Bread, confectioneries prices rise on flour hike

Due to the recent price hike in flour, controversy over the price increase of confectionery and bakery products has arisen both inside and outside the food industry.

While civic organizations and the government, which place price stability as a top priority, claim that the prices of flour have little impact on the prices of confectionery and bakery products, the industry protests that it is impossible not to raise product prices and continue to suffer losses.

According to the Korean Flour Mills Industrial Association (Kofmia) yesterday, the 2010 industry input-output table released by Bank of Korea shows that flour only accounts for 9.1 percent in bread and confectionery production and 16.4 percent in ramen and other kinds of noodles.

Based on this data, Kofmia claimed that the recent 8 percent price hike in flour by CJ CheilJedang and other flour milling companies could be calculated as having a minor, as little as 0.7 percent, factor in the rise of confectionery and bread prices.

Also, in another report released by the inflation monitoring center at the Korea National Council of Consumer Organization Monday, the proportion of flour used in manufacturing processed food products was in the range of 6.9 percent and 28.1 percent, with an average of 12.5 percent.

Taking the price hike into account, the price of 700 won ($0.66) worth of ramen should go up by 6.4 won, while that of 700 won worth of white bread should rise by 28 won, said the consumer organization.

The civic groups, however, emphasized that the confectionery and bakery manufacturers raise their product prices by more than the price hike rate of raw materials, every time the price of raw materials goes up.

In April 2011, right after the price of flour rose by 9 percent, major confectionery makers such as Haitai, Orion and Nongshim all jacked up their product prices by 8 to 25 percent.

Also, the civic groups pointed out that during the 2008-2010 period, when international grain prices stabilized and the prices of flour went down, there was no price cut in sweets or pastries.

The confectionery and bakery industry refuted the claim.

“In this situation, where overall inflation rises and consumption is continuously sluggish, the price increase of raw materials is a considerable pressure to raise product prices,” said an industry source.

“Due to the rising price of flour, we are considering raising prices of pastry products. We did not raise the price in 2011, when the flour price also went up, but it is not easy to endure pressure this time,” he added.

By Kim Jung-yoon [kjy@joongang.co.kr]