Middle East War Prolongation Sparks Crisis Fears in South Korean Food Sector

South Korea's food industry is sounding the alarm over worsening business conditions, citing the prolonged Middle East conflict as a major catalyst. A meeting convened by the Korea Food Industry Association brought together industry leaders and government officials to discuss the escalating challenges, which include rising oil prices, currency fluctuations, increased logistics costs, and sluggish domestic demand.

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The packaging material price is still at a high level, so the cost burden on the food industry continues.

Industry representatives highlighted that the cumulative impact of these factors is significantly increasing operational costs. Packaging materials, a key component for many food products, have seen supply disruptions and persistent price hikes. For instance, naphtha, a primary raw material for packaging, dropped to about 70% of normal supply levels in March-April following the conflict, though it has since recovered to 85-90%. However, prices remain high, adding to the burden. Beverage companies specifically noted that packaging constitutes a large portion of their costs, exacerbating profitability issues already strained by weak domestic sales.

Companies across various sectors, including ramen manufacturers, are grappling with increased costs for essential ingredients like palm oil and soybean oil, alongside packaging expenses. Despite these mounting pressures, many firms are hesitant to raise prices due to concerns about consumer affordability, leading to significant management strain. The industry is increasingly adopting emergency management strategies to navigate the difficult economic climate.

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The cost burden due to the rise in prices of oils such as palm oil and soybean oil and packaging materials continues. Even though cost increase factors are accumulating, it is difficult to adjust prices considering consumer price burden, so management burden is increasing.

Looking ahead, the outlook for the second half of the year remains challenging. The food industry is urging the government to expand policy support. Key requests include assistance for export competitiveness through measures like support for national certifications, building a "K-Food" certification system, expanding export vouchers, and increasing participation in overseas trade fairs. Additionally, they are seeking measures to stabilize management, such as a temporary increase in the tax deduction rate and limits for the purchase tax credit on raw materials and packaging for food manufacturers.

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We need support for strengthening export competitiveness, such as support for national certification and regulatory response by country, establishment of K-Food certification system, expansion of export vouchers, and support for participation in overseas exhibitions.