Market Information
Asia Pacific

3. Processed Meat

Product HS1601, HS1602

1. Opportunities: Strengths and Attractions of the Korean Market

1.1. It's a Big Market

The total market size of the processed meat market in Korea is about US$479 million at March 2000 exchange rates. In the Korean Won market size is estimated at 532 billion won in the year 2000. This estimate was made by the food association in 1999 and is almost certainly too conservative in view of the rapid recovery of the economy. Imports made up about 6% of sales in 1997 and about 3% of estimated sales in 1999. Imports are likely to recover to close to 1997 levels by the end of 2000, and to grow further in the future as the consumer's desire for higher quality meats grows.

Table 1. The Nature of the Processed Meat Market

Source: FWD Journal 1999 December(Plus KABC estimates)
* Excluding frozen food products

The total market size of frozen convenience food in Korea is about 200 billion won, which is considered by foreign food companies as a fraction of its potential. However the market has grown very slowly. The market for processed meat products which are mainly hamburgers, mini-hamburgers, breaded port cutlets, chicken nuggets and ham/pork slices for frying is estimated at about 50 billion won.

Frozen processed meat products are an attractive potential product for the Korean market, but to achieve sales of more than US$1 million per year, a partnership with an existing Korean brand of frozen food would be necessary, unless the local sales organization can penetrate the hypermarket and convenience store outlets.

Table 2. Representative Frozen Processed Meat Products

Section 2.3 gives the size of market for some major individual brands which reach 20 - 40 billion won. This report was prepared as Korea was entering a serious "Food and mouth disease" epidemic. Initial reports are that domestic consumption dropped, and this may present opportunities for increased imports.

1.2. It's Recovering Fast

The Korean economy grew 10.7% in 1999 after a contraction of 5.8% in 1998. By December 1999 retail and wholesale sales were 10% above the December 1997 (onset of crisis) figures. First indications for 2000 are of a 12% growth rate in the first quarter and 7-8% for the whole year. Retail and wholesale sales are likely to be up 10-15% for 2000. Imported products are still going to be more expensive in won terms with the US$ at 1050 - 1150 compared with 840 in 1997 and 800 in 1996.

Korea has undergone dramatic changes during the last two years due to the economic crisis, so that in general the imports of 1998 and 1999 broken the trend with the past. In the case of HS1601 and HS1602, the peak was 1997, despite the lower value of the won against the dollar than in 1996. Imports in 1999 were only about half of 1997 in the case of sausages, and two thirds in the case of other products.

The basic tariff rate for processed meat is 30% but it can be imported at a concessive rate(22.8%) at the moment.

1.3. There is a Premium Sector

There is a premium sector for hams and sausages both in larger retailers and in the small delicatessen. It is estimated at about 5% of sausages, and a lower amount of ham, falls into this category. (Source: trade interviews). In focus groups, consumers stated an intention to buy more high quality sausages and hams in the future which suggests that this sector will grow fast.

Three focus groups were conducted especially for this study of young women, women in their early thirties and those in their forties. The income range was moderate to well to do. As most food is almost exclusively purchased by women in Korea this was felt to give an indicative response to the issues arising from the products in question. The subjects discussed by the groups were food purchasing habits, attitudes to Canadian food and reaction to a small sample of products supplied by exhibitors to the Canadian Food Fair of March 2000. Further details are available from eabckr@kornet21.net

1.4. There is a Delicatessen Sector

The delicatessen sector exists in major hotels, select high class bakeries and a few select delicatessen stores. These sell salami and pepperoni sausages as well as prosciutto and other high value hams.

1.5. Processed Meat Fits with a Wide Range of Korean Meals

Although processed meat products are not part of the traditional Korean diet, they have become widespread and integrated into the diet, both as sausages and ham and canned products because of their adaptability as "side dishes." A Korean meal is served as a series of dishes all laid on the table at once. Rice and soup and Kimchi would be the basics, but there could be four to ten other "side dishes" served at the same time. Sausages, ham, frozen meat products or canned meat can readily be prepared in this way.

Ham and sausages also make up several popular dishes for home and restaurant usage - particularly Budei Jigae (canned ham, and sausage and noodle in spicy sauce) and sausage vegetable mix, a spicy dish popular in bars. Koreans believe food should be consumed with alcohol, and most drinking establishments require ordering a "with the drinks" food dish.

