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Health and wellness series – Health and wellness trends in South Korea

January 2019

Executive summary

South Koreans are demanding healthier foods and beverages to accommodate their lifestyle. Overall, the health and wellness product market (retail sales) increased by US$249.6 million from 2013 (US$6,338.1 million) to 2017 (US$6,587.7 million). From a market size of US$6.3 billion in 2013, it is expected to reach US$8.5 billion in 2022.

The organic products experienced the highest growth in market size from 2013 to 2017; however, "naturally healthy" products are forecast to record the highest growth from 2018 to 2022. Consumers are looking for the healthiest options for themselves and their families.

Despite the growth in the health and wellness market, the "fortified/functional" and "free from" subcategories decreased in market size from 2013 to 2017. However, as companies adapt new strategies, such as fortifying more products with probiotics and targeting different market segments, they are forecast to experience some minor growth from 2018 to 2022.

Since the Canada-Korea Free Trade Agreement (CKFTA) came into force on January 1, 2015, 85% of Canada's exports have benefited from duty-free market access to Korea, and as of January 1, 2017, 93% of Canada's exports have been eligible for duty-free access (The Canadian Trade Commissioner Service).

South Korean consumers

It is expected that South Korean women born in 2030 will live 90 years on average, while men will live to 84. This is the highest life expectancy of all countries, and may be partly attributable to diet. Kimchi, cabbage fermented in spices such as garlic and vinegar, is a naturally healthy staple in South Korean diets. It is consumed with most foods and has vitamins A, B and C, as well as probiotics to help with digestion. Other than naturally healthy products that keep South Koreans well into the later stages of life, new products are consistently being introduced with growing popularity. For example, functional and fortified low-fat/high-calcium products have successfully gained demand from parents and seniors. Despite the higher price tag, South Korean consumers are also increasingly buying organic products to avoid the chemicals used in many standard products. Given the limited amount of agriculture land available in South Korea, organic brand Doalnara has purchased a 10,000 hectare lot to harvest and meet the growing demand in the country.

South Koreans' interest in health and wellness extends past their diet. Jjimjilbang is a type of popular spa and sauna in South Korea with hot tubs, showers and heated floors. JAMA Internal Medicine reported in 2015 that these can reduce heart disease, blood pressure and diabetes risk. The South Korean government aims to improve the health and well-being of its citizens. For example, the government has enacted a "Shutdown Law" that prevents children aged 16 years and under from accessing the internet or PC games after midnight to reduce/minimize the negative effects of internet addiction. The government also implemented a universal health care plan in 1989 with South Koreans being the most satisfied of 15 countries surveyed in a 2013 Ipsos survey.

However, there are some issues with the South Korean diet. In addition to their pickled delicacy, many South Koreans also consume high amounts of instant ramen noodles, taking more than 90% of the recommended daily sodium intake with each bowl. These sodium-heavy foods, along with the higher consumption of meat and fried foods, increase the chance of abdominal obesity and higher low-density lipoprotein. The government started to advocate for reduced-sodium consumption in 2016. Alcohol is an essential part of daily life for many, with South Koreans drinking more hard liquor than anyone else in the world, according to Euromonitor. South Korea is also home to more alcoholics than any other country, and alcohol-related costs amount to more than US$20 billion a year. On average, South Koreans consume 14 shots of hard liquor a week, while Americans drink about 3 and Russians about 6, according to Euromonitor.

Market data

As South Korean consumers become increasingly health conscious, the demand for health and wellness products has shown steady growth from 2013 to 2017, and is expected to have strong growth from 2018 to 2022. Overall, the health and wellness product market (retail sales) increased by US$249.6 million from 2013 (US$6,338.1 million) to 2017 (US$6,587.7 million). From a market size of US$6.3 billion in 2013, it is expected to reach US$8.5 billion in 2022.

Health and wellness (HW) in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Health and wellness by category 6,338.1 6,587.7 1.0 6,915.4 8,521.4 5.4
HW beverages 1,993.0 2,194.2 2.4 2,406.1 3,499.8 9.8
HW packaged foods 4,345.0 4,393.5 0.3 4,509.3 5,021.6 2.7

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Although fortified and functional (FF) products had the largest market size in 2017, the NH market is expected to surpass FF products by the end of 2022. All categories of health and wellness products will grow as consumers increasingly choose the healthiest option available.

