Market Information
Asia Pacific

Korea Ag-News

December 2006

NEWS CLIPPING

Canada seeks wider agricutlural access in FTA talks

Canada has pushed for wider access to Korea's agriculture market during the eighth round of talks for a bilateral free trade agreement last week, the government said yesterday.

Canadian negotiators asked Seoul to revise its proposals for beef and pork, saying that an FTA would have to benefit the Canadian livestock industry, the Seoul's Agriculture Ministry said.

But it stressed that Korean negotiators explained their difficulty in changing the country's position on agricultural goods, citing the politically sensitive nature of the farming industry and the difficulty faced by local farmers.

The eighth round of FTA negotiations took place from Nov. 20 to 23 in Seoul. The ninth will be held in Canada during the fourth week of January next year. (Nov. 27, 2006, Korea Herald)

Bone chip found in US beef

A bone chip has been discovered in the first shipment of US beef to land in Korea. The Ministry of Agriculture and Forestry (MAF) announced that a small piece of bone was discovered in a box of chuck flap tail - the bone was detected through the x-ray process by which every carton is being inspected. While Korea has accepted that bone chips are not specified risk material, any product with bone chip is being regarded as bone in, which violates agreed import protocols.

The beef was shipped by the Kansas based processor Creekstone Farms, and it is anticipated that the Creekstone plant's approval to export to Korea will be suspended. Due to the failure of the quarantine process, the product will be shipped back to the US or destroyed.
The nine tonnes of airfreighted US beef was the first to be sent to South Korea since the US was banned in 2003 due to BSE. The market was officially reopened in early September this year. (Nov. 26, 2006, Meat and Livestock Australia)

MARKET INTELLIGENCE – OILS AND FATS
(extract from a study by Euromonitor)

Organic oils and fats set for the fast growth

Organic products showed the highest growth among HW oils and fats. Organic oils and fats are only available in olive oil and vegetable & seed oil. Within these areas, organic products have recently grown robustly.

This healthy performance stems from the country's burgeoning wellbeing boom. Industry efforts to feature additional health benefits for inherently healthy product groups have also contributed to the pattern. For example, the latest organic launches in olive oil have attracted highly health-conscious consumers through online or offline organic shopping stores, or the food corners of prestigious department stores. While small-scale players largely shape the demand, sales are showing an impressive pace of growth.

Imported and domestic brands both explore organic oils and fats

As explained, organic oils and fats are only present in olive oil and vegetable & seed oil. The major reason for the lack of product availability in other areas such as margarine, butter, and spreadable oils & fats is fact that these product groups are more or less unhealthy due to their levels of fat. This implies that inherently unhealthy food items are unfavorably poised to secure any significant HW demand.

The key organic olive oil brand is Organic Lio Extra Virgin Olive Oil produced by Lio in Turkey. This single brand dominates sales, and its availability is wide, through online health food stores, offline organic food shops, and the food corners of various department stores. As a promotional tool, distributors mainly emphasize the name power of the brand and the company as one of the world's best organic olive oil producers.

In contrast to the domination of organic olive oil by an imported label, organic vegetable & seed oil is dominated by small-scale domestic players. Distinct brands include Goesan Traditional Perilla Oil and Goesan Traditional Sesame Oil by Goesan Traditional Food Co Ltd, Hannong Evening Primrose Oil by Hannong Village Food Co Ltd, and Serim Brown Rice Oil by Serim Hyeonmi Co Ltd. Domestic players adopt indigenous ingredients, such as perilla, sesame, and brown rice. When it comes to distribution, the channels available for such products are currently limited, as only online organic stores and limited offline food stores offer them.

Naturally healthy oils and fats dominate in HW oils and fats

Sales of ‘naturally healthy' olive oil account for over 13% of total oils and fats sales. Olive oil sales grew strongly from 2000 onwards. Increasing health concerns held by South Korean consumers, coupled with the wellbeing boom, underpinned the growth. In the meantime, the growth seen in 2003 was unprecedented, with total retail consumption volume of olive oil jumping a marked 110%, from 2,650 tonnes in 2002 to 5,610 tonnes in 2003. This phenomenon was driven by an influx of domestic oils and fats players into olive oil with their own local labels, using imported materials. Until 2002, imported brands dominated domestic olive oil, particularly Borges Olive Oil by Aceites Borges Pont SA, Bertolli by Unilever Group, and Carapelli by Carapelli Firenze SpA. Baeksul Extra Virgin Olive Oil by CJ Corp was the only domestic brand. In 2003, however, domestic oils and fats players aggressively entered the field, attempting to benefit from this increasingly lucrative area. New domestic brands included Haepyo Compressed Olive Oil by Shindongbang Co Ltd, Ottogi Fresco Extra Virgin Olive Oil and Ottogi Fresco Pure Olive Oil by Ottogi Co Ltd, and Chungjungwon Chambitgoun Olive Oil by Daesang Group.

Olive oil and vegetable & seed oil present additional benefits.

