Market Overview – South Korea

Country profile

Income and expenditure

The South Korean consumer market was adversely affected by the pandemic. The country is anticipated to recover over the medium term guided by easing restrictions, improving consumer confidence, expansionary fiscal policy and declining inflationary risks.

Per capita disposable income is forecast to increase at a moderate rate as tax and social security as a share of gross income, is set to in increase and remain the highest across regional countries while demographic changes, including a rapidly ageing population and declining workforce, continue to pose major challenges to long-term economic development and income growth.

The country has a relatively large middle class which is forecast to outpace the expansion of other social classes, and expected to represent over a third of total households by 2040.

The Gyeonggi-do region will remain the largest consumer market in South Korea as it is anticipated to experience rapid expansion, accounting for 25.0% of total consumer expenditure by 2040.

Demographics

South Korea's population is expected to reach 51.9 million in 2028 and then decline to 50.9 million by 2040 as net migration reduces and natural decrease (higher death rate than birth rate) strengthens. The median ages of males and females will be 53.1 and 56.2 years respectively by 2040 as longevity will continue to increase with growth only occurring in the 60+ cohorts, while birth rates will remain low. Despite a declining and ageing population, South Korea's substantial populace and relatively high and rising wealth levels should ensure the country remains an extensive consumer market.

Universal quality health care, traditional healthy lifestyles and lower rates of smoking and obesity influence the country's higher life expectancy rate (% of cohorts who reach age 65; 91.8% in 2020 and 93.9% by 2040). Obesity and diabetes however, are expected to rise as lack of work-life balance contributes to increasingly sedentary lifestyles with more deficient diets.

Urbanisation will strengthen as the urban population is expected to represent 84.0% of the population by 2040.

Consumers

According to Euromonitor International's Voice of the Consumer; Lifestyle Survey, 42% of South Korean consumers in general, are less interested than their global counterparts in trying new products and services as millennials research their products, and are more focused on unique, new and tailored items and engage with brands. South Koreans are also global leaders in recycling as reducing food waste and recycling to compost is a consumer priority for 65% of respondents.

In 2022, roughly 23% of the total population was represented by Generation X (those aged 40 to 54 years) and 12.5% of total consumer expenditure (US$4,364) was spent per household, on food versus US$6,600 on housing and US$26,372 on non-essentials. The single person and couple with children households, were the prominent households by type and apartments accounted for the majority of households, and continue to be more common than single-family homes in South Korea. Seoul was the largest city representing 45% of South Korea's total population with disposable income per capita just under US$25,000, followed by Busan representing roughly 8% of South Korea's total population with disposable income per capita of US$4,500.

In terms of cooking and eating habits, a lack of skill and a preference for convenience remain as barriers to home cooking as eating out or ordering food, provide suitable alternatives. In addition, because of kitchen space limitations, South Koreans tend to prepare meals at home less frequently than their global counterparts (61% versus 75% respectively). Consumers also prefer healthy foods (as increased spending on health and wellness is anticipated by 45% or survey respondents) with informative nutrition labels on food and beverages. Plant-based diets are not as common as only 4% of respondents claim to be vegans or vegetarians however, 22% want to reduce their meat consumption, whether based on health, environmental or animal welfare grounds and as more options become available, demand for plant-based is expected to grow significantly. Further, 71% of survey respondents say they regularly take health supplements/vitamins as the products are popular amongst all generations.

Consumer spending habits have been effected by increasing inflation as a considerable and growing number of consumers become price-conscious, actively seeking to spend less by finding the lowest prices (25% of respondents report they regularly seek low-cost products and 60% of baby boomers like to find bargains).

Production

Maize (corn) was South Korea's primary domestic crop, with production volumes of 2.3 million tonnes in 2021, representing an increase in compound annual growth rate (CAGR) of 1.1% from 2.2 million tonnes in 2017. Potatoes attained the highest CAGR of 11.3%, while rice and cabbages experienced declines in CAGR's of 6.1% and 1.6% respectively, during the same period.

Rabbits were South Korea's largest livestock (live animals) with volumes of 27.0 million in 2021, despite a decline in CAGR of 4.1% from 32.0 million in 2017, while chickens (as South Korea's second largest livestock-live animal), increased in CAGR by 3.0% from volumes of 15.4 million to 17.3 million during the same period.