Health and wellness in South Korea: historical and forecast retail sales by category in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Health and wellness by type 6,338.1 6,587.7 1.0 6,915.4 8,521.4 5.4
Fortified/functional (FF) 3,261.3 2,841.2 −3.4 2,848.2 2,969.6 1.0
Naturally healthy (NH) 2,158.9 2,701.7 5.8 2,973.8 4,235.0 9.2
Better for you (BFY) 344.4 458.3 7.4 491.2 645.3 7.1
Free from 422.2 360.6 −3.9 364.3 389.2 1.7
Organic 151.1 225.8 10.6 238.0 282.4 4.4

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Naturally healthy

South Koreans are increasingly focusing on their diets to remain healthy. As a result, naturally healthy (NH) products, such as rice, honey and ready-to-drink (RTD) tea, enjoyed steady growth in the 2013-2017 period and are forecast to continue growing in the 2018-2022 period. These products help consumers avoid artificial ingredients, while still getting their required nutrients.

For NH food products, the largest and fastest growing category was rice. While rice is common in many dishes, the multigrain and brown varieties have become popular after companies began marketing the high fibre content. Similarly, nuts, seeds and trail mixes have gained popularity after being positioned as sources of healthy fats and proteins. Nuts were previously seen as a snack to eat while drinking, but are now considered appropriate to consume with any meal.

Producers have maintained NH product growth by adapting to consumer demand. For example, many South Koreans place as much emphasis on taste as they do on nutritional value. As a result, companies are developing products to meet this consumer profile, while preserving their rich taste. Companies have also maintained popularity by accommodating the busy and on-the-go population. Mountain and Field's Sandle brand of nuts, seeds and trail mixes experienced double-digit growth after introducing small snack packs in 2013. CJCheiljedang, the leading South Korean instant rice producer, achieved strong growth after introducing new instant rice products that can be cooked in two minutes, while maintaining rice's health benefits.

Naturally healthy food in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Naturally healthy (NH) packaged food 731.6 976.7 7.5 1,051.2 1,291.3 5.3
Rice 311.6 521.4 13.7 583.8 767.7 7.1
Nuts, seeds and trail mixes 175.2 213.7 5.1 217.9 238.3 2.3
Honey 95.2 111.4 4.0 116.2 135.6 3.9
High-fibre food 82.1 71.4 −3.4 75.2 88.4 4.1
Olive oil 31.5 39.4 5.8 40.1 44.9 2.9
Cereal bars 35.9 19.5 −14.2 17.9 16.4 −2.2

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Naturally healthy food in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Private Label 12.2 12.6 10.6 9.4 8.4 −8.9
CJ Corp 5.1 5.5 6.0 5.8 5.8 3.3
Blue Diamond Growers 3.6 4.3 6.2 5.8 5.6 11.7
Kellogg Co 3.7 3.6 3.5 3.5 3.6 −0.7
Mountain & Field 2.4 2.8 3.0 2.9 3.0 5.7

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

NH bottled water and RTD tea were the main drivers of NH beverage growth. Consumers are shifting away from extra sweet and calorific drinks, preferring teas and water instead. For example, RTD tea has nutritional benefits from its inclusion of ginseng, burdock, corn leaf and raisin tea, while also not having any sugar. NH juice experienced negative growth that is forecast to continue from 2018 to 2022. NH juice companies are expecting to have trouble appealing to younger generations; however, coconut and plant-based water products are predicted to grow.

Jeju Province Development was able to dominate the NH beverage market from 2013 to 2017 with its Jeju Samdasoo water brand. This province is known for being one of the cleanest regions in South Korea. Larger NH RTD tea companies, such as Kwang Dong and Lotte Chilsung, are focusing on increasing distribution and product innovations, such as adding healthy Asian herbs. Local RTD tea companies are incorporating their domestic knowledge of South Korean culture to instill a sense of nostalgia among the consumer base. This resulted in growth in demand from 2013 to 2017, and will contribute to continued growth from 2018 to 2022.

