Rising raw material costs and a prolonged exchange rate hovering around 1,400 won per dollar have prompted major food companies such as Nongshim and Lotte to raise prices on key processed foods, including instant noodles and snacks. Over the past two to three years, food companies had refrained from price hikes due to government policies aimed at controlling inflation. However, with exchange rates remaining high and raw material costs climbing, companies have now joined the trend of raising prices.
According to Statistics Korea on May 5, the price of processed foods in April rose 4.1% year-on-year, the highest increase in one year and four months since December 2023 (4.2%). In contrast, the overall consumer price index rose just 2.1%, slightly above the Bank of Korea’s inflation target of 2%. The processed food price increase was nearly double the broader inflation rate. After remaining at 1.3% in November last year, processed food inflation accelerated to 2% in December and has continued to rise for five consecutive months, the longest stretch since the pandemic and the inflation shock caused by the Russia-Ukraine war in 2021–2022.
This surge is largely due to food companies raising product prices to offset the higher cost of imported raw materials and the weaker Korean won. Prices for dining out, including items like hamburgers and coffee, also rose 3.2% in April—the biggest jump in 13 months since March last year.
Amid soaring food prices, consumers are cutting back. Statistics Korea data shows that retail sales of food and beverages declined 2.5% in 2022, 1.5% in 2024, and 0.3% in the first quarter of this year. Likewise, food service production, an indicator of restaurant industry performance, fell for a second consecutive year, down 3.4% in the first quarter compared to a year earlier.
This simultaneous decline in both food sales and dining out is unusual and typically occurs during economic downturns, when households tighten spending. Normally, when grocery purchases fall, dining out increases, and vice versa. During the height of the COVID-19 pandemic in 2020, dining out dropped, while demand for home-cooked meals rose sharply, boosting retail food sales. But since 2023, both categories have been declining together.
Food companies say they can no longer absorb costs. “Due to accumulated cost pressures, it is no longer possible to keep prices frozen,” one firm said. After holding prices steady in line with government guidance, companies have begun adjusting prices upward. In March, Nongshim raised prices on Shin Ramyun, Neoguri, and other products by 4–5%. Last month, Otoki increased the price of Jin Ramen by an average of 7.5%, and Paldo raised prices on Paldo Bibimyeon and Wang Ttu Keong by 4–7%.
For both Nongshim and Paldo, these were the first increases in two and a half years; Otoki also raised prices for the first time in the same period. An instant noodle industry official said, “Since late last year, the exchange rate surged, causing prices of imported ingredients like wheat flour to spike. The added burden of labor costs and rising oil prices, combined with currency pressures, made it impossible to delay any longer.”
Lotte Wellfood also raised prices on products like Pepero by an average of 9.5% in February due to surging global cocoa prices.
As of April, 62 out of 73 processed food items tracked by Statistics Korea (85%) saw price increases. Items such as dried squid (46.9%), chocolate (21.2%), kimchi (20.7%), seasoning sauces (16.9%), flavored seaweed (14.9%), baby food (11.1%), soy sauce (10.5%), sesame oil (9.4%), and coffee (8%) all posted notable hikes. In November last year, only 48 items had recorded price increases, showing a sharp rise in just five months.
This trend is expected to continue. Global raw material prices have climbed for three consecutive months. According to the UN Food and Agriculture Organization (FAO), the global food price index rose 1.0% in April to 128.3. The index had fallen 2.1% in January but then rebounded, rising 2% in February, 0.3% in March, and 1% in April. Korea’s Ministry of Agriculture, Food and Rural Affairs cited abnormal weather, reduced cultivation areas, and a weak exchange rate as contributing factors.
Prices for dairy ingredients such as butter and powdered milk, along with grains like wheat and corn, have also risen sharply due to supply shortages.
Dining out businesses are raising prices as well. Of the 39 dining items tracked by Statistics Korea, 36 saw price hikes. These include lunch boxes (8.4%), hamburgers (6.6%), sashimi (5.4%), tteokbokki (5.4%), fried chicken (5.3%), jajangmyeon (5.1%), jjamppong (4.9%), and gimbap (4.7%).
Even coffee, which is typically less prone to price volatility, saw a 3.2% increase in dining prices. Starbucks, which had frozen prices on core items like Americanos since 2022, raised the price of a Tall Americano from 4,500 to 4,700 won in January and adjusted prices on 22 other products. Budget coffee chains including Mega MGC Coffee, Compose Coffee, The Venti, and Mammoth Coffee also followed suit. A staffer from one low-cost franchise said, “The price of green beans, which significantly affects coffee prices, nearly doubled last year.”
Fast food chains have also made adjustments. Last month, KFC raised prices on chicken and burgers by 100 to 300 won. In March, McDonald’s raised prices on 20 menu items by the same amount. Shake Shack cited “increased operating costs” when it raised Shakeburger prices from 8,900 to 9,200 won, hot dogs from 5,100 to 5,200 won, and shakes from 6,800 to 6,900 won.
