How South Korea's F&B Industry Feels in 2024
Is the Current Korean F&B Industry Sustainable?
I first visited Asia as an exchange Student at Waseda University in Tokyo almost 50 years ago. I have lived in the Asia Pacific region for more than 40 years and worked for several large multinational corporations as well as started my own food & beverage and consulting business from 2005. I also remember my first visit to Seoul in 1972 when Park Chung Hee was President. (I remember Seoul very well in the 1970’s as a dreary place with few neon signs and nighttime curfews.) I have been a senior executive with KFC and Pizza Hut as well as a franchisee in Japan with Outback Steakhouse. I have visited Korea continuously over 4 decades and witnessed the growth of all the major restaurant brands in that market. Much time has passed in those 40 years but I often wonder how much the Korean F&B industry has really changed during this period.
The growth of the Korean manufacturing sector during these 40 years has been remarkable but can we say the same about the F&B sector? Fast forward to 2024, it's worth taking a look back at what F&B concepts have been successful in Korea. All-you-can-eat buffets are still thriving, and low-cost coffee brands are booming. Some experts may see this as a temporary phenomenon due to the economic recession in Korea, but it's important to note that buffet concepts and low-cost coffee concepts don't thrive in every country experiencing a bad economy. In South Korea, a variety of international cuisines are unlikely to become a business success.
I know Korea doesn't like to be compared to Japan, but the diversity of the Japanese F&B category, consumer preferences, and attitudes towards F&B workers are very different from those in Korea. In Japan, consumers appreciate even the smallest service or extras in a restaurant, but South Korea's dining culture has been shaped by economic growth from the 1970s to the 1990s. The culture hasn't changed much during this economic growth period. Customers & employees are still demanding too many extras and services. Of course, Korean consumers don't have a history of tipping restaurant employees.
This structure is no longer sustainable. Restaurant owners will eventually go bankrupt due to deteriorating cost structures, consumers will have fewer choices and may have to accept poor service as the norm. I've been watching the downfall of the “all-you-can-eat concept”, and the more sophisticated society becomes, the less these buffet concepts have possibility because the consumers who use these buffet concepts tend to be perceived as lower class. I think it's a matter of time, and Korea will follow the same trend.
What was the most popular F&B concept in the early to mid-2000s?
Most people will remember the Korean buffet and seafood buffet concepts at that time. Their success was so remarkable that many full-service restaurants and other F&B concepts were put out of business. However, as of 2024? Where are they? The full-service restaurants and fast-casual concepts that have been put out of business by them are still alive and doing well. And where is Caffe Bene, which emerged in the late 2000s and grew to 1,000 stores in South Korea? Focusing on the customer experience, building loyalty, and creating a good P&L structure is the only way to ensure long-term growth.
I've lived in Hong Kong for a long time, so naturally I have a lot of connections to the F&B industry in China. Political issues aside, China is still an attractive market and an attractive supply market for suppliers. Chinese kitchen equipment is globally competitive in terms of price and quality. It's no exaggeration to say that most countries in the Asia-Pacific region rely on kitchen equipment from China. They have reached such a high level not only in terms of price but also in terms of quality, which has attracted foreign companies such as Electronics and Unox to enter the kitchen equipment industry.
But what about South Korea?
Even now, deregulation of overseas kitchen equipment and ease of introduction and validation of new technologies to make it easier to introduce and validate new technologies will help Korean kitchen equipment companies in the long run. Generally, when they commission an interior, the quote will include a breakdown, and the breakdown will include design costs. However, Korean kitchen equipment quotes do not include design costs. As a long-standing practice, kitchen equipment manufacturers have provided design services to clients for free. Unless this practice changes, Korean kitchen companies will be forced to competitively bid on price as the only way to do business. The practice of giving away a kitchen manufacturer's know-how on the layout and detailed specifications of a kitchen for free must end because without a business-sustainable structure, no industry can exist.
It's impossible to cover everything about Korea's F&B industry in such a short article. Sustainability is a global imperative that applies to businesses and customers alike. I believe the future of the Korean F&B industry is bright as long as consumers and business customers are interested in sustainability for a healthy F&B industry.