Naturally healthy beverages in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Naturally healthy (NH) beverages 1,427.3 1,725.0 4.9 1,922.7 2,943.7 11.2
Bottled water 527.4 840.4 12.4 971.8 1,664.2 14.4
Still natural mineral bottled water 12.7 19.8 11.7 20.8 25.3 5.0
Carbonated natural mineral bottled water 8.1 17.3 20.9 20.2 30.4 10.8
Still spring bottled water 506.5 803.3 12.2 930.8 1,608.5 14.7
Fruit/vegetable juice 489.5 379.2 −6.2 370.3 337.9 −2.3
100% juice 486.3 375.1 −6.3 366.0 333.9 −2.3
Superfruit juice 3.2 4.1 6.4 4.3 4.0 −1.8
RTD tea 184.4 278.0 10.8 349.3 686.9 18.4
Other RTD tea 181.6 276.1 11.0 347.4 684.9 18.5
RTD green tea 2.8 1.9 −9.2 1.9 2.0 1.3
Tea 181.9 164.0 −2.6 163.8 171.8 1.2
Green tea 106.3 81.5 −6.4 79.5 78.7 −0.3
Fruit/herbal tea 51.0 55.9 2.3 57.1 63.0 2.5
Other tea 24.7 26.6 1.9 27.1 30.1 2.7
Asian specialty drinks 44.1 63.4 9.5 67.5 82.9 5.3

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Naturally healthy beverages in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Jeju Province Development Co 17.7 17.5 18.7 20.5 19.6 2.6
Lotte Group 4.2 4.9 5.5 5.8 6.0 9.3
Kwang Dong Pharm Co Ltd 5.6 5.6 3.9 5.6 5.7 0.4
Coca-Cola Co, The 3.8 3.7 3.8 3.6 3.3 −3.5
Nong Shim Co Ltd 2.0 2.5 2.8 3.1 3.2 12.5

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Better for you

Reduced-fat packaged food was the largest Better for you (BFY) category, as well as the fastest growing from 2013 to 2017. Within this category, reduced-fat milk products drove growth after companies began marketing to younger and older consumers, rather than just young, weight-conscious women. Reduced-salt products have also shown steady growth since the government began advocating for less sodium consumption in 2017. This campaign resulted from high sodium levels detected/observed in many South Koreans, as common staples such as kimchi, soybean and chili paste contain a large amount of sodium.

The reduced-sugar products category actually decreased in size. Confectionery, such as gum and boiled sweets, is forecast to continue the decline in market size. Gum, often consumed after a meal or drink, is starting to be replaced by coffee or desserts in homes and restaurants. This decline in gum and other snacks is related to price increases that exceed the inflation rate. Gum's price increased from 200 won in 1995 to 1,000 won in 2015. This 400% increase is significantly higher than the 81.2% inflation rate over the period.

In order to maintain sales growth, companies are expanding their distribution and product lines. For example, Maeil Dairies has begun to offer its milk product in specialist coffee shops. Reduced-fat milk companies are expected to introduce more flavours and fortifications such as higher calcium values and probiotics. Dongwon F&B and CJCheilJedang, the main reduced-salt meat producers, are expected to release new reduced-salt foods to maintain growth.

Better-for-you food in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
BFY packaged food 253.3 363.09 9.4 398.2 557.9 8.8
Reduced-fat packaged food 166.5 267.3 12.6 298.2 439.5 10.2
Reduced-fat milk (excluding organic and ff) 98.2 187.2 17.5 214 337.8 12.1
Reduced-fat flavoured milk drinks 51.2 64.6 6.0 69.1 88.0 6.2
Reduced-fat sauces, dressings and condiments 13.5 12.4 −2.1 12.1 10.9 −2.6
Reduced-fat powder milk 3.6 3 −4.5 3.0 2.8 −1.7
Reduced-salt food 76.7 87.1 3.2 91.4 109.6 4.6
Reduced-salt shelf stable meat, seafood, fruit and vegetables 73.9 84.8 3.5 89.0 107.0 4.7
Reduced-salt sauces, dressings and condiments 2.8 2.3 −4.8 2.3 2.6 3.1
Reduced-sugar packaged food 10.1 8.6 −3.9 8.6 8.8 0.6
Sugar-free mints 4.7 3.1 −9.9 3 2.8 −1.7
Sugar-free boiled sweets 2.8 2.9 0.9 2.9 3.0 0.9
Sugar-free lollipops 2.2 2.0 −2.4 2.1 2.2 1.2
Reduced-sugar spreads excluding honey 0.4 0.5 5.7 0.6 0.8 7.5

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Better-for-you food in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Seoul Dairy Cooperative 25.1 27.3 28.1 28.7 32.7 6.8
Namyang Dairy Products Co Ltd 15.1 19.2 22.5 22.8 21.3 9.0
Dongwon Group 26.8 22.5 20.5 20.9 20.1 −6.9
Maeil Dairies Co Ltd 9.0 8.3 7.9 7.9 7.4 −4.8
Hormel Foods Corp 3.6 5.0 5.2 5.0 5.1 9.1