Ham makes up several popular dishes for home and restaurant usage. Low priced ham is mainly consumed at "Kimbap" (rice roll with green seaweed-laver) houses or in making kimbap at home.

Canned products have another role in the gift and gift set market where at three times in the year, Chusok (harvest festival) Christmas / New Year and Chinese New Year gifts are extensively exchanged - the majority in the form of gift sets of food or personal products.

1.6. Importers and Customers Looking for Something New

Importers are looking for new ideas and new products. They are reflecting the fact that the Korean housewife is always looking for new and quality products. There are sharp difference between young Koreans and older Koreans. Heavy users are likely to be over 40 years old. About 60% of under 40s said that they never purchased processed meat. Demographically women over 40 are a fast growing group.

Changing Preference

As in other food products, the Korean consumer seeks higher quality products. Koreans generally perceive ham and canned meat to be of higher quality than sausages and for this reason the local industry predict a 5% fall in sausage sales in 2000 and a 2.1% increase in ham. Canned product rose in 1999 recovering its 1998 loss, largely as the result of the recovery of the gift set market. Frozen food is also seen as low quality food, but is widely used in restaurants and bars. The old fish and meat sausage is disappearing.

Diagram 3. Domestic Production Status of Processed Meat Products

1.7. The Distribution System is Changing

The retail structure of Korea is changing. The major feature is the rapid growth of hypermarkets, several of which are foreign owned and might be more willing to take or showcase foreign products.

The only hypermarket actively soliciting foreign business in early 2000 is Costco, which has only three outlets. Only container loads will be accepted.

For Canadian processed meat producers to exploit this opportunity they must make contact with the purchasing departments of the chains. However if the brand or product does not yet sell in Korea, there will be a demand for heavy advertising support. There will also be placement fees.

It has been estimated that the percentage of Fast Moving Consumer Goods(FMCG) passing through the hypermarkets will reach 40% within 3-4 years. The main impact will be on large supermarkets and some small supermarkets. However Korea is a high-density country and consumers prefer to shop at the supermarket within their apartment complex or near their home rather than travel for 40 minutes to an hour each way to a hypermarket.

Table 4. Market Size of Hypermarkets

In provincial areas and cities the share of hypermarkets appears to be significantly higher than their share in Seoul. This is the conclusion from Taylor Nelson Sofres consumer panel purchase data which samples good households every month.

Hypermarkets biggest threat is e-commerce working through the convenience stores. This is a model of e-commerce developed in Taiwan and Japan and about to be applied in Korea, where the consumer pays and receives their order at the local convenience store. Lotte aims to be the leader in this having bought 7-11, Lawson and Best Store.

Table 5. Status of Convenient Stores (CVS)

Source: Food Distribution Year Book ((1) Excluding e-commerce effect)
* Voluntary chain convenience stores do not belong to the major chains and do not have central distribution

CVS sales are much more concentrated on convenience foods than hypermarkets which sell more household products. For food products CVS likely sells the equivalent of 22% of the value sold by hypermarkets.

Some authorities believe that in Korea this model will overtake the hypermarket model, which means that the amount passing through the hypermarkets will be less than 40%.

The growth of the hypermarkets, convenience stores and e-commerce clearly offers a future opportunity for Canadian exporters. However accessing hypermarkets at the present time will be difficult.

Hypermarket

Opportunities: 

• Hugely simplified sales channel
• Access to very large market share

Problems: 

• Chains are exclusive about products
• Demand high discounts
• Demand advertising and promotion support

Accessing CVS stores is much simpler as CVS are always willing to churn product to put something new on the shelf alongside the best sellers. This gives a narrow window of opportunity to prove that the product will be a best seller.

CVS

Opportunities: 

• Simplified sales channel
• Access to a sizeable market share
• No resistance to new products

Problems: 

• If product does not sell well, then will be replaced.
• Supplier will probably be asked to take back unsold product
• Advertising campaign to back up window of opportunity required

For processed meat, the opportunities to exploit this new form of retailing depends on relations with the retail chains, since they practice central distribution. (Gift sets may prove to be particularly attractive) : Sales of processed meat as "gift set" is usually limited to the Korean special Occasions such as Chusok. Only canned ham product not sausage, is usually used as gift set items.

