Tuesday, November 26, 2019

Forecasting the Pork Market in Korea

Forecasting the Pork Market in Korea

Pork is the most popular meat in Korea and the market is huge with 1.4 million tons (US $5.4 Billion) consumed in 2018.   However, the market is changing buffeted by conflicting forces.  This makes forecasting future market opportunities difficult.  The following trends can help shed some light on the future potential for the market.

African Swine Fever (ASF) is a serious viral disease afflicting pigs that can spread very rapidly among the pig population.  Market insiders watched carefully as ASF spread across Asia and approached Korea.  ASF first appeared in China in August 2018 and then reached North Korea in May 2019. The first cases were detected in South Korea in September 2019.

Korean pork importers anticipated the impact of ASF and built up stocks expecting that the disease would result in a significant culling of the pork population and thus driving up prices.  In China, pork prices rose 40% after ASF hit the country.  However, in Korea, when ASF finally arrived, the market behaved exactly the opposite of their forecasts and pork prices have fallen.  How could market insiders be so wrong in their forecasts?

Pork Remains the Most Important Meat Source

Pork is the most popular meat among Korean consumers followed by chicken and beef. Pork consumption per person has been increasing steadily from 5 kg annually in the 1970’s to 25 kg in 2018. However, beef and chicken consumption are currently growing more rapidly than pork. Meat consumption has grown at 4% CAGR over the period 2008-2017. This breaks down as follows: beef: 5%; chicken 4%; pork 3%.

Annual Meat Consumption per Capita:  

Unit: Kg
Source: Korea Meat Trade Association

Consumers Shift Away from Pork

As Korean consumers' incomes grow, more and more are looking to beef which is considered a premium meat. Also, chicken is considered a healthier alternative to pork. A common assumption in Korea is that white meat such as chicken and duck is healthier than red meat.

Another important change among consumers is that consumers are increasingly reluctant to cook pork at home because of the mess and smell.  The most popular cut is pork belly which is considered the tastiest (due to the fat layers) and most compatible with Korean barbecue cooking methods. However, when pork is barbecued, the fat splatters all around the cooking area.  Also, the residual odor from cooking pork remains for many days.  Opening windows to reduce the odor is unwelcome in the cold Korean winters. 

Korean consumers have been migrating to healthier and cleaner dishes in recent years. Furthermore, consumers have responded to the arrival of ASF by reducing consumption of pork out of fear of contamination.  Therefore, pork prices are responding to reduction in demand rather than shortage of supply.

Premium Pork

Over the past 10 years, consistent with the shift towards quality, different species of pork have been introduced to the market as premium pork. For example, Iberico from Spain, Jeju Black pigs from Jeju Island and Mangalica from Hungary.

Among the newly introduced species, Jeju black pigs and Iberico from Spain have achieved big success. The success of Iberico has led to growth of the pork from Spain.

Pork Imports by Country by Value

Unit: USD 1,000

Pork Imports by Country by Volume

Unit: Tons
Source: Korea Customs Office       

When looking at entering the Korean market, it is risky to make assumptions based on experience in other markets.  It is critical to understand Korea's specific market dynamics and adjust your strategy accordingly.

If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.com,