Heads of food companies face questions on price hikes

Industry

Published: 04 Oct. 2022, 18:57

Heads of food companies face questions on price hikes

From left: CJ CheilJedang Vice President Lim Hyung-chan, Orion Nonghyup CEO Park Min-gyu, Vice Minister of Agriculture, Food and Rural Affairs Kim In-jung, Minister of Agriculture, Food and Rural Affairs Chung Hwang-keun, Nongshim Mills CEO Park Sang-kyu and Ottogi CEO Hwang Sung-man attend a parliamentary audit on Tuesday. [NEWS1]

Heads of local food companies were summoned to an annual parliamentary hearing to be questioned about excessive price hikes, as the government tries to tame inflation.

CEOs and executives of companies including CJ CheilJedang, Nongshim Mills, Orion Nonghyup and Ottogi were brought to the audit, with lawmakers questioning them about whether price increases were necessary.

CJ CheilJedang was criticized for raising the price of Hetbahn, its microwavable rice, considering rice prices have been falling. According to the Ministry of Agriculture, Food and Rural Affairs, rice sold for 40,700 won ($28) per 20 kilogram (44 pound) sack, down 25 percent on year.

“The price of rice makes up for less than 50 percent of Hetbahn’s production cost,” said Lim Hyung-chan, vice president of CJ CheilJedang. “Costs to make Hetbahn's containers, packaging, logistics costs and labor costs make up for the rest, which have all risen so much that a price increase was inevitable.”

“We will be cautious about further price increases and try to cut costs by investing in research and development.”

The company raised prices of its Hetbahn to 2,100 won in March, up by 7.7 percent compared to the previous price increase made in February last year.

Fried chicken prices were also criticized for being too high despite falling ingredient costs.

According to the ministry, the wholesale price of a 1-kilogram chicken was 2,671 won in June, down 19 percent compared to January. Olive oil sold for $4,602 per ton, down 10.6 percent also compared to January.

“Chicken and olive oil prices are all falling despite companies saying they have to raise prices due to rising raw material costs,” said An Byung-gil, a People Power Party lawmaker. “The government needs to conduct an inspection on fried chicken prices and raw material costs.”

With inflation becoming more and more difficult to deal with, the government has been pressuring food companies to refrain from price hikes.

In a conference hosted by the Ministry of Agriculture, Food and Rural Affairs on Sept. 27, Kwon Jae-han, head of the ministry’s food industry police, said “Prices of processed food have been rising by 7 to 8 percent despite crude oil and global grain prices stabilizing” and that “continuous price hikes of food companies will hurt citizens.”

Kwon also noted that most food companies’ revenue and operating profit has been rising on year, which would give them room to maintain low prices.

Wheat prices peaked at $444 per ton in May according to the International Monetary Fund’s commodity price system, but fell to $323 per ton in August. However, the price is still higher than 2021’s average of $265 per ton.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]