Organic sales present the highest growth potential among HW categories in oils and fats. The core growth engines look set to be organic olive oil and organic vegetable & seed oil. Industry players may move into featuring additional health benefits to existing formats in order to push up sales. Consumers are also increasingly exposed to organic oils and fats. Despite their high price levels, products are still attractive due to their prestigious images and high quality ingredients. Compounded by the country's emerging organic boom, there is ample growth potential in the near future based on the currently small demand base. Nevertheless, a narrow base of high-end consumers will continue to form the majority of demand.

In olive oil, foreign organic labels imported from overseas are likely to lead the sales for the time being, as domestic production of olive is not possible in the local climate. However, organic vegetable & seed oil is expected to see more local players over the forecast period, with the possible entry of mass producers.

Future outlook

Organic oils and fats to show healthiest growth

The future of HW oils and fats looks bright at the moment. The key growth factor is likely to be increasing health concerns held by South Koreans, compounded by the country's burgeoning wellbeing boom. The highest growth looks set to stem from organic olive oil and organic vegetable & seed oil. This is partly from their rather embryonic sales bases at the moment, coupled with the country's emerging organic boom. As consumers and industry players are both increasingly moving towards the additional health benefits of the already healthy oils and fats products, substantial growth is likely in the near future. Over the forecast period, organic oils and fats products are predicted to double their presence overall in constant value terms, taking a share of 1.2% in 2009.

Margarine heads the growth of BFY reduced-fat oils and fats

BFY reduced fat products are also poised for strong growth in the future, with over 14% growth in retail value terms to reach over Won2.6 billion constant value sales in 2009. Margarine will spearhead this movement given that local customers are increasingly replacing traditional full fat margarine with reduced fat margarine

Overall landscape

Overall, the increasing ageing population, and the growing desire for a healthy lifestyle among consumers, is predicted to facilitate the growth of HW oils and fats. Oils and fats are an essential cooking item. As the consumption of the products is more or less necessary, consumers are likely to seek health benefits from the given products rather than seeking out alternatives in other product areas. Because of this, manufacturers will increasingly add health benefits to existing products, as well as creating new product ranges with a health orientation.

Olive oil ready for HW diversification

With greater product availability, coupled with enlarged distribution channels, organic olive oil looks set to continue its robust growth momentum. Most local consumers are well aware of the health benefits of olive oil. In the past, higher pricing over vegetable & seed oil discouraged its consumption. While recently introduced domestic brands by leading local producers still carry high pricing, similar to imported brands, increasing product availability suggests the possibility that future pricing will be reduced to a certain extent over the forecast period. If this happens, the consumer base is expected to widen, leading to increasing local demand for organic olive oil, which will contribute to the overall growth of olive oil sales.

To introduce your company and products to the Korean market, why not join the Seoul Food & Hotel 2007 on 24-27 April 2007

South Korea has the tenth largest economy in the world and is a major economic power in Asia. Home to a relatively affluent population of over 48 million, South Korea offers a large market for agri-food products.
Korea imports 60-70% of its food requirements and runs a significant food trade deficit. In 2005, Korea imported US$10.9 billion in agri-food products and US$2.3 billion in fish and seafood products.

In 2005, Korea was the fifth largest market for Canadian agri-food exports. Canada has a large agricultural trade surplus with Korea, exporting significantly larger amounts of food to South Korea than it imports from the country.

The Korean consumer market is highly developed and Western styled foods are growing in popularity. Overall, consumers demand high-quality, convenient and healthy products. Changes in lifestyle and diet, as well as increasing affluence, have resulted in growing demand for convenient and processed foods.

Recently, the "well-being" phenomenon has swept through food industry. The image that Koreans have of Canada is that of a clean, natural, unspoiled country. Marketing and branding that associates food products with Canada's favourable image may be successful in South Korea.

To assist Canadian exporters interested in this market in their efforts to identify business partners in Korea, the Canadian Embassy would like to encourage them to participate in the Korea's New International Food, Drink and Hospitality Trade Show, Seoul Food & Hotel that will be taking place on 24-27 April 2007 at KINTEX(Korea International Exhibition Center).

The Seoul Food & Hotel 2007 results from a merger of the country's two best recognized exhibitions, Seoul Food and Food & Hotel Korea, with a combined track record of more than 20 years.

There will be two distinct sections of the new Seoul Food & Hotel exhibition. The first will be for domestic exhibitors and open to the public. The second, international part will be consisted of national groups and admission is restricted to trade only.

The Canadian exhibitors will be grouped in a block of space under a common look, reflecting a national identity for a Canadian pavilion in the international hall.
Companies interested are invited to contact the organizer's Canadian Representative at :

Derek Complin
dc@unilinkfairs.com
www.unilinkfairs.com
tel : 613-549-0404
fax : 613-549-2528

Newsletter prepared by
The Canadian Embassy in the Republic of Korea
International Trade Canada (ITCan)
Seoul, Korea

The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.