Market Overview – South Korea

Production

In 2017, South Korea produced over 13.6 million tons of food and beverages (excluding milk) within 6 commodities including rice, vegetables, cabbages, milk, onions & pork. Agricultural production capacity in South Korea is very limited because two-thirds of the country are mountains and hills, whereas less than a quarter of the country's land is used for agriculture. Therefore, South Korea heavily relies on imports from other countries. According to the International Trade Centre: agriculture in South Korea is characterized by a small family farm structure cultivating rice as a basic crop, while barley is the second most important crop. Other crops produced in South Korea are millet, corn, sorghum, buckwheat, soybeans, and potatoes, fruits and vegetables which include pears, grapes, mandarin oranges, apples, peaches, Welsh onions, Chinese cabbage, red peppers, persimmons, cabbage, and radishes. South Korea is also an important producer of crops like cotton, hemp, sesame, tobacco, and ginseng.

Trade

South Korea is a net food importer, importing more than 60% of its food needs which continue to grow. In 2018, South Korea's agri-food and seafood trade deficit was US$25.4 billion with imports valued at US$33.2 billion, and US$7.8 billion in exports. South Korea's agri-food and seafood imports increased by 10.0% from 2017, and by a compound annual growth rate (CAGR) of 2.9% between 2014 and 2018. South Korea has concluded 15 free-trade agreements (FTAs) covering 52 countries.

Canada is South Korea's 10^th largest agri-food/seafood supplier after US, China, Australia, Brazil, Viet-Nam, Russia, Thailand, Germany and Indonesia. However, the Canada Korea Free Trade Agreement (CKFTA) reduced import duties on many food products which led to growing food exports from Canada.

In 2018, South Korea's top agri-food and seafood imports were corn, frozen pork, food preparation, wheat and meslin and frozen boneless beef. Key supplying countries were the United States, China, Australia, Brazil, and Viet-Nam. Canada was South Korea's tenth-largest supplier of total agri-food and seafood products, with a 2.0% share.

South Korea's processed food imports were valued at US$18.1 billion in 2018, where Canada's share was 2.5%. The United States, China, Australia, Brazil and Germany were the largest suppliers of processed food to South Korea in 2018, providing 59.3% of the South Korean processed food import market. South Korea's processed food imports increased by a CAGR of 4.1% between 2014 and 2018 and by a CAGR of 11.4% from Canada during the same period.

South Korea's imports of agri-food and seafood products from Canada were valued at US$676.8 million in 2018. Top imports from Canada were crude canola oil, frozen pork, lobster, food preparations and wheat and meslin. In 2018, Canada registered an agri-food and seafood trade surplus of Can$563.2 million with South Korea.

South Korea's top agri-food and seafood exports in 2018 were food preparation, cigarettes, pasta (cooked or otherwise prepared), seaweeds and other algae and frozen fillets of tuna. Their main destinations were Japan, China, United States and Viet-Nam. Canada was South Korea's 14th-largest market for total agri-food and seafood products in 2018, worth US$113.6 million, which amounts to a 1.4% share.

Food services

Growing disposable incomes lead increased expenditure on food and beverages; eating at restaurants, cafes, bars and fast food are popular in South Korea and western-style foods becoming popular. Food services in South Korea continue to be restructured as large food service companies and broad-based food service distributors expand at the expense of small independent companies. As a result, the sector generates additional demand for products with a new taste, added value, stable supply, consistent quality and other specifications adapted to the industries. As Koreans work long hours, they increasingly appreciate the convenience of fast food restaurants that offer healthy quality options. The home delivery and take-out segments, which are strongly associated with convenience, are expected to be the fastest growing category between 2019 and 2022, with a CAGR of 6.5%.

Consumer expenditure and retail sales

Packaged food in South Korea recorded stable year-over-year retail value growth from 2014 to 2018 and it is expected to continue to grow over the forecast period (2019-2023). Retail sales were valued at US$27.4 billion in 2018, with a CAGR of 2.5% from 2014 to 2018. By 2023, retail sales are expected to reach US$31.3 billion, registering a growth rate increase of 2.7%.

Convenience remains an important factor that is driving the eating habits of South Koreans with busy lifestyles. Packaged food companies and other food manufacturers are focusing on developing more convenient and healthier food products. The South Korean consumer market is highly developed and Western-style foods are growing in popularity, which is expected to boost the demand for popular U.S., Canadian and European products.

The soup and ready meal category products are expected to see the most significant sales growth in the packaged food sector over the 2019-2023 forecast period, increasing respectively by a CAGR of 21.3% and 8.6%. These two categories are driven primarily by a growing aging population, which demands frozen foods with high nutritional value and low preservatives as well as by a growing demand for more timely ways of cooking and preparing convenient products. Increases in women entering the workforce, single person households and long working commutes are all factors that have reduced the time available for home meal preparation and grocery shopping owing to which people are shifting towards frozen processed foods. Convenience and attractive price range are among the key drivers for the growth of frozen food products in South Korea. However, during the forecast period, many packaged food categories are forecasted to reach maturity, such as edible oils, baby food, sweet biscuits, snack bars and fruit snacks.

Health and wellness food products

Consumers are becoming increasingly health conscious as a result of rising health awareness. This has led to higher demand for health and wellness variants, particularly for naturally healthy and organic products. The health and wellness sector grew by a CAGR of 2.4% from 2014 to 2018, and is expected to grow by a CAGR of 4.4% over the 2019-2023 period.

The range of available health and wellness products increased in diversity as major manufacturers continued to introduce new organic and naturally healthy brands. South Korean consumers have also become increasingly knowledgeable about food ingredients and nutrition. They can directly check ingredients through their smartphones if manufacturers make fortified/functional claims on the packaging. As a result, manufacturers tend to include as much information as possible on the packaging even if the information is in technical terms.

Organic foods and beverages remained the smallest categories in the health and wellness sector due to their higher unit prices. However, trending demand for organic and fresh frozen organic food products by young professionals and the older population will drive the growth in the upcoming years.

The health and wellness market in South Korea in 2018 continued to achieve growth, with naturally healthy (NH) products making the strongest progress. NH beverages benefited from the increasing popularity of carbonated natural mineral and spring bottled water while health-conscious consumers considered safe and wholesome ingredients and products known for their natural formulations.

Opportunities for Canada

South Korea is a growing market for safe, quality and healthy food products. Canada is perceived by Koreans as a country with good environment & quality products and South Koreans are willing to pay for big-name brands and quality Canadian products. Canada's low market share of South Korea's imported food represents room for expansion and CKFTA will help improve Canada's competitiveness within the South Korean market. Koreans are also tech savvy, and love to shop online, which is a new distribution channel for Canadian exporters.

As of January 1, 2019, 95% of Canada's exports will benefit from duty-free access into South Korea as a result of the Canada-Korea Free Trade Agreement (CKFTA). This includes new duty-free access for a variety of goods, such as: lentils; chocolate and chocolate confectionary; and prepared frozen and cold-water shrimp. Upon full implementation of the CKFTA on January 1, 2032, South Korean tariffs will be eliminated on 99.75% of Canada's exports. Consult the Canada Tariff Finder to explore further tariff information, other than below information, for the South Korean market under the CKFTA, and other foreign markets with which Canada has a free trade agreement.

Example list of products affected by the reduction in customs tariffs, following the Canada-Korea Free Trade Agreement^{Footnote 2}

Beef

• Prior to the entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of beef products were on average 35%, with a tariff peak of 89.1%
• South Korea will eliminate all tariffs and safeguard duties on beef products by 2029
• Tariffs were eliminated in 2015 for:
  • Beef fat and tallow
  • Live cattle
  • Bovine embryos
• Fresh, chilled and frozen beef cuts – Tariffs and safeguard duties of 40% will be eliminated by 2029
  • Tariffs are reduced to 26.7% for 2019
• Beef offal – Tariffs of 18% will be eliminated by 2025
  • Tariffs are reduced to 9.8% for 2019

Pork

• Prior to the entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of pork products were on average 21%, with tariff peaks of 30%
• South Korea will eliminate all tariffs and safeguard duties on pork products by 2028
• Tariffs were eliminated in 2015 for:
  • Pork fats and oils
  • Swine embryos
  • Pure bred live swine
• Fresh, chilled and frozen pork cuts – Tariffs and safeguard duties of 22.5%-25% will be eliminated by 2028
  • Tariffs are reduced to 4.5%-15.4% for 2019
• Processed and prepared pork – Tariffs of 18%-30% will be eliminated by 2020
  • Tariffs are reduced to 5%-5.4% for 2019
• Pork offal – Tariff of 18% was eliminated on January 1, 2019

Grains

• Prior to the entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of grains were on average 185%, with tariff peaks of up to 513%
• South Korea will eliminate all tariffs and safeguard duties on grains by 2030
• Tariffs were eliminated in 2015 for:
  • Wheat
  • Rye
• Wheat flour – Tariff of 4.2% was eliminated on January 1, 2019
• Barley
  • Malting barley – Tariff of 513% will be eliminated by 2029
    • Tariff is reduced to 342% for 2019
  • Un-roasted malt – Tariff of 269% will be eliminated by 2026
    • Tariff is reduced to 156.9% for 2019
    • Tariff Rate Quota: 17,800 tonnes duty-free for 2019
  • Un-hulled & naked barley – Tariffs and safeguard duties starting at 299.7%-324% will be eliminated by 2030
    • Tariff rate quota: 2,500 tonnes duty-free for 2019

Animal Feed

• Prior to entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of animal feed were on average 24%, with a tariff peak of 100%
• South Korea will eliminate all tariffs on animal feed by 2024
• Tariffs were eliminated in 2015 for:
  • Dog and cat food
  • Mixed feed for pigs, fish, birds and cattle
  • Lucerne (alfalfa) hay in the form of meal, pellets or bales
• Forage Crops: Swedes, mangolds, fodder roots, hay, clover, sainfoin, forage kale, lupines, vetches, and similar plants grown for animal feed – Tariff of 100.5% will be eliminated by 2024
  • Tariff is reduced to 50.25% for 2019
  • Tariff rate quota: 40,000 tonnes duty-free for 2019

