Sector Trend Analysis – Meat trends in South Korea

South Korea's meat production

In 2018, South Korean meat production (pork, chicken and beef) totalled 2.6 million tonnes, with pork accounting for 1.4 million tonnes, chicken for 0.9 million tonnes and beef for 0.3 million tonnes. Pork and chicken production saw steady growth from 2014 to 2018, while beef production fell at a compound annual growth rate (CAGR) of −4.3%.

South Korea's trade summary

Of the top 10 meat suppliers to South Korea by value, Canada was ranked as the sixth largest supplier, worth US$145.8 million in 2018, compared with the largest meat exporter, the United States at US$2.5 billion. Canada accounted for 2.6% of the global market share to South Korea. Due to the strong demand from the South Korean market, 9 of the top 10 meat exporters had a steady CAGR from 2014 to 2018, ranging from 6.2% (Chile) to as high as 32.9% (Thailand). In contrast, New Zealand's CAGR was 0.0% during the same period.

Of the top 10 meat suppliers to South Korea by volume, Canada also ranked sixth in 2018, exporting 49,508 tonnes and accounting for 3.6% of the total world exports (1.4 million tonnes) to South Korea. Canada grew at a CAGR of 3.3% from 2014 to 2018, while Thailand reached the highest CAGR of 36.9%, among the top 10 suppliers. New Zealand was the only exporter who had a negative CAGR of −1.0% over the 2014-2018 period.

In 2018, the top three U.S. meat products exported to South Korea were frozen boneless bovine meat at US$603.8 million, frozen swine meat, bone in, at US$560.5 million and frozen bovine cuts, bone in, at US$539.7 million. Fresh or chilled bovine meat, boneless, recorded the highest CAGR of 49.0% from 2014 to 2018.

In 2018, Canada's total meat exports to South Korea were valued at US$145.8 million. Top commodities were fresh or chilled swine at US$38.9 million, and frozen swine, bone in, at US$34.2 million. Fresh or chilled swine hams, shoulders and cuts, bone in, had the highest CAGR of 194.6% from 2014 to 2018.

At this time, Canada does not have access to South Korea for poultry and poultry products. For pork, Canada has system-wide market access to South Korea, but for beef, access is granted on an establishment-by-establishment basis. For more information on market access, please visit the CFIA website: List of establishments approved to export to Korea.

In terms of trade volume, Canada exported 49,507 tonnes of meat to South Korea in 2018. Top exports were frozen swine, bone in, at 18,922 tonnes, and fresh or chilled swine meat at 8,524 tonnes. Fresh or chilled swine hams, shoulders and cuts, bone in, had the highest CAGR of 215.0% from 2014 to 2018. During this period, there were fluctuations in trade volume for frozen swine meat, bone in, and pig fat, resulting in negative growth rate.

In terms of export value broken down by Canadian province, Alberta led with a value of US$66.1 million in 2018, which accounts for almost half of Canada's total meat exports (US$145.8 million) to South Korea. Quebec ranked second, exporting US$41.9 million in 2018, followed by Manitoba at US$28.5 million.

In terms of export volume by province, Quebec exported 20,042 tonnes of meat to South Korea in 2018, followed by Alberta at 14,700 tonnes and Manitoba at 10,965 tonnes.

Further analysis on the top meat suppliers to South Korea

1. How did the United States and Australia become the top two beef suppliers to South Korea?

With the high demand for beef in the South Korean retail sector, the United States became the country's top beef supplier, reaching US$1.2 billion in 2017 and US$1.7 billion in 2018 (accounting for 57.3% of the world total beef exports to South Korea that year). After 2003, the year that mad cow disease was discovered in Washington State, U.S. supplies of beef to South Korea decreased. However, between 2014 and 2018, U.S. beef exports increased at a CAGR of 19.8%.

Under the U.S.-Korea Free Trade Agreement (FTA), the 21.3% tariff on U.S. beef still in effect in 2018 is scheduled to be eliminated by 2026. Australian beef, on the other hand, currently faces a 26.6% tariff this year, which will be eliminated by 2028. The tariff on U.S. beef was 40% before the FTA took effect on March 15, 2012. Australia used to be the dominant beef supplier for 14 years, taking advantage of the opening created by South Korea's ban on U.S. beef in 2003. More recently, Australia slipped by 4%, hurt by drought and by tariff rates that now favour U.S. beef (U.S. Meat Export Federation [USMEF] 2019).

Canada was the fourth largest beef supplier to South Korea in 2018, with exports valued at US$23.2 million, accounting for 0.8% of total world beef exports to South Korea, growing slowly at a CAGR of 0.1% from 2014 to 2018. South Korea was Canada's sixth largest beef export market in 2018, totalling 4,438 tonnes.

2. How did the United States become the top pork supplier to South Korea?

The year 2018 was record-breaking for U.S. pork exports to South Korea at US$696.6 million (262,603 tonnes), accounting for 35.1% of total world pork exports to South Korea. The previous record was set in 2011. At that time, Korea was battling foot-and-mouth disease outbreaks, leading to about a one-third reduction in its domestic swine herd and very tight pork supplies. Canada was the fifth largest pork supplier to South Korea in 2018 at US$122.5 million, accounting for 6.2% of the market share, and growing at a CAGR of 8.6% from 2014 to 2018. South Korea was Canada's fifth largest pork export market, totalling 45,054 tonnes in 2018.

