News & Events | U.S. Beef Builds Foundation for Growth in Korea

U.S. Beef Builds Foundation for Growth in Korea

One month after its relaunch in major Korean retail chains, U.S. beef closes out 2008 having made distribution and sales inroads with key end-user accounts in Korea. Analysts are describing U.S. beef’s year-end market position as “solid, but not stellar.” They note that U.S. beef imports resumed at a tumultuous time — sandwiched between massive anti-U.S. beef protests in the summer and the onset of the global financial crisis.

“We are still operating in a market environment that is nowhere near stable,” said Jihae Yang, USMEF Korea director. “But important progress is being made, especially in laying the groundwork for future growth.”

Retail launch successful despite slow economy, slumping currency

Despite significant challenges, U.S. beef’s reentry into Korea’s mainstream retail sector has gone well overall. Since the Nov. 27 launch, total U.S. beef sales from the three largest chains (approximately 300 stores) are approaching 1,000 metric tons (2.2 million pounds). Although this volume is small compared to the estimated 30,000 tons (66.1 million pounds) that have cleared customs and entered distribution channels since product arrivals began in June, the retail relaunch achieved a breakthrough in terms of restoring confidence by traders in the salability of U.S. beef. But there is still concern about lingering negative consumer sentiment, reflected by the reluctance of major high-end department stores to restock U.S. beef.

Retailers have also complained that high U.S. export prices, coupled with severe depreciation of the Korean won since the resumption of imports, have diminished the competitiveness of U.S. beef when compared to its main competitor, Australian grain-fed product. Consumer price sensitivity has been heightened since Korea’s economy slumped this fall, which has slowed the pace of U.S. beef sales and caused a build-up in inventories. Some retailers are also reporting low U.S. beef purchases by shoppers less than 40 years of age.

To help overcome these obstacles, USMEF’s retail promotion program will continue through the Christmas holiday and New Year’s Day, culminating at the lunar New Year, January 25.

“We face a very competitive retail environment at the moment,” said Joel Haggard, USMEF senior vice president for the Asia-Pacific region. “It’s more important than ever that we promote our product aggressively.”

Despite some complaints about U.S. pricing, USMEF estimates that the major chain retailers have seen a surge in their sales of total imported beef of up to 50 percent since restocking U.S. product — with U.S. beef accounting for an estimated 60 percent of the sales value. In one illustration of the market’s extremely competitive landscape, leading market retailer E-Mart is currently running U.S. beef and Australian beef promotions side-by-side. Consumers are also benefitting as retailers formulate their own strategies against their competitors. This week, shoppers at one of Home Plus’s 113 stores can buy a kilogram of pre-sliced frozen U.S. short plate, chuck short ribs or sliced chuck-eye roll for 9,800 won per kg ($3.45/lb.). This price is below that of some pork and poultry items.

Expanded traceability, COOL requirements present new challenges

Although retailers are currently price-focused, market players also are looking to USMEF to restore and build the quality and safety image of U.S. beef that will provide Korean consumers with a long-term value proposition. Analysts note the success of Australia’s massive Clean and Safe campaign in building consumer confidence for Australian beef.

In another move designed to inspire consumer confidence, Korea launched its mandatory traceability plan for all domestic cattle earlier this week. Under the first phase of the program, all cattle presented to slaughter facilities must possess identification allowing traceability back to the place of birth. The program will be extended through the distribution system to the consumer on June 22, 2009. In a similar announcement, the Ministry of Food, Agriculture, Forestries and Fishery issued amended regulations that will require merchants handling imported beef in Korea to possess and retain all product transaction records. Korea also implemented mandatory country-of-origin labeling for pork and kimchi at all foodservice outlets this week. This will highlight the need for suppliers to boost the image of products that may previously have been sold without consumers’ knowledge of their provenance. Mandatory COOL for beef served at foodservice has been in effect since this summer.

To meet these challenges, USMEF’s outreach to Korean consumers has already begun. Advertisements and advertorials containing “U.S. beef myth-busters” and product quality and preparation information appear this month in popular lifestyle magazines such as Men’s Health, the House Full of Happiness, and Essen. This past weekend, USMEF held a U.S. beef and pork barbecue event at the Yongin Yangji Pine Resort, serving more than 6,000 skiers and vacationers with U.S. beef steaks and U.S. pork collar butt. Additional consumer events are planned, with the aim of restoring trust and confidence in U.S. beef, and ultimately rebuilding demand.

“Although we face economic headwinds in Korea next year, it is essential that we establish a high-quality and safe reputation for our products,” noted Yang.