Creating business opportunities out of these changes will be impossible in the processed meat sector without close relations with the hypermarket and e-market chains. This cannot be done at a distance or by fax or e-mail alone, though a powerful and attractive website will help. Without monthly visits to Korea or an on the ground organization, maintaining momentum will be impossible.

If access to the hypermarket or e-market system is achieved then sales should grow rapidly. This will require considerable work to build relations and incentives with the buying chains.

2. Weaknesses and Discouragements

2.1. Tariffs in 2000 will be 22.8% (30%)

The book tariff on sausages and processed meat is 30%. This is sufficiently high to require a careful look at costs and pricing structures for exports to Korea. Currently a concessionary tariff of 22.8% is applied, but may be changed at short notification.

The tariff is this high because the costs of the Korean local industry are relatively high. Sample prices per kg are as follows:

Note: Price sold to discount stores

Korea has a general commitment under WTO to reduce tariffs to international levels. It has been relatively slow to reduce tariffs for major food products which are produced in Korea.

2.2. Inspection Services May Have Some Problems

Compared with many food products, the import process for processed meat and sausages is relatively simple and automatic. Customs clearance on a documentary basis may be started before the product arrives, and it may be subject to physical inspection on arrival. Currently Canadian processed meat is being imported without visual inspection by the National Veterinary Research and Quarantine Service(NVRQS) based on a quarterly list of registered Canadian meat packing/processing establishments.

The Korean customs and quarantine system works on a "reliability" basis. A new importer, a new exporter or a new product will normally attract a full inspection, which should take a maximum of 18 days including testing for e-colli. Once the bone fides of the importer, exporter and product are established, documentary inspection should be sufficient and the product should clear within 5 days.

All foreign food importers indicate that unpredictable delays in food imports occur from time to time, and this is largely the result of the action of individual officials who have wide discretionary powers, rather than government policy. Success in a market may however lead to official complaints to the authorities by competitors, the most famous in this category being the damaging reclassification of Kraft's sausage shelf life in 1996. (The changes in regulations would make a repetition of the Kraft case difficult in the future because shelf life is now self specified).

In the case of Kraft the lobbying of the competitors persuaded the Ministry of Health and Welfare to change the conditions of distribution and shelf life. Subsequent to this self-specification of shelf life has become the practice.

2.3. Shelf life could be a Problem

In 1996 Kraft which was rapidly building an import market was caught by the change of shelf life regulations. Since that date, the Korean government has changed its regulatory practice towards shelf life. Companies may now specify the shelf life of their product. The shelf life specified may be subject to testing if challenged by officials or competitors. All locally produced ham and sausages carry the message "for shelf life expiry date, see the packaging." Korean companies are currently specifying one to two months. This is too short for imported sausages and ham in the general distribution trade.

A Canadian company may by challenged by a competitor or even a customs official to prove that the shelf life it specifies is safe for the consumer. This would require testing at a Korean institute, presumably(NVRQS)

2.4. Korean Competitors are Strong

In 1999 97% of all processed meat products were produced by local companies. The major companies were Lotte Ham and Milk, Jinju Ham and Cheil Jedang. All of these companies have chilled distribution systems for ham and sausages. Major producers of canned meat were Cheil Jedang, licensee of the name Spam, Jinju Ham and others.

The following tables show the size of market for particular products and indicate the relative strength of major companies.

Table 7. Largest Brands of Processed Meat in Korea

Sales Value: sales value per one month

2.5. Distribution Tends to be Tied to Manufacturing Company

The new distribution systems described in section 1.7 are only affecting about 12% of the market for processed meat at the current time. (23% if CVS are classed as new distribution systems as well).

This means that at the present time to reach 77% of the market, the old distribution system must be used, which is in the hands of the large competitors.

Each of the companies named in 2.3 has their own proprietary distribution system of logistics, sales force and exclusive agents. This represents a considerable barrier to practical mass distribution of new products except in partnership with a Korean manufacturer. As a result there are few professional distribution companies which can reach achieve national distribution.

Source: Trade and Industry Interviews

Frozen meat will have a different distribution by-passing Ma and Pa stores.

