Organic Packaged Food in South Korea

PROSPECTS

Distrust in the credibility of organic certification and high cost of organic products result in lower demand for products targeting general consumers

Organic dairy and organic baby food are the largest categories of organic packaged food in the South Korean market, and other than organic chocolate confectionery and organic rice they were also the only categories that posted positive value growth in 2019. In general, demand for organic products (other than organic milk) that target general consumers continued to decline or stagnate over the year.

While declining demand for organic milk formula results in slower growth for organic baby food overall, convenient prepared baby food sees strong value growth

Demand for organic baby food overall declined in 2019, driven especially by lower demand for organic milk formula, and partially due to a decreasing birth rate South Korea. Value sales of organic milk formula declined for the fourth consecutive year in 2019, just as overall consumption of milk formula had continually decreased.

Organic milk in smaller pack sizes performs well, as Maeil successfully changes perceptions about the benefits of consuming shelf-stable milk

In 2019, organic milk and, to a lesser degree, organic flavoured milk drinks both saw value sales growth increase, although the growth was lower than that seen in the previous year. Organic milk positioned as children’s drinking milk in only 120-180ml formats is continually performing well, with Maeil Dairies having created a sensation by offering organic shelf-stable drinking milk with a smaller pack size for children.

COMPETITIVE LANDSCAPE

Accounting for more than half of total sales of organic baby food and organic milk, Maeil Dairies creates a sensation with its shelf-stable product targeting children

Maeil Dairies dominates organic packaged food, accounting for more than half of total value sales of organic dairy and organic baby food, the two largest categories of organic food within the South Korean HW packaged food market. While organic breakfast cereals, sauces, dressings and condiments; rice, pasta and noodles are also available in South Korea, all of these smaller categories showed weak performance in 2019.

General distrust in the validity of food labelled as “organic” prompts manufacturers to choose other terms to attract consumers to their products

Like dairy manufacturers, manufacturers of other products such as organic snacks, sauces, dressings and condiments that mainly target adult consumers are showing weak performance, with most players losing value share in HW packaged food overall. Basically, Korean consumers have developed some distrust of so-called organic packaged food after an insecticide/egg issue was raised in the country, and most do not know what the necessary conditions are for a product be labelled organic, which might help them appreciate the merits of products on the market that have legitimate organic certification.

Premiumisation boosts value sales of organic rice at a time when total sales of rice have been declining

South Korea’s National Agricultural Cooperative Federation has reported slight increases in organic rice value sales in 2019 thanks to premiumisation in the rice category at a time when total sales of rice have declined gradually. Rice, which has been one of Korea’s most important agricultural crops and a staple grain for decades, has benefited from increased government support of domestic producers in the form of income subsidies, some of which are linked to their rice output.

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