Rabbits were South Korea's primary meat, producing 131,126 tonnes in 2021 representing a decline in CAGR of 3.9% from 154,000 tonnes in 2017. Swine/pig meat production also declined in growth by 3.7%, while chicken meat experienced an increase in CAGR of 2.3% from 29,945 tonnes in 2017 to 32,834 tonnes in 2021.

Trade

Korea depends heavily on imports to fulfill its food and agricultural needs, as domestic production is limited, meeting only 46% of the country's food demand (United States Department of Agriculture (USDA); Food Processing Ingredients, May 2023). Recently, the pandemic, Russia's invasion of Ukraine and rising inflation, have impacted the country's reliance on available and affordable agriculture imports (South Korea continued to import vast amounts of food and beverage products to maintain food security in 2020 despite the challenges presented by the pandemic {Food Navigator Asia; March 16, 2021}).

To mitigate some of the economic pressure experienced by the country, Korea's Finance Ministry expanded its tariff-rate quota on energy, and lifted import tariffs on 26 major industry and food items in 2022, as the country struggled to cope with inflation and the strong U.S dollar (The Korea Times; Finance, July, October 2022). Despite this initiative, Statistics Korea reports that the prices of processed food has risen by 7.9%, with three out of ten items experiencing a double-digit growth (The Korea Times; Finance, May 2023). In addition, Korea's grain self-sufficiency rate (the proportion of grain production compared to domestic consumption of the commodity) has also fallen below the 20% mark for the first time amidst growing international grain prices, as experts caution Korean consumers will continue to face steeper rises in food prices compared to their counterparts in other countries (The Korea Times; Business, April 2022). In the interim, the government has encouraged food manufacturers and industry to control their prices as they continue to increase, despite the relative stabilization of other consumer prices (The Korea Times; Finance, May, 2023).

South Korea is a net importer of agri-food and seafood products. In 2022, South Korea's agri-food and seafood trade deficit was US$36.0 billion with imports valued at US$46.8 billion, and exports at US$10.8 billion. The United States (U.S) and China were South Korea's primary agri-food and seafood suppliers with values of US$10.6 billion (22.7% market share) and US$5.0 billion (10.8% market share) respectively, followed by Australia with values of US$3.9 billion (8.4% market share) in 2022.

Canada in comparison, was South Korea's ninth largest supplier of agri-food and seafood products with values of US$1.2 billion (2.5% market share) in 2022. Top imports from Canada in 2022 were low erucic acid rape or colza oil (US$206.5 million, 17.7% market share), wheat (US$122.6 million, 10.5% market share), frozen meat of swine (pork), bone in (US$103.3 million, 8.9% market share), fresh or chilled meat of swine (pork), bone in (US$95.8 million, 8.2% market share) and food preparations, n.e.s. (US$85.8 million, 7.3% market share).

South Korea's agri-food and seafood imports have increased moderately by a CAGR of 8.9% from US$33.3 billion in 2018. In 2022, top agri-food and seafood imports from the world were corn, food preparations, not elswhere specified, frozen pork, wheat and frozen, boneless beef. Key supplying countries were the United States (U.S) (22.7% market share), China (10.8% market share), Australia (8.4% market share), Brazil (6.1% market share ) and Argentina (5.1% market share) in 2022.

South Korea's processed food and beverage imports were valued at US$32.8 billion in 2022, with Canada as the ninth largest supplier, accounting for US$920.3 million (2.8% of the market). South Korea's processed food and beverage imports increased by 8.4%% from US$23.8 billion in 2017 to US$32.8 billion noted in 2022. In 2022, South Korea's top processed food and beverage imports from the world were food preparations n.e.s., frozen pork, frozen, boneless beef, fresh or chilled boneless beef and frozen beef cuts with bone in. Top suppling countries to South Korea were the U.S., China, Australia, Vietnam and Brazil accounting for 53.8% of the market in 2022.

In 2022, South Korea exported US$10.8 billion of agri-food and seafood to global markets. Top agri-food and seafood exports were pasta, food preparations n.e.s., cigarettes, non-alcoholic beverages and fruit and other edible parts of plants. Top export markets were Japan, China, the U.S, Vietnam and Hong Kong Canada was South Korea's fourteenth largest export market for agri-food and seafood with values of US$179.9 million (1.7% market share) in 2022.