Accurate figures for distribution by channel are not readily available for these products as neither AC Nielsen which is the major source of store audit information, nor Taylor Nelson Sofres which is the major source of consumer purchase audit in Korea have data in all there categories in the public domain.

The trade estimates that about 10% of sales are to the Hotels, Restaurants, Institutions(HRI) sector (which is relatively low given that about 62% of consumer expenditure is on food for the home and 38% on meals outside). Sausages and ham and processed meat (except the special category of fish sausage) are not widely consumed outside the home except for the specialized dishes mentioned above and in western restaurants. The hot dog currently has a low profile compared with the hamburger in fast food restaurants.

Frozen meat products are more widely used in the HRI sector, notably what are called "western restaurants" and "HOFs (as Korean pubs are known) and bars." There are about 8,000 western restaurants licensed in Korea, but many holders of cafe or bar licenses serve a similar range of food.

2.6. No Korean "Canadian Image"

The Korean consumer does not have a strong image of Canadian product as opposed to US, European or Australian product. Focus group work showed that Korean housewives and young people generally had a good expectation of Canadian food products. They were generally disappointed in the product itself and particularly the packaging which was found to be not attractive nor to Korean taste.

Koreans prefer Korean products. Conventional amongst multinational food companies' wisdom is that Korean will tend to buy "made in Korea" although they can be tempted by attractively presented and made to taste products if the consumer is convinced that the product is superior. In focus group work the brand Moguchon was singled out because of no additives or preservatives. This brand is made by the National Livestock Cooperative Federation. A long shelf life will raise suspicions of additatives.

2.7. Must Be Container Load

The minimum unit of sales into Korea is the container load. The Canadian exporter must find a Korean partner willing and able to distribute a container sized consignment, or work with a Canadian consolidator who can arrange port loads. For processed meat products requiring chilled or frozen containers this will be more difficult than for canned meat.

3. Strengths

3.1. Price

Canadian manufacturers have the advantage of access to lower priced raw materials compared with Korean manufacturers. The price per kg in Table 6 will give an indication of how expensive the Korean product is. A rough check on the landed Korean retail price for a Canadian processed meat product is that it will be 2.15 times higher than the Canadian FOB price, but Korean products are selling at a discounted prices from time to time, particularly during sales promotion period. Korean consumers will not be deterred from paying a premium and will expect quality to be reflected in the price. A break down of the price build up is given in section 5.1.

3.2. Quality

Sausages and domestic processed meat are seen as likely to have low quality ingredients. Imported products can be projected as higher quality, and therefore more suited to the premium price.

Frozen food is also seen as non fresh and low quality and a frozen food supplier must work hard to overcome this image in the retail sector. HRI customers will normally just be looking at price except in 5 star hotels.

Customers stress quality, trust and freedom from preservatives and additatives as the key issues in choosing a product. Korean consumers are most sensitive to the perceived fresh- ness of the product. The impression left from the focus groups was that Koreans are more concerned about their health than convenience and that identification of the data of production and shelf life was an immediate concern.

3.3. Potential to Create Canadian Image

In discussion in focus groups conducted for this study the Korean consumer has a high, but unclear, expectation about Canadian product. There is a strong potential to create a "Canadian" image in the mind of the consumer but this cannot be done by a single food manufacturer alone, but could be developed to the benefit of many Canadian producers on a collective or collaborative basis.

4. Threats

4.1. Well Established Competition

Major Korean competitors already have established systems and relationships. The local Korean companies have been listed above, but Kraft is currently occupying several segments that a Canadian exporter might wish to compete in since 96.7% of imported product comes from the US. The dominance of the US products is shown in Diagram 8.

Diagram 8. Sausages and Similar Products, of Meat, Meat Offal or blood, Food Preparation based on these products (1601) Imports by Country 1999

US products are of no higher quality than Canadian products, but US manufacturers have:

• A local subsidiary
• Strong relations with local importers and food business.
• Good reputation for product
• Recognized brands
• A broad portfolio of products

Hormel's brand "Spam" is licensed to Cheil Jedang. Korean competitors will rapidly produce a similar product if a foreign company makes a successful market entry. Lotte Group which includes Lotte Ham and Milk is notorious for making "MeToo" products at low prices.

