG, has seen its market share grow explosively. Its market share now stands at US$29.2 million. Combined, the two largest players in the market account for 75.2% of the market, only slightly down from the 78.6% share enjoyed in 2016 by the then two largest players.

New product launch analysis

The top claim for organic packaged food launches from 2017-2021 was the food being for those aged 0-4, with 237 total launches. Other common claims included the absence of additives or preservatives with 203 claims, convenient packaging with 198 claims, and claims of an environmentally friendly product with 198 claims. In addition, environmentally friendly packaging saw 135 claims. Wholegrain products saw 175 claims, while foods lacking allergens saw 140 claims.

Popular packaging types included products that came in a flexible stand-up pouch, flexible packaging, and a jar. Popular flavours included strawberry, roasted or toasted, and apple. However, by far the most common flavour was plain. In addition to salt and sugar, purified water, rice and milk were common ingredients to include in organic products.

Examples of new product launches

Organic Labelling

In South Korea, using the phrase "100% organic" is prohibited. Anything that is certified as such must be advertised simply as organic, while products that fall below this threshold must be labelled with a claim such as "organically grown", with a statement indicating the percentage of non-organic ingredients. If the level of organic ingredients falls below 95% organic, it cannot be claimed as organic.

Products in South Korea can receive a label indicating that they are certified organic according to the Ministry of Agriculture, Food, and Rural Affairs. However, Canada and South Korea do not have an organic equivalency agreement that would allow products certified as organic in Canada to market themselves as certified organic in Korea. ^{Footnote 2}

Conclusion

The popularity of organic products in South Korea is less mainstream than in some other advanced economies. The South Korean market for organic packaged foods has seen strong growth over the last several years, although growth remains almost entirely dependent on organic dairy, baby food, and rice. Organic dairy, baby food, and rice are all expected to see dynamic growth in the coming years, however organic packaged food will remain a relatively small portion of the overall market, expected to account for 1.1% of packaged food retail sales in 2026.

Organic milk, organic flavoured milk drinks, and organic milk formula in particular are expected to be the main drivers of growth. The markets for organic dairy and organic baby food are both quite consolidated. Nevertheless, opportunities exist for Canadian suppliers that seek to take advantage of the growing popularity of organic foods in South Korea.

For more information on what the CKFTA will mean for Canada's agriculture and agri-food sector visit the CKFTA for Agri-Food Exporters page. Further information on the state of Canadian market access to South Korea can be found through the Canada Tariff Finder.

South Korea is also in the process of applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which Canada has already signed, along with Mexico, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

For more information

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Resources

• Euromonitor International. Better For You Packaged Food in South Korea, January 2022
• Euromonitor International. Economy, Finance and Trade: South Korea, February 2022
• Euromonitor International. Organic Packaged Food in South Korea, January 2022
• California Certified Organic Farmers. International Market Labeling Guide, January 2022
• Johns Hopkins University Center for Systems Science and Engineering. COVID-19 Data Repository, April 2022

Health and Wellness Series – Organic packaged food trends In South Korea
Global Analysis Report

Prepared by: Brendan Dwyer, Student

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