Canada's performance

Canada exported US$974.1 million of agri-food and seafood products to South Korea in 2022. The top agri-food and seafood suppling Canadian provinces were Alberta with values of US$324.5 million (33.3% market share), followed by Saskatchewan with US$139.5 million (14.3% market share) and Ontario with values of US$113.4 million (11.6% market share) in 2022.

Low erucic acid rape or colza oil/canola oil was the largest commodity exported (US$145.4 million) to South Korea with Saskatchewan representing 59.7% of the market share and Alberta representing the remaining market share (40.3%) in 2022. Wheat was the second largest commodity exported to South Korea with values of US$106.3 million with Saskatchewan and Alberta providing 35.2% and 32.7% respectively, followed by Manitoba and Ontario providing 19.0% and 11.3% respectively, of the market share in 2022.

Retail sales

According to Euromonitor International, in 2020, packaged food in South Korea recorded the strongest retail value growth with the emergence of the pandemic, strengthening the home-cooking trend, and demand for packaged food. Ready meals (meals and soups) and meal kits grew in popularity offering convenient home and restaurant meal replacements with the option of food and drink delivery, if requested. E-commerce remained a popular distribution channel for packaged food during the pandemic offering a convenient and greater selection of supplies and products in relation to those found in brick-and-mortar retailers, in addition to the increased availability of packaged ready meals and meal kits from popular restaurants. The less congested supermarkets and convenience stores located near residential areas were the preferred in-store retail distribution channels for limiting a consumer's physical time spent in-store.

The packaged food market in South Korea was valued at US$30.3 billion in 2022 and experienced a marginal increase in CAGR of 3.4% from US$25.5 billion in 2017 (+6.2% from US$26.7 billion in 2019 to US$28.3 billion in 2020) . The market is forecast to increase in CAGR by 3.1% to attain US$35.3 billion by 2027.

The top three packaged food categories in South Korea, in terms of largest retail value sales in 2022, were rice, pasta and noodles with values of US$4.9 billion (16.0% market share) increasing at a CAGR of 2.0% from US$4.4 billion in 2017 , followed by dairy with values of US$4.4 billion (14.5% market share) increasing in CAGR by 1.6% from US$4.0 billion in 2017 and processed meat, seafood and alternatives to meat valued at US$3.7 billion (12.4% market share), representing an increase in CAGR of 4.8% from US$3.0 billion in 2017 Of interest, the meals and soups category performed well within the historic period as the product experienced the largest increase in CAGR (16.9%) as retail sales increased from US$1.5 billion in 2017 to US$3.3 billion in 2022. Similarly, breakfast cereals also performed well, and experienced an increase in CAGR of 7.5% as retail sales grew from US$202.2 million to US$290.5 million during the same period. In contrast, baby food and confectionery experienced declines in CAGR of 0.7% and 3.0% respectively, during the same period, and are expected to recover with increases in CAGR of 3.7% and 4.0% respectively, in the forecast period.

South Korea's packaged food market is expected to remain positive in the forecast period, as more consumers remain satisfied with the quality of ready meals (meals and soups) and with home-cooked meals in general (Euromonitor International). For example, dumplings, included under frozen ready/meals, has been developed by leading food manufacturers in South Korea and are now perceived by consumers as having better quality than restaurant versions, with the potential to generate consistent sales growth in packaged food in the forecast period (Euromonitor International).

Health and wellness packaged food

Health and wellness is expected to experience continued growth amid growing consumer interest in healthy living and eating habits. Notable changes in consumption habits such as a greater willingness to try new packaged products with reduced sugar and salt, has increased in demand (Euromonitor International, 2022).

The health and wellness food and drink product sector in Souh Korea experienced an increase in CAGR of 4.3% from US$7.7 billion in 2018 to US$9.1 billion in 2022 (+4.1% from US$7.9 billion in 2019 to US$8.2 billion in 2020) and is expected to increase in CAGR by an additional 4.3% to attain US$10.8 billion in 2026. Naturally Healthy (NH) was the largest health and wellness category in the historic period with retail sales of US4.2 billion in 2022 and is expected to remain the largest category in the forecast period with retail sales of US$5.2 billion in 2026. Fortified/Functional (FF) was the second largest health and wellness category in the historic period with retail sales of US3.0 billion in 2022 and is expected to remain the second largest category in the forecast period with retail sales of US$3.3 billion by 2026. Of interest, Free From Lactose and Organic Beverages experienced the largest increase in CAGR in the historic period (25.5% and 13.5% respectively.