It is important to ensure that trade marks and package design are registered in Korea. Registration is inexpensive (about US $40 if done directly)

5. Market Strategies

The Korean processed meat market is a relatively difficult market to get started in. It requires investment, knowledge and patience. Until a secure marketing organization is set up it cannot be an orderbook market. To establish a presence in the Korean market will require proactive measures by the Canadian exporter. Unless any investment in the market is well planned, the development of long term business in the sausage and processed food sector is not likely to be attractive. The following set out possible approaches to the Korean market and the kind of investment needed.

5.1. Looking for a Niche Market

Creating a mass market takes time and money. A Canadian exporter will start by seeking a way to establish a niche market. The following table shows the price build up for meat products, and the potential exporter can multiply through his product to obtain an idea of the potential retail price in Korea and compare it with competitors.

Retailers attempt to return out of date stock and an allowance for returns must be made of 2-3%. A liberal return policy encourages retailers to stock a new item

Niche market exists in terms of delicatessen sales, in both the high and low end class HRI sectors and possibly CVS or large supermarkets. This market is estimated to represent about 7.5% of sales by value, but both trade and retailers expect it to grow rapidly in the future. The low end HRI sector is estimated at about 7% of the market.

For a niche market approach the company would either use an agent or import and distribution company. In the case of an agent, he would be responsible for finding a freight forwarder and physical distribution.

All companies currently importing processed meat are listed in the appendix and could be approached.

The following brands are imported by these companies.

Korean Air Lines

• Ham & sausage : Hickory Sweet/B.B in USA
• Lean meat of short ribs & ribs of beef from USA, Australia and New Zealand

Costco Wholesale

• Sausage for hot dog : Sainai Co., Ltd in USA

KTSC

• Bacon: Oscar Mayer (Kraft) in USA
• Meats: Maple Leaf Foods

Asiana Air Lines

• Black forest ham : from Australia (agent: Tenderplus company)
• Sausage: from USA

Nong Shim

• Luncheon meat, chopped ham: Tulip International in Denmark

Cheil Jedang

• Pork: Denmark(50%) - Tican, Steffhoulberg, Danishcrown
• Canada(30%) - Maple Leaf, Olymel (tie up for import of raw materials)
• France
• Beef: USA, Australia

5.2. Looking for a Mass Market

The pricing structure of the Korean market is such that a mass market in imported sausages, ham or canned product could be created if the FOB price can be competitive. A mass market means success with a brand name which can be supported by advertising and trade promotions. A brand name can only be established with the Korean consumer through intensive TV advertising geared to Korean tastes. To achieve this, it would normally be necessary to find a large company which will to act as partner / distributor. This could be one of a select number of large companies running sales and distribution for other brands, such as Nongshim, which is already engaged with Tulip for canned meat, or a cooperative agreement with one of the existing food companies, either already making processed meat products or seeking to enter the market. Many Korean food companies not currently making processed or canned meat are now considering entering the market.

In both cases the willingness to invest in advertising and promotion will be essential and a first year budget of US$3 million might be appropriate.

Only one hypermarket, Costco, is currently a major importer. Costco has only three outlets and naturally wishes to be sure that a container load can be sold.

The conclusion is that without partnership with a large Korean company, it is unlikely that a Canadian firm can build up a mass market in processed meat. A firm with a brand which covers a wider range of products, or a consortium of Canadian food companies might find the investment easier.

The industrial market is extremely large, since Korea imports a high proportion of its meat products. As noted above the major canned manufacturers using their own label import the product in bulk. The same can be true for frozen food products.

5.3. HRI Market

The HRI market is a dispersed field, but generally has a large number of independent wholesale agents supplying restaurants and food outlets. The larger chains such as Pizza Hut, McDonald's, and Burger King have central purchasing outlets. The biggest chain, Lotteria, is aligned with the Lotte Food Group. Some major outlets are served by the KTSC.

The KTSC is the major supplier of hotels. It does not have an exclusive right, but has the widest distribution to more than 700 hotels and tourist restaurants.

5.4. Alternative Approaches

The hypermarket sector is growing, but it is predominantly using domestic product. The following are "breakthrough" strategies.

TV Shopping

If being on TV is the requirement of mass success, blocking a space on a TV shopping channel could be a good way to start a business. Food products are particularly well suited to the target audience. Channel 39, the most progressive has just been acquired by Cheil Jedang. The other shopping channel is owned by LGHG. LGHS is the world's third largest home shopping channel and is now developing a related Internet site. The shopping channel companies can be approached direct.

E-commerce

According to surveys 81% of Koreans have visited an e-shopping mall and 51% have bought something. Inclusion of product in a company's cybermall requires very little stock and no shelf space. This is a business still in its infancy. The biggest cyber shopping mall is run by Lotte Department Store, but there are currently 139 other malls to choose from.

6. Do you measure up to the Korean market?

This section allows you to measure your ability against the Korean market without further investment.

6.1. Product

Do you have a product which fits the Korean market in terms of taste and SKU size? The preferred size in Korea is:

Sausages, 700g
Ham, 340g
Canned pork meat,180g

HRI will take catering packs, and premium products could have other sizes. Koreans have very particular tastes. Current sausages tend to be bland and eaten for texture rather than taste. Taste is added by sauces or other products eaten at the same time. In discussion with consumers the major comments on the canned sausages offered to focus groups were about texture.

6.2. Partner or Agent

A Canadian company will want a reliable partner in Korea. Korean business ethics are not always impeccable and in dealing with a small to medium sized company, a credit or reputation check is advisable. With large companies there is less cause for concern.

Korea has changed a great deal and the important issue is whether the partner has the experience and capacity to handle the product, or can outsource it reliably. Older Koreans often approach problems in a very old fashioned way, over emphasising relationships and entertainment and this adds cost and inefficiency to the process. In general Canadian exporters should be cautious of agents that talk too much about "under standing Korean customs". Even without direct payments the exporter may find himself paying for expensive entertainment.

The Confucian nature of Korean society means that a business relationship with a small company is also a personal relationship. With bigger companies the relationship would also be expected to transcend a simple profit and loss relationship.

The partner must also recognize the long term commitment that is needed, and must have contacts in the food business that know how to run a chilled distribution service.

Given the rapidity of change in Korea, the past may not be a guide to the future, but some 70% of foreign companies dealing with Korea have learnt expensive lessons with respect to agents and partners. Time spent in studying the market and learning who has a successful track record is essential.

In selecting an agent attention should be given to his proven track record, and to whether he has an organization which can deliver the product to the retail or HRI outlets, or whether he is only the first in the chain of middlemen. Note that the suggested price build-up in Table 9 allows for only two middle-men, an importer and a distributor.

6.3. Package

Packaging has two elements, the type of package and the design of the label or other material.

In focus groups, consumers criticized Canadian packaging as being unappealing. Koreans are sensitive to materials, design and colour. One Canadian pack was identified as having a "childish" image and therefore unlikely to be selected by adult shoppers.

The main meat product supplied for focus group work was a can of sausages, which was generally regarded as unusual and interesting. However the shape of the can (round) was identified by more than 50% of consumers as more appropriate to pets than humans.

Too much attention should not be paid to initial "top of the mind" reactions to new concepts. Nevertheless it suggests that further qualitative research be conducted before launching a product aimed at the Korean consumer. Focus groups cost about US$1,000 - US$2,000 per session and quantitative research about US$20,000 - US$60,000.

6.4. Pricing

Consumers agree that price is an important signal of quality. Importers and the trade agree that quality product may be priced at up to twice the basic price without damaging its appeal. Importers, distributors and retailers will expect to share in the higher margin structure and this is their incentive to carry and promote this product. Korean consumers are also willing to accept up to 100% higher prices than the basic product price for a quality processed meat product. This has been demonstrated by new Korean entrants into a wide range of processed food products. Lotte for example produces "PokPok" sausages which are twice the price of regular sausages.

6.5. Willingness to Modify the Product

Koreans have strong ideas about the product. A focus group discussion about Canadian sausages showed a considerable age difference. Older Koreans liked the softness of the product whereas younger Koreans disliked them. Young Koreans found the product greasy and unattractive. Older Koreans liked the texture.