Most U.S. pork has entered Korea at zero duty under the Korea-U.S. Free Trade Agreement and it continues to enjoy duty-free status under the revised version of that agreement that took effect this year. This is an important factor in the price-competitiveness of U.S. pork. Recent USMEF promotional activities are funded through support from the USDA Market Access Program and the National Pork Board (USEMF 2019).

U.S. pork was featured in a promotion on FoodJang, South Korea's leading online platform for home meal replacement items. Following the introduction of high-end U.S. pork – including U.S. Berkshire and Duroc pork through the 2018 Seoul Food & Hotel Show, the USMEF conducted Berkshire pork promotions with e-commerce companies catering to different target audiences. MeatBox, a business-to-business e-commerce platform linking suppliers to buyers, such as butcher shops and restaurants, held a promotion offering small-portion packs for trial purposes.

The 2018 Seoul Cafe Show is the largest cafe industry trade show in Asia, where the USMEF encouraged bakery and cafe operators to include U.S. processed pork products on their menus. USMEF's booth featured tasting samples of U.S. pulled pork, ham, sausage and bacon.

Recognizing the growing popularity of craft beer in Korea, the USMEF introduced U.S. pork sausages as a perfect paired snack at "Beer Week Seoul," an event that attracts thousands of young Korean professionals. The USMEF used social media to promote U.S. pork sausages to young adult Korean consumers as a delicious, quality snack at Seoul's Waterbomb Festival. The USMEF distributed samples of Johnsonville and Oscar Mayer sausages to about 10,000 booth visitors at the festival. The event attracted more than 60,000 people–mostly young adults ages 20 to 30 (USEMF 2019).

Consumption and spending

1. Total volume sales^{Footnote 1}

The total volume sales of meat in South Korea reached 2.6 million tonnes in 2018. Pork accounted for the largest volume of meat sold in South Korea in 2018 at 1.2 million tonnes, accounting for 48.5% of the total meat sales, followed by poultry at 0.7 million tonnes and beef at 0.6 million tonnes. Meat sales in all categories increased from 2014 to 2018. Beef and veal had the highest CAGR of 3.4% and pork had the lowest CAGR of 0.8% during this period. This is partly due to the fact that as consumers are learning more about food, they are making conscious decisions and consuming less pork or shifting to other types of protein sources within the meat or seafood category.

It is forecast that by 2023, total meat sales in South Korea will reach 2.6 million tonnes. Beef and veal are projected to have a CAGR of 1.3%, followed by poultry at a CAGR of 1.1%, while pork will have the lowest CAGR of 0.3% from 2019 to 2023.

Per capita consumption of meat (based on total volume sales) by South Korean consumers was 49.4 kilograms (kg) in 2018, up from 47.0 kg in 2014, and it is projected to reach 50.5 kg by 2023.

2. Retail sales: value and volume

The South Korean meat sector is led by the fresh meat (counter) category, while frozen meat is forecast to show the fastest growth in retail value from 2019 to 2022.

The South Korean meat sector grew from US$12.5 billion in 2015 to US$13.1 billion in 2018, registering a CAGR of 1.6%. The sector is expected to reach US$13.7 billion by 2022, growing at a CAGR of 0.8% from 2019 to 2022.

From a retail volume perspective, the sector grew from 840.2 million kg in 2015 to 877.6 million kg in 2018, registering a CAGR of 1.5%. The sector is expected to continue to grow and to reach 924.4 million kg by 2022, registering a CAGR of 1.2% from 2019 to 2022.

3. Leading players and top brands in the South Korean meat sector

"Harim Corporation", "CJ Group" and "Lotte Co., Ltd." are the leading trademark players in the South Korean meat sector. However, private labels held 19.9% of the market share, while others held 79.1% in 2018.

Among trademark companies, Harim, CJ, Lotte and Ottogi are the top four brands in the South Korean meat sector. Harim accounted for a value share of 0.7% and CJ held value share of 0.2% in 2018. Lotte and Ottogi each accounted for a value share of 0.1%.

Distribution channels in retail sales for meat

In 2017, hypermarkets and supermarkets were the leading distribution channels (67.8%) in the South Korean meat sector, followed by food and drink specialists (27.6%) and convenience stores (3.6%).

Consumer foodservice in South Korea

Although South Korea is currently experiencing stable economic expansion, consumption recovery is slow. Due to previous lessons learned during the economic downturn, South Koreans are using this period of stability to pay off their mortgages rather than increasing discretionary purchases. Nevertheless, changing lifestyles, an ageing population, and growing wages will be shifting some priorities and driving certain expenditure categories upwards (Euromonitor International).

Within the foodservice sector, in 2018, 75.4% of the meat consumed in South Korean was through restaurants, while the rest was consumed in the other seven outlets. In South Korea, restaurants are crucial not only to social and cultural life, but also to work and business success, traditionally and contemporarily.

