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Suggested pricing to prompt hikes for food products

Aug. 7, 2011 - 19:43 By
Further price increases for some processed food products appear unavoidable with the revival of the manufacturer’s suggested retail price from this month, industry sources said Sunday.

The Ministry of Knowledge Economy announced in June that food products such as instant noodles, snacks and ice cream will no longer be listed for the current “open-price policy” starting in August. 
Snacks are displayed on the shelves of a local retail store in central Seoul on Sunday. (Ahn Hoon/The Korea Herald)

Suggested pricing is to return a year after retailers were allowed to set their selling prices since last July to encourage price competition in the food industry.

The government, struggling to ease soaring price concerns, is asking for food makers to set retail prices within the month, hopefully at the similar level before the open-price system.

Industry sources predicted, however, the food industry, with many companies having already increased their factory prices by 5-25 percent in May, would not return to the prices a year earlier.

Nongshim, a major food maker, was considering a 100-won increase in its snack products compared to last July.

The price of the classic “Shrimp Cracker” will increase from 800 won to 900 won and those of other signature snacks such as Banana Kick and Jagalchi to 800 won.

“When adjusted for inflation, it’s difficult to return to last year’s prices. We have decided on the price increase reflecting the May hikes in factory prices,” said a Nongshim official.

In May, the company raised the factory price of Jagalchi, the octopus cracker, 7.6 percent from 505.5 won to 544 won. However, its retail price increased 14.2 percent in a year.

Even though some companies such as Orion said they would maintain the retail prices, many others were expected to follow Nongshim, industry sources said.

“We in principle agree to the government’s intention to relieve price concerns among consumers. But we cannot return to the earlier prices considering the clear loss of operating profits,” said an official of a local food maker.

Like other companies, the official said, his company also cannot ignore the public expectations about price cuts, facing a difficult choice now.

With the industry waiting for their products with no prices shown to be sold out within the month, the pervasive outlook is they would set the price at the current price level of convenient stores, which have maintained the suggested pricing even during the open-price policy.

By Lee Ji-yoon (jylee@heraldcorp.com)