1. General data
The number of confirmed cases of COVID-19 in South Korea had reached 10,702 by April 23. Inevitably, the outbreak shocked South Korea's economy. The International Monetary Fund (IMF) predicted Korea’s economic growth rate was minus 1.2%, which would be the first contraction since the foreign exchange crisis in 1998 [1].
The Korean government has implemented several policies to fight against coronavirus. Authorities have called for people to work remotely and suspended school. This new normal has also drastically changed consumer purchasing behaviors.
2. Impact on Food Industry
1) The catering industry in contraction
Prior to the outbreak, Korean people loved going out for dinner. Korean restaurants used to have a rate of return on investment (ROI) of about 7%. After the outbreak of coronavirus, the sales of the catering industry fell off a cliff with a decrease of 95% (a 66% loss in customers) [2]. Lots of restaurants have close to observe social distancing rules.
2) A Surge in Online Purchasing
As more people stay inside, they prefer to purchase foods online. The sales of offline distribution firms tumbled by 7.5%, while online sales grew by 34.3% in February. The online consumption amount of food was enhanced by 92.5%, as reported by the Ministry of Trade, Industry, and Energy [3].
3) Hot Food Products
People staying at home are purchasing convenience foods. Consumption of snacks grew by 17%. Home cooking is the best choice during the pandemic, which results in rising demand of 11.5% for seasoning and condiments. Purchase of foods like instant noodles went up 26.5%, and frozen food by 13.4%. Sales of beverages grew by 30.8% [4].
According to data from CJ online mall, the sales of HMR (home meal replacement) food showed a YOY growth rate of 84% from February 24 to March 1. The same category grew by 50% on JungonEshop [5].
(Figure 1. Examples of HMR food, source: naver.com)
Demand amongst Korean consumers for health functional foods also increased. Demand for products formulated with active ingredients purported to strengthen the immune system and decrease the odds of getting sick, increased. As published by Statista Research Department [6], the sales of the functional products increased by 579% from January 27 to February 11. The sales of vitamin products grew over 2,000% compared to the previous year.
(Figure 2. Sales of functional products from January 27 to February 11, source: Statista Research Department)
Based on experiences during 2009 H1N1 influenza and MERS 2015, the surge in demand for functional health food is predicted to last until the end of 2020, with sales expected to reach 5 trillion won (about eight hundred million dollars).
3. New Opportunities amid the Pandemic
1) The contactless principle: Untact
“UnTact (언택트)” is a new trend in South Korea. It is a compound word of “un” and “contact” and describes a supply chain management principle which allows consumers to interact in a supply chain where the products they purchase or the retail environment they purchase in, minimizes the potential for contact with other humans and minimizes the potential for transmission of the virus.
According to Korea news [7], consumers in their 40s and 50s are the new digital consumers. Many firms are now setting up contactless supply chains and digitalizing their supply chains to reduce the potential of viral transmission. Pulmuone, a Korean traditional food company, launched a new online purchasing website that provides customized services [8]. It uses big data and algorithms to recommend products for each customer according to their age, lifestyle, or consumption habits. The platform also allows scheduled deliveries.
Korean company SMARTKIOSK [9] operates meat vending machines named “FreshStore” in Seoul's neighborhoods. This unmanned machine offers meat products, meal kits, salad, and other products. It allows consumers to buy food without having to interact with other people. Mark Hyun, chief executive officer of SMARTKIOSK, told ChemLinked editor that the sales amount had risen over 20% after the outbreak. He also believed opportunities lay in the contactless business, as more people considered “UnTact” as the new lifestyle.
(Figure 3. FreshStore Meat Vending Machines, source: SMARTKIOSK)
Stepping out and being sensitive to the new trend can help enterprises get through the crisis and gain more market shares.
2) Soaring Demand for Imported Food
The outbreak in China affected food material importers. The shutdown of overseas factories, transport dilemmas, etc. resulted in a massive lack of imported food in China, which is one of the largest exporters of food to South Korea. To offset the impact of this South Korea has implemented various measures. To facilitate importation from other regions, MFDS loosened the requirements on imported food and is now accepting alternative custom documents [10]. According to KFIT, labeling requirements for imported foods have been reduced [11]. MFDS now accepts copies of certification on organic food imported for the USA [12] and Europe [13]. Overseas food factories and exporters have a good opportunity to export food to South Korea now.
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