Korea Food Service Market Size
Units: 1,000 companies,1,000 people, KRW billionSource: 2019 Food and Service Statistics
An
interesting fact about Korea is the number of restaurants. In 2017, the number
of restaurants and bars in Korea reached over 692,000 which is close to the
number of restaurants in the U.S. Moreover, this was twice or more the number
in Italy, France, or Taiwan. This fact becomes more fascinating when we
consider the ratio to the population.
The
ratio of restaurants and foodservice companies per population in Korea is overwhelming
compared to other countries.
However,
we cannot be optimistic about being the number one country with a restaurant
per population. As much as the number of restaurants increases, the competition
grows and chance for companies to create revenue decreases. The average yearly
revenue per restaurant in 2017 was USD 100,000 compared to USD 800,000 in the
US and USD 500,000 in China. We can understand from the data that the
foodservice and restaurant business in Korea is a red ocean, where the market
is saturated and too many competitors are fighting over a limited market.
Food Service Characteristics
Food Service Industry Outlet Size
Number of
Employees
|
Volume ratio
|
Revenue ratio
|
Less than 5
|
86.40%
|
50.70%
|
Between 5 and 9
|
11.20%
|
27.30%
|
More than 10
|
2.40%
|
22%
|
The
majority of restaurants are small stores with less than five employees and low
revenue. On the other hand, 2.4% of the companies which have more than ten
employees account for over 20% of the market. The foodservice market is polarized
similar to most other industries. The polarization is not only related to the
size of the company but also related to regional characteristics.
Food Service Industry Regional
Distribution
Seoul
and Gyeonggi-do, which are together considered the metropolitan area, contains
50% of the population and accounts for about 40% of the foodservice industry.
Food Service Industry Categories
Korean
food is still the most popular cuisine accounting for 60% of restaurants by
number and 56% value.
Units: ea, KRW billionSource: KREI Foodservice Trends and Characteristics
Food Service Industry Trends
The
growth rate shows a very different situation. Korean food restaurants are
decreasing. Most restaurants showed revenue growth with ‘other national food’
restaurants showing the most, with 39.2%, followed by chicken-based (17.2%) and
Chinese food (16.9%).
Delivering
focused outlets also showed a sharp growth of 15.4% per annum as customer
trends changed toward simple, easy and quick. The increase in single households
and double-income households has led to less interest or time to spend on
cooking driving the take-out and delivery sector. (For more information on
delivery food visit this link)
COVID-19 Impact on the Food Service Industry
The
spread of COVID-19 in Korea has led to a dramatic decline in the restaurant
business. Although restaurants were
never under lockdown in Korea, many people opted to stay away due to social
distancing. Now when people eat out and risk exposure to COVID-19, they want to
be rewarded with something better.
Therefore, less popular restaurants or value-oriented restaurants will
feel more commercial pressure. This will
lead to a decline in the number of small restaurants and increased business for
large restaurants and franchises.
Restaurants
with delivery and take out services have a better offer to overcome this
situation. In response to social distancing, more people will opt for delivery or
takeout rather than eat at a restaurant.
Even
though consumer tastes are changing, Korean restaurants still account for the
majority of restaurants. A typical Korean meal includes rice, soup, a few side dishes,
and the main dish. Generally, more side dishes suggest a fancier meal. When
people are dining together, side dishes are shared and diners take the food directly
from the dish with their own chopsticks. In light of stopping the spread of
Covid-19, this is not ideal. We anticipate that in response to Covid-19
consumers will be less inclined to select Korean food compared to other options.
Another
significant trend influencing the foodservice industry is dining alone. Prior to 2010, eating alone was not common. Since
then, with the increase in ‘single’ and ‘double income’ households, eating
alone has started to gain acceptance. With the awareness of Covid-19, single-serving
menus and eating alone are also gaining more acceptance while restaurants focusing
on single diners are showing growth.
Overall,
we can see many opportunities emerging in the foodservice market but equally there
are many uncertainties as the full impact of Covid-19 remains unknown.
IRC CONSULTING
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