Concerns that ‘milkflation’ could further sour cost of living

Seoul Dairy Cooperative's "Seoul Milk Na 100%." displayed at a large mart in downtown Seoul. [YONHAP]

Korean dairy companies are poised to raise milk prices, but the increases are limited in response to government concerns over possible "milkflation."

Seoul Dairy Cooperative, holding a 40 percent market share in Korea's milk industry, announced plans to implement a 3 percent price increase for the 1-liter version of its milk brand “Seoul Milk Na 100%.” The increase, set to take effect in October, is lower than last year's 6.6 percent surge.

Consequently, consumers can expect the product to retail around 2,900 won ($2.19), compared to the current price around 2,800 won at major discount retailers.

The price increase is linked with a planned 8.8 percent, or 88 won per liter increase, in raw milk prices that will come into effect in October. The raw milk price increase is the largest hike in a decade since the 106 won jump in 2013.

Following the hike, some people were worried about the 1-liter milk price could go beyond the 3,000 won threshold. But the cooperative leaned towards a more limited increase in line with the governmental warning.

In a bid to curb potential inflationary effects, the Ministry of Agriculture, Food and Rural Affairs convened a meeting with the dairy sector in July, calling for prudence in imposing excessive price hikes. The move aimed to prevent "milkflation", or a domino effect of escalating prices across diverse sectors, including coffee and ice cream.

"While navigating a challenging business landscape marked by increased raw milk costs and adverse market conditions, we have decided to minimize the price increase to ensure stability for consumers’ cost of living," explained Seoul Dairy Cooperative.

The industry leader's cautious approach to price adjustments is expected to influence fellow dairy enterprises, encouraging them to follow suit with modest increases in milk prices.

Maeil Dairies said it is under discussions on price increases, with a focus on minimizing the financial burden on consumers. Similarly, Namyang Dairy Products echoed an understanding of public concerns surrounding inflation-triggered price hikes and expressed their commitment to meticulously reviewing pricing levels and timing.

Major retail channels have joined the endeavor to curb milk price hikes.

Nonghyup Hanaro Mart has outlined to retail their flagship milk product, available in 900 milliliters or 1 liter, for 2,980 won or less across all their outlets, starting October. Nonghyup holds 11 percent of the retail milk market.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]