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Better-for-you beverages experienced much smaller growth from 2013 to 2017 (1.1% CAGR) and are forecast to shrink at a −1.5% CAGR from 2018 to 2022. Consumers are choosing taste in the standard versions over the healthier versions. They are also choosing private label options, which are generally cheaper than name brands, despite having similarly unhealthy ingredients. As the standard versions are only consumed occasionally, many buyers do not care much about the negative effects of these indulgence products. However, all of the BFY coffee categories are forecast to grow from 2018 to 2022 as consumers begin to monitor sugar and caffeine intake.

The most successful BFY beverage producers are often international companies. For example, the largest better-for-you producer, Coca-Cola, exports reduced-sugar carbonates to South Korea. During the 2018 Winter Olympics in PyeongChang, Coca-Cola changed its marketing and bottle packaging to appeal to younger people and female consumers. Lotte Chilsung is also working on a low-sugar variant of its carbonate that does not tarnish the taste. Starbucks has entered the emerging decaffeinated instant coffee market with its decaffeinated espresso.

Better-for-you packaged beverages in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Better-for-you (BFY) packaged beverages 91.2 95.4 1.1 93.0 87.4 −1.5
Reduced-sugar beverages 86.3 90.6 1.2 88.1 82.1 −1.7
Other low-calorie cola 61.6 50.9 −4.7 46.7 32.3 −8.8
Reduced-sugar non-cola carbonates 20.3 26.5 6.9 27.4 32.1 4.0
Reduced-sugar instant coffee 4.4 13.1 31.4 14.0 17.6 5.9
Reduced-caffeine beverages 4.8 4.8 0.0 4.9 5.3 2.0
Decaffeinated instant coffee mixes 4.2 3.9 −1.8 4.0 4.3 1.8
Decaffeinated instant standard coffee 0.6 0.9 10.7 0.9 1.0 2.7

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Better-for-you drink companies in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Coca-Cola Co, The 56.7 56.5 54.5 49.8 47.0 −4.6
Lotte Group 15.1 15.9 16.5 16.6 17.4 3.6
Mondelez International Inc 8.9 8.9 10.8 15.6 17.1 17.7
PepsiCo Inc 9.0 7.3 5.7 4.7 4.3 −16.9
Nestlé SA 0.5 0.6 0.6 0.6 0.7 8.8

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Fortified/functional

Despite being the largest HW category, fortified/functional (FF) products had negative growth over the 2013-2017 period. From 2018 to 2022, FF products are expected to grow, but at the slowest rate of all HW products. The decline from 2013 to 2017 is a result of declining categories among all FF products, except probiotic plain yogourts, reduced-fat milk, sports drinks and nectars. Companies are adapting to new trends and tastes to lead into the forecast growth from 2018 to 2022.

FF food products decreased in size from 2013 to 2017. However, consumers are interested in incorporating more probiotics into their diet to help with digestion for themselves and their families. They are expected to look for the probiotic version of their food over other fortifications. This trend is forecast to cause the largest subcategory, probiotic yogourt, to grow the fastest from 2018 to 2022 with a 0.8% CAGR.

Companies have quickly reacted to the probiotic interest. Lotte Confectionery has incorporated probiotics into its biscuits to position them as healthy. Probiotic chocolate and milk have also been introduced to combat their segment decline. Companies with established probiotic products, such as Korea Yakult and its yogourt, are looking for additional benefits probiotics can provide to advertise on the product labels. Lotte Food introduced a new probiotic food from fermented kimchi with heart and digestion benefits. Outside of probiotics, companies are introducing products with other health-promoting ingredients, such as Orion Corp. with its taurine-infused jelly energy drink.

