Korean food makers' factory price hikes are reaching shop shelves within weeks

Shelf prices have moved toward the factory increases and mostly stopped short of them. CJ CheilJedang said in mid-July it would raise the price of its Hetbahn instant rice by 12% ^[7]. Instant rice at supermarkets and convenience stores cost 5.7% more in August than in July ^[4], so about 48% of the announced rise reached shoppers in the first month ^[1]. If shelves converge on CJ's figure, roughly six more points are still to come ^[3]. Ottogi's average 6.1% increase on curry and ketchup ^[8] showed up as 4.1% and 4.3% at retail ^[4], about two-thirds ^[2]. Each comparison sets a category average against one maker's list price, so the ratios are approximate.

Soda overshot. Shelf prices rose 6.7% in a month ^[4], more than the 5% Lotte Chilsung put on Pepsi in late June ^[5], or rather, more than Pepsi alone would account for, since Coca-Cola's increases of 100 to 300 won took effect in August ^[6].

The government's explanation for the summer is catch-up. "Companies that had not fully reflected last year's rise in the exchange rate and this year's higher oil prices caused by the war in the Middle East appear to be raising prices one after another," a government official said ^[14]. On that account the hikes are a one-time change in level. Once a product has passed through its currency and oil costs, it drops out of the year-on-year comparison twelve months later without anyone cutting a price. The Bank of Korea's research team described the other path in August. "With core inflation recently trending upward in the mid-2 percent range, attention needs to be paid to the possibility that upward pressure on overall core inflation could intensify further as price increases spread to other items," the team said ^[11].

Processed-food inflation rose 0.6 points between August and September ^[4]. A ministry official said the September figure reflects "factory price increases for some processed foods, such as bread and frozen foods" ^[10], neither of which appears among the products in the August shelf data ^[4].

Part of the gap between the consumer agency's double-digit item figures and the ministry's index is sampling ^{[2] [9]}. Of gochujang's 19.8% annual rise, 15.6 percentage points come from January's change in which products are measured, and so do 23.5 of the soups' 39.2 ^[5].

I think the September move leans toward spread, though not by much. The counter-case is that firms catching up one after another and competitors following each other produce the same monthly prints. The two separate only after a year, when catch-up drops out of the comparison and spread does not. The government's plan to stagger increases with makers ^[12] blurs the two further. "Even if they raise prices, we will continue to consult with the industry to keep increases to a minimum and expand the number of discounted items," the official said ^[15]. The spread reading is wrong if the processed-food index is back near August's 1.5% by year-end ^[9] with no new categories announcing factory increases.