Market and Trade Data
South Korean Consumers
Opt for Convenience
FAS Report KS7024
Korea, a country the size of Indiana and home to 50
million, has an evolving retail food industry. As its
predominantly urban population becomes more affluent,
convenience is a driving force in the retail food
2005, the retail food market was estimated at $50
billion, up 5 percent from the year before. Though
overall growth has slowed in recent years, modern retail
outlets are growing rapidly. Since their introduction in
1993, modern mass retail businesses in South Korea have
expanded dramatically, accounting for 40 percent of the
retail food sales in 2005.
retailers are responding to consumer demand with
increased amounts and varieties of convenience food
products, online ordering, and delivery service.
Hypermarkets have become the single largest retail force
in South Korea, and there is room for expansion as
demand in dense metropolitan areas fuels growth.
phenomenon, online retailers, has grown 189 percent
during the past 5 years to almost a tenth of retail
sales. Demands for convenience, more products, dense
population, and consumers’ high affinity for information
technology have been key factors behind online shopping
growth. By 2008, online shopping sales are expected to
be second only to that of mass retailers.
Competition and consolidation within the food retail
industry will continue as businesses establish
horizontal integration to encompass all retail food
shopping formats — hypermarkets, online shopping,
convenience stores, supermarkets, and department stores.
International Retailers Import Directly
While international retailers do import many of their
food products directly, few domestic retailers do,
buying instead from specialized importers. Though
domestic companies plan to move toward direct imports to
diversify their offerings, progress is slow. For now,
they are focusing on developing private brands,
including processed foods, to attract higher profits and
growth of mass retail venues has coincided with the
rapid development of a modern, large-scale logistics and
distribution sector in South Korea. Most mass retailers
have nationwide, controlled-temperature distribution
networks of trucks and warehouses. Smaller retailers
tend to rely on third-party distributors. Many food
importers have their own distribution force covering
major metropolitan areas, but use third-party
distributors further afield.
Look for Quality, Functional Products
Like U.S. consumers, Korean shoppers look for better
value, convenience, new tastes, and safer and fresher
products. For affluent groups and young professionals,
quality and image can outweigh price and other factors
when making purchasing decisions.
part to increasing health awareness of aging consumers,
there is a public emphasis on healthy eating. Organic
foods and wines have gained popularity among
culture has long subscribed to the health attributes of
ordinary foods. This belief contributes to an ongoing
trend to seek these effects in almost every food
encountered in the market. As a result, sales of
functional foods (regular foods targeting health
concerns) with efficacy claims, remain strong; e.g.,
glucosamine, chlorella, vitamins, antioxidants, lactic
bacteria, antlers, pollen, green tea, fish oil, and
ginseng and other Asian herbs.
As with any market, research is important to understand
trends and local tastes. The Korean dietary culture is
fast evolving, so it is important to keep informed.
Korean trends tend to follow and be about 2-5 years
later than those of Japan.
Inner-city congestion has impacted distribution and
store size. In Seoul, traditional markets and small
independent retail outlets still flourish. The
convenience store format has made inroads here, but the
expansion of hypermarkets and chain supermarkets has
been more pronounced in developing suburban areas.
distributors and retailers are risk-averse, they often
exchange promotional support for slotting fees for new
products. In-store promotions are highly recommended,
with free sampling most commonly used.
integrated retailer — and most leading retailers are
horizontally integrated to operate across a full
spectrum of retail formats — can provide access into its
Korean food processors compete directly with imported
consumer-ready U.S. products, and consumers are
generally biased toward homegrown and produced products.
However, the food industry depends heavily on imported
raw materials and ingredients.
competition in consumer-ready foods comes from:
European countries and Japan for confectioneries and
Australia, New Zealand, and France for meats and
Norway, China, Thailand, and Vietnam for fish
China and Chile for fresh fruits and other produce
How Will KORUS
FTA Affect U.S. Exports to South Korea?
South Korea is our sixth-largest food and
agricultural export market. The United
States already supplies a wide range of
agricultural products to South Korea
including corn, soybeans, wheat, and
In 2004, South Korea imported $14.7 billion
in agricultural products to satisfy the
demand from its increasingly affluent
consumers. In 2006, about $3.2 billion came
from the United States — making us South
Korea’s largest foreign supplier of these
KORUS FTA will create highly valuable new
export opportunities for U.S. farmers and
ranchers by eliminating and phasing out
tariffs and quotas on a broad range of
products. Under the agreement, over $1.9
billion worth of U.S. farm exports to South
Korea will become duty-free immediately.
Most remaining tariffs and quotas will be
phased out over the first 10 years the
agreement is in force.
This agreement will also help our producers
compete against those in countries such as
China and Australia, which are making
inroads into the South Korean market.
from China have increased greatly in recent years. South
Korea’s free trade agreement with Chile has greatly
expanded Chile’s market share in wines, grapes, pork,
and olive oil.
a weakening U.S. dollar has helped U.S. products become
more affordable and gain an edge against competitors in
recent years. Additionally, KORUS FTA, the U.S.-Korea
Free Trade Agreement, concluded on April 1, 2007, has
focused attention of Korean importers on U.S. products.
With little arable land (South Korea’s terrain is 70
percent mountainous), consumers depend heavily on
imports as the country’s resources cannot supply all
their needs. About 70 percent of all foods are imported.
In 2006, U.S. consumer-oriented products accounted for
$882 million of the $2.7 billion worth of U.S. foods
imported in 2006.
recent growth of mass retailers and increasingly
sophisticated tastes are translating into opportunities
for consumer-ready food products. Large retailers are
looking for ways to increase their assortment of
imported foods. Best-selling U.S. products include pork,
poultry, seafood, processed vegetables, fruits, tree
nuts, dairy products, juices, alcoholic beverages,
condiments, sauces, cooking oils, organic foods, coffee,
snacks, and confectioneries.
with good potential include processed turkey meat,
specialty cheeses, soups and broths, ethnic sauces and
spices, prepared foods, processed organic products,
packaged fresh vegetables, and specialty fresh fruits.
Private label branded products also offer new
opportunities for U.S. exporters.
author is an agricultural promotional specialist with
the FAS Agricultural Trade Office in Seoul, South Korea.