Korean Sales Competition Brings Benefits to U.S. Beef
Joon-Seok Song, supervisor for the GS Super retail chainThe educational tour, funded primarily with support from the USDA Market Access Program (MAP) and the Beef Checkoff Program, is appreciated by the participants, who understand that they stand between the U.S. beef industry and a consumer base that is very sensitive to nuances of beef quality and safety.
“The store managers I brought with me are new to U.S. beef,” said Joon-Seok Song, supervisor for the GS Super chain of mid-size retail grocery stores. “We want to learn about this industry from the farm to the packing plant. This will help us better understand the quality and safety message and give us the confidence to sell more American beef.”
Song and his four store managers were accompanied to the U.S. by USMEF-Korea Director Jihae Yang and five representatives of Lotte Super, another mid-size retail grocery chain. The two supermarket chains represent nearly 700 retail outlets in Korea.
The challenge facing these retail managers is that while they appreciate the quality of U.S. beef, consumers in their homeland are sensitive to sensationalist Korean media reports that inaccurately portray American agriculture, including inflating the BSE risk to consumers who eat U.S. beef.
The retail climate in Korea for beef has been a rugged one for the past year as the market has been flooded by domestic Hanwoo beef, driving down prices and encouraging more consumers to buy the more expensive home-grown product.
Currently, this nation of more than 50 million has just over 3 million head of Hanwoo cattle – a total that is expected to fall by nearly 10 percent by the end of the year.
“As the supply of Hanwoo beef declines, the price gap between U.S. and Hanwoo beef will increase, which will improve opportunities for American beef to increase sales,” said Yang.
Korea is typically about 39 percent self-sufficient in beef production, and the U.S. currently is the No. 2 supplier of imported beef, trailing Australia by a margin of 53.5 percent to 34.4 percent in volume. New Zealand is a distant third at 11.1 percent.
That is a far cry from the pre-BSE days of 2003 when U.S. beef owned a dominant 66 percent share of the volume and 74 percent of the value of Korea’s beef imports. Since 2003, Australia’s beef industry has capitalized on Korean consumers’ fears with its “clean and safe” imaging campaign that has enabled grass-fed Australian beef to eclipse sales of U.S. beef.
That margin continues to narrow, however, as USMEF-Korea’s comprehensive imaging campaign steadily raises the confidence of Korean consumers in U.S. beef – up from 5.3 percent in early 2010 to more than 38 percent in late 2012. The announcement earlier this year by the World Organization for Animal Health (OIE) that the U.S. has earned a “negligible risk” rating – the best possible rating – for BSE risk should help further boost that consumer confidence level.
GS Super’s Song believes there is a good opportunity for growth in Korea for U.S. beef. He thinks that Koreans will always prefer home-grown Hanwoo beef, but its higher price limits its audience.
“Grain-fed U.S. beef is similar to Hanwoo, and the taste is preferred over Australian beef,” Song noted. He added that while Australian beef has been successful in taking market share in Korea while the image of U.S. beef was down, when his stores offer samples of U.S. beef, it wins new converts.
“Pricing is always important,” Song said, “but giving our customers samples of U.S. beef is the most effective tool. They like it.”
Through the first seven months of 2013, U.S. beef exports to South Korea stand at 58,949 metric tons (130 million pounds) valued at $315.2 million, down 23 percent in volume and 11 percent in value from last year. Korea is the No. 6 export market for U.S. beef in volume and No. 5 in value.