Where Korean companies have sourced product from overseas they have flown taste panels to the originating country to get the taste right

7. How Do I Start?

7.1. Start as Simply as Possible

Our recommendation is to start in as simple and easy as possible. No potential exporter should start without a week long visit to Korea. But this first visit should be well prepared without committing to an agency relationship first. It should include visits to several large food manufacturers, hypermarket buyers, the KTSC and one or two major hotel managers, and others in the food business. The preparations would begin with fax contact with selected importers to see whether they have an interest in importing processed meat products from Canada. The list of importers is appended to this section and the importers are graded according to information currently available.

Before leaving Canada an adequate supply of brochures and name cards (100 is not enough) should be prepared. At the same time at the start of the process, the company website should be reviewed. Current big Korean company and hypermarket practice is to look at the website on receipt of a fax or inquiry.

The Canadian company may be judged purely on its Canadian website and on this may hang the acceptance of a proposal for a meeting.

It is possible that even after a visit there will be a minimal response, and that one of two decisions must be made, to look for a suitable agent, or to attend a trade show or make an independent assessment.

• Name of potential agents may be found either by consulting a professional consulting company, or by contacting the Canadian embassy or a trade organization such as AFTAK.
• Contacts can also be made by attending trade shows, or visits to Korea to follow up or initial contacts. The Canadian Embassy reports that the recent food trade fair attracted about 450 Korean trade visitors. The next Canadian food trade fair (2001) will be held in Seoul in March, 2001.
• The final way is to make a second visit.

The best prospects for immediate business in processed meat are the hotel delicatessens and other high class restaurants served by the Korea Tourist Supply Center. The KTSC complain that the buyers in the hotels are conservative, and that therefore direct contact with the hotels as well as the KTSC is essential.

As a way to get down to business quickly we consider that the trade show is the best route.

7.2. Getting a Container Load Together

A single container of processed meat would require about 40-60 outlets willing to take the product, or a major promotion to move the stock. The alternative is to share a container with an existing shipping in a consolidation move. Freight forwarders in Canada will be able to identify consolidation opportunities.

In terms of coordinating sales and shipments, the time of year is also important. Canned meat should catch the gift season from September to February i.e. be shipped from Canada by July. Official production figures for ham also shows a September peak. Production and shipment of sausages is constant all the year round.

• Sharing
• Promotion to move stock
• Choose the right season

7.3. What to Watch Out For

Physically Getting the Product Cleared

Complaints about customs procedures on clearance for food products continue. Both Amcham in its annual report on business conditions in Korea and the Investment Ombudsman which handles business complaints find that arbitrary actions by quarantine and customs individual officers fill up their case books.

The first time is likely to be the worst and the following are the most common causes of delay:

• Paperwork not in order. The necessary documentation on contents are inadequate
• Korean labels proposed for the product are too small or do not conform to specification.
• Products tested reveal minimal trace elements of proscribed products.

The most celebrated case was the change in shelf life and distribution conditions for imported sausages which caught Kraft in the mid 1990s.

The second and subsequent shipments should go through much more easily unless:

• Change in local official
• Change in local regulations

2000 is predicted to be more difficult than 1998-1999 because the rise in imports will encourage nationalistic officials to look for ways to create problems, meaning that due diligence will be even more important, to avoid problems.

7.4. Regulatory Issues

The importation of sausage HS 1601 and prepared meat HS 1602 into Korea must not contravene the Livestock Epidemic Law, the Livestock Processing Law and the Food Hygiene Law.

The importation of sausage has a 22.8% tariff in 2000.

For prepared meat (HS1602) has a 30% tariff in 2000.

Inspection of Goods

Inspection of goods or their labels / packaging is necessary to determine:

• The value of the goods for customs purposes and their dutiable status;
• Whether the goods must be marked with the country of their origin or are in need of special making or labeling. If so, whether they are marked in the manner as prescribed;
• Whether the shipment contains prohibited articles;
• Whether the goods are correctly invoiced;
• Whether or not the goods are in excess of the invoiced quantities.

To be specific, customs officers will ascertain the quantity of goods imported, making allowance for shortages under specified conditions and assessing duty on any excess.

The showing of the contents of each package on the invoice, the orderly package of the good, the proper marking and numbering of the packages, and the placing of the corresponding marks and numbers on the invoice facilitate proper duty adjustment according to actual volume of goods brought in and the ascertainment of whether any excess goods are contained in the shipment. If any package which has been designated for inspection is found by the customs official to contain any article not specified in the invoice with fraudulent intent on the part of the seller, shipper, owner, or agent, the contents of the entire package in which the excess goods are found are subject to investigation for possible violation.