Fortified/functional food in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Total fortified/functional packaged food 2,791.00 2,472.50 −3.0 2,463.00 2,507.20 0.4
Dairy 1,940.50 1,774.50 −2.2 1,765.10 1,787.70 0.3
Total probiotic yogourt 1,413.50 1,287.60 −2.3 1,285.50 1,327.70 0.8
Probiotic drinking yogourt 1,060.40 874.6 −4.7 859.1 826.7 −1.0
Probiotic fruited yogourt 266.4 215.6 −5.2 208.4 192.2 −2.0
Probiotic plain yogourt 62.1 170.4 28.7 190.8 279.7 10
Probiotic flavoured yogourt 24.6 26.9 2.3 27.2 29.1 1.7
Milk 491.7 462.9 −1.5 456.8 439.9 −0.9
Standard milk 371.9 304.8 −4.9 299.4 288.1 −1.0
Reduced-fat milk 119.8 158.1 7.2 157.4 151.7 −0.9
Cheese 35.4 24.1 −9.2 22.8 20.2 −3.0
Baby food 394.8 354.9 −2.6 355.5 366.2 0.7
Confectionery 268.3 220.4 −4.8 218 217.3 −0.1
Sugar-free chewing gum 195.8 148 −6.8 146.4 145.3 −0.2
Sugarized medicated confectionery 26.2 30.2 3.6 30.2 31.6 1.1
Chocolate confectionery 17.2 15.2 −3.0 14.5 13.0 −2.7
Sugarized chewing gum 15.7 11.9 −6.7 11.5 11.2 −0.7
Sugar-free medicated confectionery 13.4 15.1 3.0 15.3 16.3 1.6
Breakfast cereals 150.6 92.7 −11.4 94.2 103.1 2.3
Sweet biscuits, snack bars and fruit snacks 36.6 29.9 −4.9 30.2 32.9 2.2
Sweet biscuits 26.0 23.4 −2.6 23.9 27 3.1
Energy bars 10.6 6.5 −11.5 6.3 5.8 −2.0

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Fortified/functional food companies in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Korea Yakult Co Ltd 25.4 24.2 24.0 25.1 25.2 −0.2
Namyang Dairy Products Co Ltd 15.2 16.5 16.0 15.6 15.2 0.0
Maeil Dairies Co Ltd 12.5 11.4 12.0 12.1 11.8 −1.4
Seoul Dairy Cooperative 9.8 9.8 11.0 11.2 11.3 3.6
Lotte Group 6.9 7.2 7.5 7.3 7.4 1.8

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

FF beverages experienced a more significant decrease in market size from 2013 to 2017, with a −5.9% CAGR. FF sports drinks was the only category that grew during the period, as brands such as Pocari Sweat began advertising the need for electrolytes and hydration during the longer and hotter summers to the general public. This contrasts with the popular PepsiCo and Coca-Cola Company brands, Gatorade and Powerade respectively, which generally advertise to young male athletes. FF bottled water, such as vitamin-infused waters, lost popularity throughout the period as a result of a limited economic environment for many consumers.

Companies have begun to use different marketing strategies to reignite growth. Donga Otsuka started using K-Pop advertisements and endorsements for its sports drink Pocari Sweat. Other brands following this strategy include Coca-Cola with its sports drink Toreta. Outside of the established brands, only private label brands are expected to succeed in FF beverages. Proven South Korean brands have already gained a loyal following and international brands rely on their reputation to gain market share, making it difficult for most new entrants. 

Fortified/functional beverages in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Fortified/functional beverages 470.3 368.8 −5.9 385.2 462.4 4.7
Sports drinks 256.3 264.1 0.8 278.8 343.0 5.3
Bottled water 101.7 22.1 −31.7 20.1 15.7 −6.0
Energy drinks 85.9 61.9 −7.9 65.7 82.9 6.0
Fruit/vegetable juice 14.3 14.2 −0.2 14.3 14.9 1.0
100% Juice 5.1 4.9 −1 4.9 5.2 1.5
Juice drinks (up to 24% juice) 5.7 5.6 −0.4 5.5 5.4 −0.5
Nectars (25%-99% juice) 3.5 3.7 1.4 3.8 4.3 3.1
Chocolate-based flavoured powder drinks 7.2 6.5 −2.5 6.4 5.9 −2.0

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Fortified/functional food companies in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Otsuka Holdings Co Ltd 26.2 29.0 32.3 34.2 35.2 7.7
Coca-Cola Co, The 27.4 28.0 26.2 25.1 24.0 −3.3
PepsiCo Inc 10.9 11.8 13.0 13.6 14.0 6.5
Lotte Group 20.8 17.4 14.9 12.5 12.3 −12.3
Monster Beverage Corp N/A 1.2 1.7 2.9 3.5 42.9

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

N/A: Not available

Organic

Overall, organic products showed strong growth from 2013 to 2017 (10.6% CAGR) and are expected to continue to demonstrate steady growth (4.4% CAGR) from 2018 to 2022. Even with the rising unit costs for organic products, consumers are still purchasing them for their children's health. For example, despite total baby food sales being down due to a lower birthrate, organic baby food sales grew from 2013 to 2017. Consumers prefer the small ingredient lists on these organic products for their children.

