Inflation triggers fried chicken price war in South Korea
In South Korea, where the highest inflation in years is causing chicken prices to rise, one grocery store is cutting costs.
Homeplus, the nation’s second-largest retailer, has slashed prices for fried chicken by as much as two-thirds to cash in on consumer angst. Demand has surged. Koreans have left no stone unturned in looking for ways to save on food. That includes standing in hours-long queues to buy discounted poultry.
Homeplus has turned the logic of seeking wider profit margins through price hikes on its head. But if successful, the retailer, which has nearly 140 branches, could boost its market share in a country where fried chicken is big business and emerge as an unlikely ally in the Bank of Korea’s fight against inflation.
The country is dotted with tens of thousands of chicken “hofs” – pubs that specialise in fried chicken and beer. But prices have soared recently, out-pacing most other foods.
Higher delivery fees introduced during the pandemic have only added to consumer grumbles. So in late June, Homeplus launched “Dangdang” chicken, which in Korean means “fair” or “proud,” but is also shorthand for “made today, for sale today.”
Customers flooded the retailers’ supermarkets to buy a bucket for 6,990 won. In the weeks that followed, rival chains followed suit.
For a limited time, Lotte slashed the price of its main chicken product by almost half. Emart, South Korea’s largest retailer, rolled out its own week-long deal, selling a bucket of chicken for 5,980 won. The company said cooked chicken sales for July jumped 26% compared to last year.
Homeplus, which is run by Jay-hoon Lee, the former KFC Korea chief, has committed to selling discounted chicken indefinitely. The company says it has kept Dangdang profitable by streamlining its supply chain and relying on word of mouth, rather than a flashy marketing campaign, to draw in customers.
Chicken plays a significant role in South Korea’s inflation numbers. The meat is among the most heavily weighted among some 480 products and services that the government tracks for inflation, ranking 29th. And pork, which ranks 16th, the highest among grocers, also comes under pressure if chicken prices fall because the customer base is similar.
Prices have surged this year after sharp jumps in energy and commodity costs. Demand has also quickly strengthened as Covid restrictions eased and people returned to in-restaurant dining.
To address inflation running at 6.3%, the fastest pace in more than 23 years, the BOK has raised interest rates repeatedly. Meanwhile the government has cut fuel taxes to keep a lid on costs while boosting supplies through extra imports and the release of public stockpiles.
The government estimates that shops specialising in chicken generate an average of 200 million won in sales each year. Total revenue nationwide amounts to a whopping 7.3 trillion won.
By comparison, Homeplus has sold about 460,000 buckets since its June launch. That equates to 3.2 billion won, a paltry figure next to the estimated 610 billion won sold each month by neighborhood stores nationwide.
Still, Koreans are hopeful that retailers like Homeplus will pressure others to lower prices. Many are far less sympathetic to mom-and-pop chicken stores than they were in 2010, when Lotte rolled out a similar low-priced product.
Public backlash was fierce and a then-presidential aide accused the supermarket chain of jeopardizing tens of thousands of small businesses. Lotte stopped selling the chicken almost immediately.
SOURCE: NEWS AGENCIES