Invest1 publisher3 min readPublished
Haitai's 7.8% snack increase leads a Korean October price round built on deferred costs
Haitai Confectionery raises prices on 25 snack brands by an average 7.8% on Oct. 1, the day Korea's bus fare ceilings rise 9%. Most of the round passes through costs that were absorbed or put off, and the end of Chuseok discounts will push October receipts up faster than list prices.
The Investor · Invest desk
What happened
- Woongjin Foods raises more than 20 drinks by an average 7% on Oct. 1, taking a 500ml Achim Haetsal to 2,500 won from 2,350 won at convenience stores.
- Haitai will shrink 14 items across five brands, including Honey Butter Chip and Calbee Potato Chips, instead of raising their prices.
- Bus operators had asked the transport ministry for 17% on intercity fares and 20.1% on express fares, citing labor and fuel costs.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint With half of 2019's intercity riders, operators would need fares twice as high to match 2019 fare revenue, so a 9% ceiling cannot by itself stop the route closures Jang described.
- constraint Shelf-price comparisons will miss the 14 shrunken Haitai items, whose cost per gram rises with no change on the tag.
- precedent Food makers say they can no longer absorb raw material, currency, fuel and logistics costs; if companies beyond Haitai and Woongjin act on that, October becomes a packaged-food round.
October brings three different kinds of price change within a week: list-price increases from food makers [1][7], a regulated fare ceiling [10] and the end of a temporary discount [8]. Each could go a different way. If Haitai and Woongjin are releasing costs that food makers say they absorbed or put off [9], the price level steps up once and the monthly rate settles back. If more food makers follow, it becomes a round across packaged food. If bus operators set route fares below the new ceiling, as the rules allow [11], the transport part shrinks. I think the food increases are the part that deserves the inflation label, and the discount expiry deserves it least.
Haitai's 7.8% is an average across 25 brands, according to food and retail industry sources cited by Sedaily [1]. The spread under it is wide. Free Time rises 16.7% to 1,400 won [2] and a 46-gram Pocky 15.8% to 2,200 won [3], while Home Run Ball in the same 46-gram size goes up about 5.3% and Oh Yes about 6.1% [4][1]. Fourteen items across five brands, Honey Butter Chip among them, keep their price and lose weight [5]. On those, Haitai is holding the price point and taking the increase in grams. The company blamed crude oil and raw materials for higher manufacturing and logistics costs [6]. Woongjin's 7% average [7] works out to about 6.4% on a 500ml bottle of Achim Haetsal [2].
Most of the jump shoppers will feel comes from the discount ending. The government's Chuseok campaign ran with about 20 food companies and took up to 64% off more than 4,700 processed items [8]. Sedaily's report argues that the pressure consumers feel could exceed the actual increases [18]. At the maximum discount a shopper paid 36% of list. An item bought that way that also took Haitai's 7.8% average would cost about three times its holiday price in October [3]. The list price returning accounts for a factor of about 2.8 of that, and the increase for the rest [3].
The bus ceiling is a catch-up. Nine percent after about three years is under 3% a year [10][4], and with the 5% of July 2023 the last two revisions compound to about 14.5% [8]. The ministry gave operators about 53% of the increase they sought on intercity routes and 45% on express routes [12][5]. Daily intercity passengers, meanwhile, fell by half between 2019 and last year [13]. With half the riders, operators would need fares twice as high to collect 2019's fare revenue [6]. Express routes are already down 21% to 164 [14].
"Intercity and express bus routes are essential public transportation for the regions, and many are being scrapped as profitability deteriorates, so a minimum fare increase is necessary," said Jang Gu-jung, director general for comprehensive transport policy at the ministry [15]. He added that the ministry would make sure the extra revenue goes to new routes and service improvements [16]. That leaves operators to absorb the 8 to 11 points between the grant and their requests [5].
Everland's 3,000 won on the adult pass is about 4.4% [17][7].
The report does not say how much of a household budget these items make up, so it cannot size the effect on consumer prices. If Haitai or Woongjin announce another increase within a year, the one-time reading is wrong.
What to watch
- Whether other companies from the government's roughly 20-company Chuseok discount campaign announce list increases in the weeks after Oct. 1.
- The route fares operators actually set on the Seoul-Busan express line, against a new standard ceiling of about 29,100 won.
- Next year's ministry route counts, to see whether the fare revenue funds new routes as Jang pledged.