In recent months processed meat has not been subject to delays or inspections. If in doubt about procedures the Canadian exporter of processed meat should contact the NVRQS.

Appendix 1. Further Information on Import Procedures and Regulations

1) Local customs Commissioners or Directors may deploy a special inspection team for fast processing for "fresh food". Processed meat should not be included as "fresh food" but the discretion of local authorities in case of chilled products should be noted.

2) In principle, the inspection should finish within 5 working days from receiving the import report. The imported foods etc. subjected to incubation test such as canned or bottled foods and retortable pouched foods, and the other imported foods etc. subjected to inspection by special order from the Commissioner of Korea Food and Drug Administration, are exempted from the processing date limit.

3) The test items for the laboratory inspections and the random sampling inspections for the imported foods, equipment and containers/packages are referred to in Appendix 4 Primary Laboratory Analysis List for imported foods etc. As noted this has not been applied to Korean processed meat products.

Inspection and Clearance Procedures for Foods

Diagram shows the inspection procedures.

The documentation required is:

a) Certificate of Quarantine by Orign Country
b) B/L
c) Import Declaration
Need to attachment of copy of Korean label
(manufacturing progress, Ingredient, shelf life)
d) Copy of Livestock Import Sales Certificate

1) Application for food safety inspection

Since the imported foods and domestic foods are regulated by the Food Sanitation Act identically, the importer would normally must make an application for a safety inspection to one of the six Regional KFDAs which are substructures of the Korean Food and Drug Administration (KFDA). As the pre-arrival application system was introduced in August 1995, an arrival application can now be conducted five days before the arrival of the shipment. In the case of processed meat this would normally be handled by the NVRQS.

The criteria and the types of inspection

a) Confirmation of safety

• Residual test for pesticides, antibiotics, heavy metals etc.
• Confirmation of micro-organisms
• Test of toxicological substances such as aflatoxin
• Perishability test

b) Confirmation of standards and specification

• Confirmation of meeting the standards provided by the Food Code
• Confirmation of additives in compliance with provisions of the Food Additives Code

c) Provision of consumer information

• Examination of labeling in Korean (nine items including main ingredient, etc.) to confirm the suitability of information for consumers

d) Ensuring the soundness of food

• Protection of sound dietary habits through the elimination of unsuitable foods

2) Procedures after rejection of food

a) Food that has not passed the KFDA inspection is destroyed except in the following cases:

• The food rejected is to be returned to the exporting country or converted for other use as non-edible products.
• When the sanitation hazard sanitation can be eliminated by processing, heating or selection after customs clearance

b) Inspection Procedure of Imported Food

Imported food import - Declaration - Food & Drug Administration - Regional Food & Drug Administration - Health and Environment Research(as needed) - Institute at City and Province - Document Test - Organoleptic Test - Laboratory Test - Random Sampling Test - Customs Office(Pass) - Customs - Clearance (In case of rejection: return to the origin or diversion to other use - destruction)

3) Improvement of the imported food product inspection system

a) Compliance Sampling Group (subject to mandatory laboratory testing):

• New-to-market products
• Products with a record of violation
• Products with prior information of sanitary risk
• Products falling under the health supplementary products of the ginseng products category, for which laboratory testing is compulsory.

b) Surveillance sample groups (Products random sampling for laboratory testing)

• Same products from same producer which passed the laboratory testing.
• Raw materials which a manufacturer imports to make his own products.

Appendix 2. Useful Data

2.1. Other prepared or preserved meat, meat offal or blood
(HS 1602) Imports by Country 1996-1999
(Unit: US$1,000)

2.2. Sausage and smaller products of meat, meat offal or blood: Food preparation based on these products (HS1601) Imports by country 1996-1999 (Unit: US$1,000)

2.3. Imports by country of origin: HS 1601 Sausage

2.4. Imports by country of origin: 1602 Other prepared or preserved meat, meat offal or blood

Appendix 3. Importers

M = Mass Market
HRI = Hotel, Restaurant and Institutions
No comment means small company only suitable for niche.

Appendix 4.

Source: Discount Merchandiser(Jan 2000)