Although there has been strong growth in organic foods for families and children, other organic foods, especially those aimed at adults, have declined in popularity. Since August 2017, consumers have been skeptical after 27 of 31 farms measured for excessive contamination were still certified as organic. This is a major factor in the forecast decline of certain organic food categories. However, the South Korean Ministry of Agriculture, Food, and Rural Affairs (MAFRA) plans to monitor organic production more thoroughly before certifying food to regain consumer trust.

Maeil Dairies dominated the organic food market from 2013 to 2017 and will increase its shares in the 2018-2022 forecast period. After Maeil Dairies established its dominance with its uniquely packaged organic baby food, dairy, shelf-stable milk and flavoured milk, other companies have not been actively competing against the company to gain market share. As a result, the unrivalled company has gone on to gain more loyalty from the South Korean market. Maeil Dairies is expected to bring new innovative products to increase its organic market share.

Organic packaged food in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Organic packaged food 146.9 220.7 10.7 232.7 276.0 4.4
Dairy 34.8 90.2 26.9 97.4 118.4 5.0
Cheese 24.9 26.3 1.4 25.6 22.7 −3.0
Flavoured milk drinks 16.3 N/A 18.9 26.8 9.1
Organic milk 10.0 47.6 47.7 52.9 68.9 6.8
Organic standard milk 8.7 43.0 49.1 47.6 61.5 6.6
Organic reduced-fat milk 1.3 4.6 37.2 5.3 7.4 8.7
Organic baby food 60.7 70.0 3.6 71.8 81.3 3.2
Milk formula 38.1 38.7 0.4 38.0 36.6 −0.9
Other baby food 14.0 26.7 17.5 29.1 39.4 7.9
Dried baby food 6.4 2.4 −21.7 2.3 2.0 −3.4
Prepared baby food 2.2 2.1 −1.2 2.4 3.3 8.3
Rice 38.2 47.8 5.8 50.8 64.1 6.0
Sauces, dressings and condiments 5.7 5.3 −1.8 5.2 4.9 −1.5
Chocolate confectionery 4.2 4.4 1.2 4.4 4.3 −0.6
Spreads 2.3 2.1 −2.2 2.1 1.9 −2.5
Breakfast cereals 0.8 0.7 −3.3 0.7 0.8 3.4
Olive oil 0.1 0.2 18.9 0.2 0.3 10.7

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

N/A: Not available

Organic food companies in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Maeil Dairies Co Ltd 42.8 48.8 51.6 54.4 54.7 6.3
National Agricultural Cooperative Federation 6.5 6.1 6.1 6.1 6.5 0.0
Seoul Dairy Cooperative 5.1 5.7 5.6 4.9 4.4 −3.6
Namyang Dairy Products Co Ltd 5.4 4.5 4.5 4.3 4.1 −6.7
Il Dong Pharmaceuticals Co Ltd 2.6 2.8 3.1 3.0 3.3 6.1

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

As is the case for organic food, parents are willing to spend a premium to ensure quality products for their children that are additive- and preservative-free. Companies are making sure to highlight their clean ingredients that are free from preservatives and additives to maintain their popularity. While organic products make up a small portion of the total organic market, the steady forecast CAGR of 4.8% could make it a more significant segment in the future.

Companies such as Nokchawon, the dominant South Korean tea manufacturer, and Seoul Dairy, the dominant organic chilled juice producer, have increased their product variety of teas and chilled juices respectively to increase sales. As there is a lack of serious competitors for the two, Nokchawan is expected to gain even more market share over the forecast period by introducing new organic tea ranges. Seoul Dairy is expected to introduce many new organic juices aimed at office workers over the period, to differentiate from the offerings of Lotte Chilsung and Coca-Cola.

Organic beverages in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Organic beverages 4.3 5.1 4.4 5.3 6.4 4.8
Organic green tea 2.8 3.3 4.2 3.5 4.1 4.0
Organic 100% juice 1.5 1.7 3.2 1.9 2.3 4.9

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Organic beverage companies in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Nokchawon Co Ltd 22.2 21.5 21.4 21.2 20.7 −1.7
Seoul Dairy Cooperative 6.3 6.4 6.5 6.6 6.7 1.6
Jayeonwon Co Ltd 3.1 3.0 2.9 2.8 2.8 −2.5
Others 68.4 69.0 69.2 69.4 69.9 0.5

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Free-from

"Free-from" food is not widely popular in South Korea yet. While free-from-gluten and free-from-meat products are available in the country, distribution channels and brand awareness are limited. As a result, producers have not shown significant interest in introducing new free-from food. This will result in the free-from food market remaining similarly sized in the forecast 2018-2022 period as in the historical 2013-2017 period.