The consumer foodservice sector is expanding along with the growing middle class and is forecast to reach total sales of US$86.6 billion by 2022, compared with US$74.7 billion in 2018 (GlobalData). Eating at restaurants, cafes, bars and fast food outlets is popular in South Korea as it saves time. Food services in South Korea continue to restructure as large foodservice companies and 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 specifications adapted to the industry. With longer work hours, increasing single-person households and mobile transactions, Koreans appreciate the convenience of fast food restaurants with healthy food options. Home delivery and take-out are expected to be the fastest growing segments of the foodservice market.

Because chained foodservice outlets are operated primarily by large global brand owners, they are likely to have access to more resources to adapt to the latest technologies and environments in South Korea than independent stores. Specialist coffee shops continue to lead growth in the cafés/bars subsector. Bars/pubs have had marginal value growth as younger consumers are attracted to other consumer foodservice channels. Independent cafés/bars also had lower performance than chained foodservice outlets.

South Korean food delivery apps, such as Yogiyo and Baedal Minjok, have been experiencing a boom in recent years due to the rise of single-person households and a consumer desire for convenience. Food delivery apps will serve to boost sales of smaller independent operators that do not enjoy as much consumer awareness as the bigger chains, thus helping to sustain their revenue amid the continued expansion of chained operators (GlobalData).

Opportunities for Canada

The Canada-Korea Free Trade Agreement

According to the Canadian Trade Commissioner Service (TCS), as the first bilateral free trade agreement for Canada in the Asia-Pacific region, the Canada-Korea Free Trade Agreement (CKFTA) is expected, once fully implemented in 2032, to boost Canada's gross domestic product by $1.7 billion and to increase Canadian exports to Korea by 30%.

Since the CKFTA entered into force on January 1, 2015, Canada's agri-food and seafood trade with South Korea has increased by over 20% by May, 2018. Under the CKFTA, Korea will eliminate tariffs on 70% of Canada's agricultural exports by 2019, and 99% of Canadian exports will be duty-free by 2029. As average South Korean tariffs are three times higher than those of Canada (13.3% versus 4.3%), tariff elimination will be particularly advantageous for Canadian businesses exporting to the South Korean market.

Under CKFTA, Canadian exports of beef to Korea will be tariff and safeguard free as of January 1, 2030.

Canadian exports of pork and pork products to Korea will be tariff and safeguard free as of January 1, 2028.

Tariff reductions have had the following results:

• Canada's exports of beef grew from $16.0 million in 2014 to $36.0 million in 2017 (increase of 125%), having benefited from reductions in Korean tariffs from up to 72% to a maximum of 58% in 2017; and
• Canada's exports of pork and pork products grew from $91.0 million in 2014 to $135.6 million in 2017 (increase of 49%), having benefited from reductions in Korean tariffs from up to 30.0% to a maximum of 19.6% in 2017;

Tariff preferences for key Canadian beef exports to Korea:

• 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 2030
  • 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

Tariff preferences for key Canadian pork exports to Korea:

• 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% to 25% will be eliminated by 2028
  • Tariffs are reduced to between 4.5% and 15.4% for 2019
• Processed and prepared pork - Tariffs of 18%-30% will be eliminated by 2020
  • Tariffs are reduced to between 5% and 5.4% for 2019
• Pork offal - Tariff of 18% is eliminated on January 1, 2019

The CKFTA can support Canadian exporters by:

• eliminating tariffs on virtually all trade between Canada and South Korea,
• improving and expanding market access for Canadian products, and
• providing a competitive advantage with preferential access to South Korean markets.

It is important for Canadian exporters to work closely with their importing partners to ensure that South Korea's import requirements are met and that the necessary documentation is provided. More details on the CKFTA are available at the Global Affairs Canada website.

Seoul Food and Hotel 2019

As the largest international food trade show in South Korea, Seoul Food and Hotel (SFH) 2019 provides an excellent opportunity for Canadian food and beverage exporters to explore market opportunities, showcase their products and meet with South Korea's food trades, including importers, distributors, retailers, wholesalers hoteliers, restaurateurs, foodservice buyers and manufacturers.

As a flagship show for Agriculture and Agri-food Canada (AAFC), Canadian companies which join the Canada pavilion are eligible for the support from the Canada Pavilion Program.

Activities organized by the Trade Commissioner Service include the following:

• Briefing on the Korea's agriculture and food market
• B2B meetings with potential local buyers
• Networking lunch

The AgriMarketing Program

The AgriMarketing Program is a Canadian government grant designed to support export expansion projects undertaken by agri-food and beverage companies. The program was designed to offset a portion of eligible expenses to help small and medium-sized enterprises (SMEs) reach export markets and execute strategic marketing projects such as participation in trade shows or government-led trade missions. As part of the Canadian Agricultural Partnership (CAP), the AgriMarketing Program will provide support to agri-food and beverage companies through 2023. Interested Canadian SMEs are encouraged to apply for this grant.

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 Trade Commissioner Services 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 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

Sector Trend Analysis – Meat trends in South Korea
Global Analysis Report

Prepared by: Hongli Wang, Market Analyst

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