Inside Korea’s cost crunch: Why food and drink prices keep rising despite backlash
Published: 20 May. 2025, 12:06
Updated: 21 May. 2025, 14:14
Audio report: written by reporters, read by AI
![A barista makes coffee in Seoul on Jan. 6, 2022. [NEWS1]](https://koreajoongangdaily.joins.com/data/photo/2025/05/21/17482806-cf95-4769-bf79-868beed1d71d.jpg)
A barista makes coffee in Seoul on Jan. 6, 2022. [NEWS1]
Liberal presidential candidate Lee Jae-myung's claim that the production cost of a cup of coffee is only 120 won (9 cents) may have angered business owners, but it has also surfaced a question that has been lingering on coffee-loving Koreans' minds: So why do coffee and snacks cost so much?
This comes as major domestic food and beverage companies have repeatedly raised prices this year, fueling consumer frustration amid a nationwide economic downturn.
Prices of key products such as coffee, snacks, instant noodles, soft drinks, ice cream and sauces have increased by an average of 5 to 10 percent this year. Companies attribute the price hikes to rising production costs, citing increases in the prices of key ingredients. For imported materials, the burden has grown further due to currency exchange rate fluctuations.
The international price of soybean oil rose from 40.19 cents per pound in August last year to 48.93 cents per pound as of May this year, according to the Ministry of Agriculture, Food and Rural Affairs. Although the simple price increase is 21 percent, when factoring in the exchange rate of around 1,330 won per dollar at the time, the actual cost burden rises to 28 percent.
During the same period, the price of coffee jumped from 242.23 to 390.4 cents per pound, an increase of 61 percent. With the exchange rate included, the hike amounts to 69 percent. Causes include the war in Ukraine, seasonal crop yield drops worldwide and rising oil prices, which have led to higher international logistics costs.
![A cup of iced coffee is being made at an outside stool in Daejoen in June 2024. [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2025/05/21/9424417c-949e-4180-8652-cd865dbee60d.jpg)
A cup of iced coffee is being made at an outside stool in Daejoen in June 2024. [YONHAP]
When the JoongAng Ilbo examined the cost ratio — the proportion of production costs to sales revenue — of a low-cost franchise coffee brand, it found that raw material costs, excluding rent and labor, accounted for half the retail price.
For instance, on a 1,500-won Americano, coffee beans alone accounted for 33 percent of the price. The cost of disposable items such as cups, lids, holders and stirrers was 135 won, and coffee machine maintenance added another 100 won, totaling 735 won. That equals 49 percent of the sale price.
“Accessory costs are similar for both cheap and premium coffees, but the price of beans determines the cost ratio,” said a coffee industry official. “If you factor in rent and labor, selling a 1,500-won cup of coffee actually results in a loss. Still, we keep prices low as a ‘customer draw’ strategy to open more wallets.”
The situation is similar for snacks. A leading domestic food company revealed that grains such as wheat made up 50 to 60 percent of its snack production costs. Fats and oils, including soybean and palm oil, accounted for 20 percent, while other materials made up the remaining 20 percent. This company raised the price of its snack by around 7 percent this year for the first time in about two years.
![Instant noodles and snacks on display [NEWS1, YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2025/05/21/e008c0b1-d5be-455d-8174-375c7dd243bb.jpg)
Instant noodles and snacks on display [NEWS1, YONHAP]
“Even if the cost of wheat and oils — key ingredients — skyrockets, we cannot fully pass that on to consumers, so we limit increases to the minimum,” said a food company representative. “Still, consumer backlash is strong.”
In fact, while major domestic food and beverage companies reported higher sales in the first quarter compared to the same period last year, most saw a drop in operating profits.
Lotte Wellfood’s operating profit for the first quarter of 2025 was 16.4 billion won, down 56.1 percent from the same period last year. Lotte Chilsung Beverage posted 25 billion won, a 31.9 percent decline. CJ CheilJedang fell 30 percent to 128.6 billion won and Otoki dropped 21.5 percent to 57.5 billion won. Cost-to-sales ratios are also rising. The average cost-to-sales ratio last year for Haitai Confectionery, Otoki and Lotte Wellfood stood at 62 percent. A higher ratio means lower profits for the companies.
![Shoppers inspect instant coffee mixes displayed at a discount mart in southern Seoul on April 2. [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2025/05/21/0026490f-4286-4e03-85b1-dcfac55d9cfc.jpg)
Shoppers inspect instant coffee mixes displayed at a discount mart in southern Seoul on April 2. [YONHAP]
Food companies know they cannot raise prices indiscriminately, as even a 50 to 100-won increase in the price of essentials triggers strong consumer resistance. As a result, they are focusing on reducing costs by shrinking product sizes, cutting packaging expenses and automating production processes.
“The most straightforward solution is to raise prices, but if customers stop buying, it’s meaningless,” said a food industry insider who asked to remain anonymous. “Cutting product weight or size can also be seen as a ‘sneaky trick,’ so we’re adopting diverse strategies such as direct overseas purchases and streamlining inventory management to reduce costs.”
Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY CHOI HYUN-JU [[email protected]]
with the Korea JoongAng Daily
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