Free-from beverages are also not well-established in South Korea. As a result, despite the high CAGR growth of 11.7% (free from lactose) from 2013 to 2017, the market size was only around US$12.0 million. Maeil Dairies Co Ltd, the main producer of free-from-lactose milk, hopes that its products will become the replacement for normal milk. The company began marketing its milk as "good digestible milk," which was beneficial for its product sales. Most other free-from-lactose producers have abandoned the industry due to Maeil Dairies' domination, so the forecast CAGR will come solely from the expansion of Maeil Dairies' products and distribution.

Free-from-dairy products, which are all soy milk, made up 94.1% of the total free-from market in 2017. However, as it is already an established and mature market, these products experienced a CAGR of −4.3% from 2013 to 2018. To prevent a decline in market size, soy milk producers have introduced new products that target more specific segments. For example, soy milk manufacturer Dr. Chung's Food introduced Vegemil Senior Soy Milk, targeting 50- to 60-year-old customers with added calcium, omega-3 and minerals. With more product introductions, the category is expected to experience modest growth with a 1.6% CAGR over the forecast 2018-2022 period.

Free-from products in South Korea: historical and forecast retail sales in US$ millions
Category 2013 2017 CAGR* % 2013-2017 2018 2022 CAGR* % 2018-2022
Free from 422.2 360.6 −3.9 364.3 389.2 1.7
Free from dairy 405.3 339.3 −4.3 342.6 365.7 1.6
Soy milk excluding organic 400.6 335.8 −4.3 339.2 362.4 1.7
Organic soy milk 4.6 3.5 −6.6 3.4 3.3 −0.7
Free from lactose 7.7 12.0 11.7 12.3 13.2 1.8
Free-from-lactose milk 5.5 9.8 15.5 10.1 11.0 2.2
Free-from-lactose powder special baby milk formula 2.2 2.2 0.0 2.2 2.2 0.0
Free from meat: soy-based frozen meat substitutes 7.1 7.0 −0.4 7.2 8.1 3.0
Free from allergens: powdered milk 2.1 2.2 1.2 2.2 2.1 −1.2

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Free-from products in South Korea: historical shares in % of top companies
Company 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Dr Chung's Food Co Ltd 42.2 43.6 47.0 47.2 48.3 3.4
Sahmyook Foods Co Ltd 20.1 19.4 20.1 20.0 20.1 0.0
Maeil Dairies Co Ltd 9.9 9.1 9.5 9.0 8.6 −3.5
Namyang Dairy Products Co Ltd 10.1 9.7 9.0 7.9 7.3 −7.8
Yonsei Milk 4.4 4.7 4.7 4.1 3.7 −4.2

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

Distribution channels

There have been major changes in the distribution channels of HW products in South Korea. In 2013, 60.4% of HW distribution was done through modern grocery retailers such as hypermarkets, super markets and convenience stores. By 2017, modern grocery retailers dropped to 18.6% of HW distribution. Each of the modern grocery retailers lost more than 20% of the distribution over the period. This was balanced by a significant change of "other grocery retailers," with an 84.4% CAGR over the 2013-2017 period. Other grocery retailers consist of small outlets such as kiosks, market stalls and street vendors and they have easily been able to adapt to the new HW trends in the South Korean market.

From 2013 to 2017, many established distribution methods lost popularity. For example, since the 1990s, home shopping has been popular due to the implementation of an engaging format with hosts demonstrating the available products. Consumers can purchase products from home shopping platforms such as GMarket, Coupang and CJO shopping over the phone or online. However, from 2013 to 2017, there was a −10.7% CAGR for this channel. Hypermarkets and supermarkets lost popularity due to low supply, believing there was a limited interest in HW products. These channels have to increase their supply to match the increasing consumer demand.

