Korea must sow the seeds of sophisticated consumerism

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Korea must sow the seeds of sophisticated consumerism

Published: 20 Mar. 2025, 00:02

Audio report: written by reporters, read by AI

Moon Jung-hoon

The author is a professor at the Department of Agricultural Economics and Sociology at Seoul National University and the director of Food Business Lab.

According to Michael Porter, a distinguished professor at Harvard Business School, the growth and competitiveness of a nation's specific industry are determined by four key factors. First, the extent to which competitive elements within the industry function in a “rational” manner. Second, the adequacy of infrastructure and other input factors that serve as the foundation of the industry. In agriculture, this includes land management, advanced irrigation systems and road networks.

The third factor is the competitiveness of related industries. In the case of agriculture, this encompasses seed production, logistics and distribution, and food manufacturing. The development of Dutch agriculture, often cited for its high competitiveness, is closely linked to the strength of its domestic seed industry and port logistics sector.

The fourth factor is demand conditions — the size and quality of the market for the industry’s output. In the context of Korean agriculture, our market is relatively small, and the level of sophistication varies. For instance, tomatoes, strawberries, beef, and pork are considered part of a relatively sophisticated market, whereas potatoes, apples, and rice are not. In these latter sectors, price remains the dominant competitive factor.

A “sophisticated buyer” is typically one who possesses a high level of understanding and holds elevated standards for products or services. The larger and more influential this group of buyers, the more the supply side is compelled to pursue continuous innovation and to develop higher-quality products, thereby driving overall technological advancement and quality improvement within the industry. This is also one of the indicators used by the World Economic Forum to evaluate product market efficiency in its annual Global Competitiveness Report.

A shopper examines the displayed fruit at a supermarket in Seoul on Feb. 2. [YONHAP]

Governments play a crucial role in influencing these four factors and in fostering industrial competitiveness. Looking at Korea’s agricultural trajectory, significant investments were made in the 1960s and 1970s to develop agricultural infrastructure. Policies focused on enhancing key production inputs — land, irrigation, and road networks — led to a dramatic increase in productivity.

Subsequently, the primary objective of Korean agricultural policy shifted toward reducing competition and protecting the domestic industry. Efforts were made to prevent the inflow of imported agricultural products, which could intensify market competition, and to limit external capital from altering the structure of the domestic sector. Moreover, policies have restricted the influence of related industries such as distribution, logistics, and food manufacturing on agricultural competition. Additionally, measures have been implemented to prevent domestic producers from being pushed out of the market.

Should we continue along this path, emphasizing infrastructure investment while restricting competition within the agricultural sector? If Korea’s agricultural sector has yet to attain global competitiveness, then it is time to reassess and adjust the direction of our agricultural policies.

Among the world’s leading agricultural nations, some — such as the United States and Australia — achieve dominance through large-scale production. However, other advanced agricultural countries, including France, the Netherlands, Italy, and Japan, differ significantly from Korea in one key area: the scale and sophistication of demand for agricultural products. Their domestic markets are larger, and they boast a substantial base of discerning consumers. It is time for Korea to adopt a more proactive approach toward demand-side policy.

Until now, policy interventions have predominantly focused on the supply side — namely, farmers and producers. Moving forward, greater attention must be given to consumers and businesses that purchase agricultural goods and services. Expanding the scale of demand and enhancing its sophistication will open new avenues for the growth of Korean agriculture. Porter emphasized that the latter is even more critical. This is a path we have yet to explore.

France, despite lacking the price competitiveness of the United States and Australia, remains a formidable agricultural powerhouse due to its strong culture of gastronomy. It has a substantial base of sophisticated consumers, supporting both affordable and high-end agricultural markets. Buyers make purchasing decisions based on their preferences and intended use, rather than price alone. As a result, many producers focus not just on cost competitiveness but on crafting distinctive agricultural products tailored to consumer needs.

The hands of a farmer close-up holding a handful of wheat grains in a wheat field. [SHUTTER STOCK]

Japan is well known for its regional food manufacturers, which leverage local agricultural products to create diverse and competitive food products. This is possible because a discerning consumer base recognizes and values such efforts.

I am reminded of a comment from an Italian professor of agricultural economics: “Italian consumers never assume that olives from one side of the river are the same as those from the other. They don’t simply compare prices. That is the driving force behind our agriculture.”

Korean agriculture, too, needs a robust base of sophisticated buyers.

Translated using generative AI and edited by Korea JoongAng Daily staff.