Food companies look to premium products for juicier profits

Industry

Published: 14 Apr. 2022, 18:55

Food companies look to premium products for juicier profits

Nongshim's premium version of its Saewookkang shrimp chip [NONGSHIM]

Korean food companies are opting for premium products in order to raise their profitability amid the low birth rate and a drastically shrinking number of customers.

The majority of customers are in their 20s and 30s but their number has shrunk significantly in recent years due to the low birth rate, leaving manufacturers hurrying to launch high-quality products to target the older generation.

The number of newborns in Korea recorded 260,500 last year, which is less than half the figure posted in 2001 when the number of newborns were 559,934, according to Statistics Korea.

“With a rapid drop in population, food companies are concerned about profitability. In that sense, premium products is like killing two birds with one stone as they raise profitability while fulfilling diverse customer preferences,” said a source from the industry.

Nongshim launched a premium version of its flagship product Saewookkang or shrimp-flavored chips last October, selling over 11 million units since. The premium product features a truffle flavor and has double the amount of shrimp than the original version.

The premium version is priced at 1,980 won ($1.60) per bag compared to 1,100 won for the original, but is still selling well, according to Nongshim.

Ramyeon is another area where competition among premium products is fierce.

Harim last year launched The Gourmet Ramen which is sold for 2,200 won per unit compared to an average of 700 won that an ordinary package of ramyeon would cost.

Ottogi Ramen Secret Method, which comes in a variety of flavors, is also sold for 1,827 won per unit.

Frozen mandu (Korean dumplings), which are known for their affordability and convenience, have been doing battle in the realm of premium products for the past couple of years.

Haitai used to lead in the mandu market with its resonably-priced Gohyang Mandu.

But as it gradually lost market share to newly launched premium products, Haitai released a premium product called Myungga Gohyang Mandu, which has double the amount of meat inside each dumpling compared to the original.

“On the back of 34 years of experience in making frozen mandu, Haitai launched the premium product using top quality ingredients,” the company said.

Premium products marketed as healthier and using high-quality ingredients are luring in the older generation.

“More of the older generation are interested in health and also have the purchasing power so they are leading the growth of the premium food market,” said Lee Kyei-im, a researcher at the Korea Rural Economic Institute.

“Even after the pandemic, I project the premium snack market will continue to grow.”