In terms of retail channel distribution of health and wellness products, e-commerce has grown as a result of the pandemic as soft drink manufacturers in particular, increased their online sales growth and presence by offering products in large packaging formats, while convenience stores offered consumers convenience in location, even though their price offerings were less competitive in comparison to larger hypermarkets and supermarkets.

The health and wellness food and drink product sector is expected to increase theoughout the forecast period by a CAGR of 4.3% as naturally healthy (NH) and fortified functional (FF), remain the larger product categories. NH nuts, seeds and trail mixes will continue to appeal as popular local souvenirs purchased by inbound travellers while increasing demand for NH bottled water and lightly flavoured beverages also promises a brighter future for this category (Euromonitor International, 2022). Of note, the revisions in regulations concerning the recognition of functional ingredients, in addition to the standards and specifications for healthy functional foods by the Ministry of Food and Drug Safety, is anticipated to further expand and promote the specific health benefits inherent to the FF beverages product range in the future (Euromonitor International, 2022).

Foodservice

Social distancing restrictions were lifted in 2022 and consumer foodservice in South Korea witnessed an increase in value sales. Increasing costs and inflation however, encouraged foodservice participants to raise their prices, and a polarization of consumption (premium versus affordable costs of dining out) developed. (Euromonitor International, 2023). Both independent and chained consumer foodservice industries experienced increases in terms of the number of outlets, transactions and value sales in 2022, however, independent consumer foodservice participants reported larger value sales indicating that Korean consumers preferred more diversified dining out experiences after the pandemic (Euromonitor International, 2023).

Consumer foodservice in South Korea increased slightly in CAGR by 1.1% from value sales of US$68.4 billion in 2017 to US$72.2 billion in 2022 (−12.1% from US$75.6 billion in 2019 to US$66.5 billion in 2020). Post pandemic, with the occurrence of increased labour costs and fewer employees working in restaurants, led to the increase of IT services available and implemented in the consumer foodservice industry. In addition to widely used kiosks, more tablets for ordering food and robot servers to substitute wait staff became more prominent (Euromonitor International, 2023).

Full-service and limited-service were the largest foodservice types in the historic period, despite full-service restaurant's recent decline in CAGR, with value sales of US$39.5 billion and US$19.7 billion respectively in 2022, as more family and casual dining full-service restaurants rebranded as premium full-service restaurants, increasing their menu prices and providing high-quality ingredient dishes (Euromonitor International, 2023). Cafés and bars experienced slight declines in CAGR of 2.2% as value sales decreased from US$13.7 billion in 2017 to US$12.2 billion in 2022 (−21.5% from US$14.8 billion in 2019 to US$11.6 billion in 2020), while self-service cafeterias experienced the largest increase in CAGR (14.8%) as value sales increased from US$62.0 million in 2017 to US$123.6 million in 2022.

Consumer foodservice value sales are expected to continue to increase in the forecast period by a moderate CAGR of 7.3%, to attain US$102.9 billion by 2027. Euromonitor International notes that the prospects for the South Korean consumer foodservice industry will be positive after the pandemic as the demand for dining out is expected to rise in the forecast period. In particular, cafés and specialist coffee and tea shop outlets are anticipated to increase, while full-service and limited-service restaurants are expected to expand their value sales throughout the forecast period. Street stalls/kiosks transaction volumes in contrast, are predicted to decline in the forecast period, unless new key trends or participants emerge (Euromonitor International, 2023).

The standalone (freestanding foodservice establishments, not operating in a travel, leisure, lodging or retail location) format was by far, the largest consumer foodservice by location with value sales of US$58.3 billion (80.7% market share) in 2022, representing an increase in CAGR of 1.9% from US$52.9 billion in 2017 (−6.6% from US$57.9 billion in 2019 to US$54.2 billion in 2020). In comparison, consumer foodservice through lodging (food establishments located in hotels) attained modest value sales of US$1.0 billion in 2022, while both travel and lodging experienced the largest declines in CAGR's (7.4% and 2.8% respectively) in the historic period however, these locations are expected to recover by CAGR's of 18.6% and 11.6% respectively by 2027 as pandemic implemented travel restrictions ease and are removed, as more inbound travellers will lead to increased spending on food and drinks and accommodations in travel locations (Euromonitor International, 2023).

