Korea steps up pressure on private sector to ease inflation

South Korea is intensifying pressure on the private sector to curb inflation by forcing companies such as food and beverage makers not to raise product prices on the growing risks of inflation accelerating in Asia’s fourth-largest economy amid the deadly conflict between Israel and Hamas.

The Korea Sugar Association, an industry body, said on Thursday its member companies, including CJ CheilJedang Corp., Samyang Corp. and TS Corp., decided to refrain from hiking sugar prices until early next year.

The move came although global raw sugar prices jumped amid concerns over tighter supply and surging oil prices resulting from the Israel-Hamas war. Raw sugar futures soared 47.7% to 27.3 cents per pound this month from a year earlier, biting into the profitability of South Korean sugar makers.

The government is trying to prevent higher sugar costs from ramping up prices of other food products such as snacks and beverages, the local industry sources said.

“Sugar makers may have bitten the bullet and decided not to ramp up prices as the government is paying particular attention to sugar,” said one of the sources.

A day before the sugar industry announced the decision, the Ministry of Agriculture, Food and Rural Affairs said local sugar prices are unlikely to rise further as manufacturers have secured inventory for four to five months.

The comment put actual pressure on sugar producers not to increase product prices, industry sources said.

Bank of Korea Governor Rhee Chang-yong said inflationary pressure may ease more slowly than expected. Consumer prices rose 3.7% last month from a year earlier, their fastest pace since April.

SOJU AND FRIED CHICKEN

Liquor makers are also struggling in not jacking up the prices of soju, a Korean distilled alcoholic beverage, due to surging ingredient costs.

The industry needs to raise the spirit’s prices by at least 7% as their earnings shrank after giving up plans to hike them in February as the government asked not to do so, industry sources said.

The leading soju maker HiteJinro Co. logged an operating profit of 50.6 billion won ($37.3 million) in the first half, down 58% from a year earlier.

The fried chicken industry is facing similar issues.

A leading brand BBQ decided to cut the use of Spanish extra virgin olive oil for its signature menu for the first time in 18 years to keep prices intact. The sector has already been under pressure from rising breed broiler and delivery costs.

Write to Soo-Jung Ha and Young Chan Song at agatha77@hankyung.com
 

Jongwoo Cheon edited this article.