USMEF Strategic Market Profile

South Korea

Market Trends and Growth Potential

• Per capita beef consumption dropped during the time that U.S. beef was out of the market due to short supply and inflated prices.
• The Korean market was open to U.S. beef intermittently from mid-April through September 2007, but the Korean government suspended quarantine inspections on October 5^th. The Korean market will not reopen until a new import protocol is negotiated between the U.S. and Korea.
• During the brief period that the market was open, U.S. beef sales gained momentum, reclaiming a 3.9% market share of the total import volume of 195,524 mt for January-August 2007.

• Consumers are eager for the return of popular highly marbled U.S. beef – at reasonable prices.
• While the market was open, U.S. chilled choice loin in Lotte Mart was selling at $4.1/100kg vs. Aussie 300 day grain-fed at $5.4/100kg
• During U.S. beef’s absence, the two major competitors (domestic Hanwoo and Australian beef) have maintained high profiles to keep their beef prominently before consumers and gain momentum in light of the imminent return of U.S. beef.

Market Penetration

• During the period when the market was open, there were more than 25 importers handling U.S. beef and distributing to their downstream customers through well-organized sales channels. When import conditions normalize with bone-in beef, these loyal importers are expected to play an important role to quickly retake lost market share.
• Five major U.S. beef importers (Hanjung, Meataem, Kosca, E-net and KRSC) successfully launched the first U.S. beef sales in retail outlets when the market opened earlier this year.

Product/Industry Image

• The three major Korean retail outlets – Lotte Mart, E-Mart and Homeplus – recognize that U.S. beef sales result in a better operating profit than beef from competing countries.
• Franchisers and small-scale restaurants view U.S. beef as a high profit margin item and are anxious to resume sales, particularly to offset losses faced during the ban.
• Repetitive finding of bones and SRM under the current import protocol have made importers and distributors regard the U.S. as an inconsistent supplier.

Operating/Marketing Environment and Trade/Distribution Issues

• A proposed COOL bill would increase the number of restaurants required to identify beef origin (as well as pork, chicken, Kimchi and rice) from 4,300 to 19,000 establishments. Though public opinion toward U.S. beef changes quickly, in the long run, this could represent increased opportunities to promote high-quality U.S. beef.
• Considering Korean consumers preference for highly-marbled chilled BBQ items, a shift at the retail level from 50% chilled / 50% frozen to 70% chilled / 30% frozen strengthens U.S. beef’s competitiveness.

Access Conditions

• As the Korea-US FTA resulted in continuous efforts to more forward with bone-in beef trade, the U.S. and Korean governments are currently holding bilateral technical consultations to negotiate health requirements pursuant to Korea’s risk assessment for the import of U.S. beef products.

Import and market share data is based on import data of Korea (from GTA), and U.S. export data is from the U.S. Department of Commerce, Trade Census Bureau.

Long Term Strategy:

• Once the Korean market is fully open with commercially viable access for U.S. beef, efforts will focus on regaining ground lost during the ban on U.S. beef imports. Initiatives will address concerns about the safety of U.S. beef and will work to overcome consumer bias against imports.
• Reintroduce U.S. beef to consumers by presenting opportunities for them to experience the superior taste and quality.
• Reinforce awareness of the profitability and safety of U.S. beef in HRI and retail outlets through continuous education.
• Form strategic alliances with Korean BBQ restaurants and encourage Korean BBQ restaurants to identify the U.S. origin of the product to increase visibility of U.S. chilled beef.

USMEF Export Forecasts: