(Yonhap Feature) Korean confectioneries seek sweet taste of growth

By Lee Minji
SEOUL, Oct. 8 (Yonhap) -- As their domestic market becomes rapidly saturated,
South Korean confectioneries are turning in droves to feed the sweet tooth of
emerging overseas markets, including China, Vietnam and Russia, as they scramble
to search for new profit sources, market watchers say.
The biggest reason behind the surging overseas entrees is slowing domestic
demand. According to analysts, the domestic market, estimated at 4 trillion won
(US$3.6 billion), shows signs of coming to a standstill.
"The sweets market grew in big numbers in the beginning stages as people beefed
up their spending on food products thanks to income increases," said Park Ae-ran,
an analyst at IBK Securities Co. "However, there's a limit in that pattern.
People do not endlessly keep increasing food spending despite their growing
income."
Many other analysts agree that the slowing demand, coupled with the country's
falling birthrate and new health-conscious eating habits, have all contributed to
the fast-paced market saturation,
"Although sales seem to grow, most of them are based on price hikes and premium
products rather than a demand increase itself," said Chung Hye-seung, an analyst
at HMC Investment Securities Co.
As Koreans start valuing health over price, many are opting for homemade snacks
rather than store-bought products, which is putting a crimp in growth, analysts
say.
Lee Hyung-sook, a 44-year-old housewife in Seoul, is one of the many
health-conscious Korean consumers who prefers to make snacks at home for her
children.
"After watching a television report that revealed the amount of sugar and food
coloring included in children's snacks, I thought I'd have to make them myself,"
she said. "When I do have to buy ready-to-eat snacks, I go for the healthier
ones labeled 'organic' or 'well-being.'"
The changing domestic market environs are driving many local food manufacturers
to turn elsewhere. Orion Corp., the No. 2 industry player in South Korea, has
been highly successful in moving its plants abroad.
Orion attributes its success to its active adaptation of local culture to its
marketing strategy. In China, for example, Orion wrapped their signature "Orion
Chocopie" in red instead of blue, taking into account the country's keen
affection for the color. It has even changed its brand name to "Haoliyou", which
roughly means "good friend."
"We focused on understanding the country before selling products. As a result,
Orion Chocopie now claims more than 85 percent of China's pie-sector share," said
Hwang Hee-chang at Orion.
With this year's sales in China expected to be nearly equivalent to that in South
Korea, the company estimates that its sales in the world's most populous nation
will surpass the 1 trillion won mark in the next three years, he added.



Orion's success abroad has prodded industry leader Lotte Confectionery Co. and
other domestic competitors to jump on the bandwagon. With plants in Vietnam,
India and Russia, Lotte now aims to rake in 400 billion won in overseas sales,
about one-fifth of its total projected sales for 2010.
Lotte is also paying keener attention to human resources to spur international
growth.
"In recent years, we have been putting more importance on language proficiency
and marketing skills when recruiting new employees," said Ahn Sung-geun at Lotte,
adding that more and more of its head office staffers are being transferred to
its overseas plants.
Smaller players are also eager to seek growth abroad.
Binggrae Co., known for its ice cream lines, struck gold in Brazil with an
expanded choice of ice cream flavors. While the company's hallmark "Melona" ice
cream bars are only available in melon flavor in their home market, Latin
American consumers can choose from a wider range.
"Thanks to the variety of choices, Melona became a cultural icon among young
Brazilian trend-setters, just as Baskin-Robbins was a big hit in Korea," said Suh
Ho-seong at Binggrae, referring to the popular U.S.-based ice cream chain.
According to Suh, Melona's Brazilian sales took up one-eighth of Binggrae's total
overseas sales as of July. Now a steady seller in several overseas markets,
Binggrae expects that its ice cream products will rack up 30 billion won overseas
next year, nearly a 10-fold increase from 2008.



Market watchers believe that Binggrae's success augurs well for other
hard-pressed Korean sweets makers. More growth awaits them, especially in
emerging economies such as China and Southeast Asia, they say.
"The confectionery industry is still in the beginning stage in China and
Southeast Asia. That allows more room for Korean companies to settle down there,"
said Chung of HMC Securities Investment, adding that Vietnam, with its large
youth population, has great potential to grow.
Some analysts note that, in general, proven marketing skills and experience with
picky consumers in their home market help Korean confectioneries successfully
secure their foothold in overseas markets.
"South Korean consumers are known to be picky. They are also known for their
taste for high quality," said Kim Jin-young at the state-run Korea Agro-Fisheries
Trade Corp. "Furthermore, South Korea is regarded as a country with high safety
standards."
According to data by the trade agency, exports of Korean sweets, excluding
products made at overseas plants, jumped 21 percent on-year as of August.
However, experts agree that a more consolidated strategy is needed for sustained
growth.
"Korea is not the only country tapping into new markets. A slew of global food
manufacturers, with stronger brand awareness and better-organized distribution
networks, are out there," Park of IBK Securities said.
"Industry-wide efforts such as co-marketing are a 'must-do' in order to match
massive retailers and food manufacturers overseas. We have to increase the
overall pie together," Kim of the Korea Agro-Fisheries Trade Corp. said.
mil@yna.co.kr
(END)

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