Opportunities for Canada

South Korea is a net importer of agri-food and seafood products. In 2022, South Korea's agri-food and seafood trade deficit was US$36.0 billion with imports valued at US$46.8 billion, and exports at US$10.8 billion. Canada was South Korea's ninth largest supplier of agri-food and seafood products with values of US$1.2 billion, representing a 2.5% market share in 2022. In comparison, the U.S was South Korea's primary agri-food and seafood supplier with values of US$10.6 billion, representing a 22.7% market share in 2022.

Canada has an available supply capacity, and is a trusted, and reliable source for agri-food and value-added products. As noted, Canada has yielded an agri-food production capacity equivalent to 80% of South Korea's primary domestic crop production from 2017 to 2021, and was the eleventh largest global supplier of processed food and beverage products with values of CDN$54.6 billion in 2022 (Global Trade Tracker, April 2023).

Given the expected and continued growth in the South Korean market, Canadian producers and suppliers have an opportunity to expand their exports and products within agri-food and value-added product market in South Korea. That being said, it is important for interested Canadian suppliers to work closely with Trade Commissioners to help find qualified importing partners to ensure South Korea's import requirements and duties for their specific products are met.

Benefits of the Canada-Korea Free Trade Agreement (CKFTA)

The Canada-Korea Free Trade Agreement (CKFTA) is Canada's first free trade agreement (FTA) in Asia-Pacific representing increased, and preferential access for Canadian exporters and suppliers to the Korean market. Once fully implemented, the CKFTA will result in the elimination of tariffs on virtually all trade between Canada and Korea and will increase market access opportunities across all sectors.

Since the agreement entered into force on January 1, 2015, 85% of Canada's exports benefited from duty free market access into Korea, and since January 1, 2021, 98.5% of Canada's exports were eligible for duty free access. Upon full implementation of the CKFTA on January 1, 2032, Korean tariffs will be eliminated on 99.75% of Canada's current exports (Trade Commissioner Services; Country and Sector Information, Korea, Republic, How the CKFTA will benefit Canada's Key Economic Sectors).

For more information on the CKFTA and prospective benefits from this Agreement, please visit Canada-Korea Free Trade Agreement, or contact the Trade Commissioner Service in South Korea (seoul-td@international.gc.ca). Trade Commissioner Services; Country and Sector Information, Korea, Republic, How the CKFTA will benefit Canada's Key Economic Sectors).

In addition, please consult the Canada Tariff Finder to explore tariff information for the South Korean market under the CKFTA, and other foreign markets with which Canada has a free trade agreement Trade Commissioner Services; Country and Sector Information, Korea, Republic, How the CKFTA will benefit Canada's Key Economic Sectors).

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

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Resources

• Euromonitor International:
  • Country Report; Consumer Foodservice in South Korea, February 2023
  • Country Report; Consumer Lifestyles in South Korea, June 2022
  • Country Report; Consumer Values and Behaviour in South Korea, June 2022
  • Country Report; Health and Wellness in South Korea, January 2022
  • Country Report; Income and Expenditure: South Korea, May 2022
  • Country Report; Packaged Food in South Korea, December 2020
  • Country Report; South Korea in 2040: The Future Demographic, September 2021.
• Food Navigator Asia. South Korea food imports 2020:  Wines and processed fruit top list as beer and kimchi take COVID-19 hit. Neo, Pearly. March 16, 2021.
• Global Trade Tracker, 2023.
• United States Department of Agriculture (USDA); Food Processing Ingredients, Chun, Hye rim. May 3, 2023, page 1.
• The Korea Times-Finance; Gov't pressures manufacturers to curb food prices. Yeon-woo, Lee. May 8, 2023.
• The Korea Times-Finance; Korea to expand tariff-rate quota on energy, food imports. October 28, 2022.
• The Korea Times-Finance; S. Korea to lift import tariffs on more key foodstuffs amid high inflation. July 8, 2022.
• Trade Commissioner Services; Country and Sector Information, Korea, Republic, How the CKFTA will benefit Canada's Key Economic Sectors

Market Overview – South Korea
Global Analysis Report

Prepared by: Laurie Bernardi, International Market Research Analyst

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