Pulses

• Prior to entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of pulses were on average 162% with a tariff peak of 608%
• South Korea will eliminate all tariffs and safeguard duties on pulses by 2030
• Tariffs were eliminated in 2015 for:
  • Pulse flour meal and powder
  • Pulse bran, sharps and other residues
• Lentils – Tariff of 27% was eliminated on January 1, 2019
• Beans
  • Kidney and white peas – Tariff of 27% will be eliminated by 2024
    • Tariff is reduced to 13.5% for 2019
  • Small red (adzuki) beans – Tariffs and safeguard duties of 420.8% will be eliminated by 2030
    • Tariff is reduced to 376% for 2019
    • Tariff rate quota: 476 tonnes duty-free for 2019

Processed Food Products

• Prior to entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of processed food products were 30.4% on average, with tariff peaks of 754.3%
• South Korea will eliminate all tariffs on processed foods by 2021
• Tariffs were eliminated in 2015 for most biscuits, cookies and crackers
• Tariffs were eliminated in 2017 for:
  • Bread
  • Ship's biscuits
  • Pastries
  • Cakes
• Tariff of 8% is eliminated on January 1, 2019 for sweet biscuits

Various food preparations

• Tariffs of 8% are reduced to 2.3% for 2019 (to be eliminated by 2021) for:
  • Coffee creamer
  • Edible seaweeds
  • Bases for non-alcoholic beverages
  • Flavours in food preparations
  • Sauces
  • Condiments
  • Soups/broths
  • Yeast/yeast extracts
  • Acorn flour
  • Aloe
  • Alcoholic beverages mix
  • Royal jelly or honey

Sugar confectionary

• Tariffs of 8% were eliminated on January 1, 2019 for:
  • Hard candies
  • Chocolate and chocolate confectionary
  • Chewing gum

Oilseeds

• Prior to the entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of oilseed products were on average nearly 50%, with tariff peaks of 487%
• South Korea will eliminate nearly all tariffs on oilseed products by 2024
• Canola / canola oil
  • Crude canola oil – Tariff of 5% will be eliminated by 2021
    • Tariff is reduced to 1.40% for 2019
  • Tariff was eliminated in 2015 for canola
  • Tariff was eliminated in 2017 for refined canola oil
• Soybeans
  • Soybeans for soy-sauce/cake – Tariff starting at 487% will be eliminated by 2024
    • Tariff is reduced to 243.5% for 2019
  • Soybeans for human consumption
    • Tariff reduced to 487% for 2019
    • Tariff rate quota: 15,000 tonnes duty-free for 2019

Alcoholic Beverages

• Prior to the entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of alcoholic beverages were on average nearly 19%, with tariff peaks of 30%
• South Korea will eliminate all tariffs on alcoholic beverages by 2024
• Beer – Tariff of 30% will be eliminated by 2021
  • Tariff is reduced to 8.6% for 2019
• Spirits
  • Tariff was eliminated in 2015 for rye whisky
  • Tariff was eliminated in 2017 for wine
  • Vodka – Tariff of 20% will be eliminated by 2024
    • Tariff is reduced to 10% for 2019

Fish and Seafood

• Prior to entry into force of the CKFTA on January 1, 2015, South Korean duties on Canadian exports of fish and seafood were on average 17% and could reach up to 27%
• Most Canadian fish and seafood exports have been eligible to enter Korea duty-free since 2017
• South Korea will eliminate all customs duties on fish and seafood by 2026
• Tariffs were eliminated in 2015 for:
  • Salmon
  • Sea urchins
• Tariffs were eliminated in 2017 for:
  • Lobster
  • Frozen crab
  • Dungeness crab
  • Prepared crab
• Crab
  • Snow (queen) crab – Tariff of 14% will be eliminated by 2024
    • Tariff is reduced to 7.0% for 2019
  • Live snow crab – Tariff of 20% will be eliminated by 2024
    • Tariff is reduced to 10% for 2019
• Shrimp and prawns
  • Prepared shrimp and prawns – Tariff of 20% was eliminated on January 1, 2019
  • Frozen shrimp and prawns:
    • Coldwater or northern shrimp – Tariff of 20% was eliminated on January 1, 2019
    • Other shrimp – Tariff of 20% will be eliminated by 2024
    • Tariff is reduced to 10% for 2019
• Frozen hagfish – Tariff of 10% will be eliminated by 2021
  • Tariff is reduced to 2.9% for 2019
• Clams, shells and other aquatic invertebrates
  • Frozen or prepared cockles – Tariff of 20% will be eliminated by 2024
    • Tariff is reduced to 10% for 2019
  • Prepared molluscs and aquatic invertebrates:
    • Sea cucumbers – Tariff of 20% was eliminated on January 1, 2019
• Other molluscs – Remaining tariffs of 20% were eliminated on January 1, 2019

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.

• Overview of the Trade Commissioner Service in South Korea
• Find a Trade Commissioner

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 the Seoul Food and Hotel (SFH) 2019, please contact:

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

Market Overview – South Korea
Global Analysis Report

Prepared by: François Thériault, International Market Research Analyst

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

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