Convenience stores also declined in distribution over the 2013-2017 period. To counter their continuing decline, they are looking to launch private label HW products, especially in drinks, such as juice, RTD coffee and dairy, targeting millennials with the convenience of their locations and product cost-effectiveness. In the coming years, internet retailing is expected to become an important channel both for producers and consumers, similar to the trend in other countries. Producers are increasing their online advertising to raise awareness of their products, often highlighting their health and wellness properties. Local and small companies are able to reach a wide audience without competing for shelf space with larger companies. Consumers can now have a wider selection of products available to them, often at a cheaper price.

Health and wellness in South Korea: % channel distribution
Outlets 2013 2014 2015 2016 2017 CAGR* % 2013-2017
Modern grocery retailers 60.4 60.2 60.4 60.5 18.6 −25.5
Hypermarkets 32.4 32.1 32.3 32.7 11.2 −23.3
Supermarkets 15.4 15.1 14.9 14.6 4.2 −27.7
Convenience stores 12.5 12.8 13.1 13.2 3.2 −28.9
Forecourt retailers 0.1 0.1 0.1 0.1 0.0 −100.0
Traditional grocery retailers 13.8 13.7 13.8 13.7 56.1 42.0
Independent small grocers 9.1 9.1 9.0 8.8 1.8 −33.3
Other grocery retailers 4.7 4.6 4.8 4.9 54.3 84.4
Non-store retailing 16.9 17.2 16.9 16.4 16.0 −1.4
Direct selling 9.5 9.7 9.4 8.9 8.3 −3.3
Internet retailing 5.0 5.3 5.5 5.8 6.1 5.1
Vending 1.3 1.2 1.1 1.0 0.9 −8.8
Home shopping 1.1 0.9 0.8 0.7 0.7 −10.7
Non-grocery specialists 0.5 0.5 0.6 0.6 0.0 −100.0
Total 100.0 100.0 100.0 100.0 100.0 N/A

Source: Euromonitor 2018

*CAGR: Compound annual growth rate

N/A: Not available

Conclusion

With new government initiatives and an increasingly health-conscious South Korean population, the demand for health and wellness products is increasing. From 2013 to 2017, HW products experienced steady growth, with better-for-you, organic and naturally healthy products leading market development. However, in the forecast period, all categories are expected to grow.

Producers that focus on children's products are likely to have an advantage, as parents are willing to spend extra for their children's' wellbeing. Highlighting the healthy benefits of the products on labels or in advertising/promotion is also becoming an increasing necessity to differentiate from the higher competition.

Opportunities for Canada

Canada-Korea Free Trade Agreement (CKFTA) – Opportunity for Canada in South Korea

The CKFTA will help provide opportunities for Canadian producers, processors and exporters to reach South Korea's 51 million consumers and the fourth-largest market in Asia. As the first FTA for Canada in the Asia Pacific region, upon its full implementation in 2032, it is expected to boost Canada's GDP by $1.7 billion and Canadian exports to Korea by 30%. "Since the Canada-Korea Free Trade Agreement entered into force on January 1, 2015, agri-food and seafood trade with South Korea has increased by over 20% and 85% of Canada's exports benefited from duty-free market access into Korea. As of January 1, 2017, 93% of Canada's exports are eligible for duty-free access. Upon full implementation of the CKFTA on January 1, 2032, Korean tariffs will be eliminated on 99.75% of Canada's current exports" (The Canadian Trade Commissioner Service). It can support you by:

According to Global Affairs Canada, with additional tariff reductions implemented on January 1, 2018, Canadian exporters of the following agri-food and seafood products to South Korea benefit from the tariff preferences indicated below.

Lowered tariffs provide a significant advantage for Canadian companies. They result in reduced costs to enter the market, helping to grow exports to South Korea.

It is important for Canadian exporters to work closely with their importing partners to ensure that South Korea's import requirements are met and the necessary documentation is provided. One thing to point out is that Canada has not reached an Organic Equivalency Arrangement with South Korea.

Find more details: Canada-Korea Free Trade Agreement

For more information

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

For additional intelligence on this and other markets, the complete library of Global Analysis reports can be found on the International agri-food market intelligence page, arranged by region.

For additional Information on upcoming South Korean trade shows, please contact:

Ben Berry, Deputy Director
Trade Show Strategy and Delivery
Agriculture and Agri-Food Canada
ben.berry@canada.ca

Xuguang Huang, Counsellor and Trade Commissioner
Canadian Embassy in Seoul, South Korea
xuguang.huang@international.gc.ca

Resources

Health and wellness series – Health and wellness trends in South Korea
Global Analysis Report

Prepared by: Jonathan Inada, Market Analyst

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2019).

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