This is part 2 of my guide to entering the food and beverage market in Korea. I’ll be looking at methods of selecting a partner and ways of working with import partners that you need to think about.
Why South Korea?
You might be wondering why I think it’s important to dedicate a 2nd post to the market in South Korea. (If you didn’t read the first part, you should go back and read that too).
South Korea is the fourth-largest economy in Asia and the twelfth largest in the world as of 2019. The food industry in South Korea takes up more than one-third of the country’s retail market, totaling more than 163 trillion South Korean won (that’s approx €120 billion). Despite the ongoing economic downturn, food retailing has shown steady growth rates together with luxury goods and electronic equipment markets. In 2020, as the social distance restrictions continued and people spent more time at home amid the pandemic, online food retail experienced a large sales growth.
South Korea is one of the EU’s largest trading partners (outside of the EU) when it comes to food and drink, with steady increases over the years. In recent years, pork exports have become an increasingly hot topic with ever more countries being affected by the African Swine Fever which has lead to import bans. Of course, product groups such as snacks, chocolate and beer are also popular export products. Looking at the figures below you can see why entering the food and beverage market in Korea is an attractive option.
Food Retail Channels
Grocery supermarkets lead the food retail industry in South Korea, with food sales amounting to over 40 trillion South Korean won. Grocery supermarkets have gained popularity by selling locally grown agricultural and livestock products at discounted prices while maintaining quality. Based on the number of units nationally, Hanaro Mart by Nonghyup (National Agricultural Cooperative Federation – also known as H-Mart), was the leading grocery supermarket chain in 2019 with over 2,000 stores. Whilst offline retailers such as convenience stores or super supermarkets (SSMs) experienced a slump in food retail in 2020, only hypermarkets saw a sales growth of food retail.
The South Korean online food market grew by 51.5 percent in 2020 as more and more people switched to online shopping during the pandemic. Over the past years, consumer confidence has also increased as large retail brands and food specialists entered the online grocery market. Food companies have developed logistics and delivery systems as competition in the online market has intensified. For example, the usage of Coupang’s Rocket Delivery, which enables consumers to receive their products in less than 24 hours, has led to an increase in the number of consumers who want to buy fresh food online.
Consumers using Rocket Fresh can get their groceries delivered to their house the very next morning. Rocket Fresh orders placed before 10 a.m. will arrive before 6 p.m. the same day, and orders made before midnight will be delivered the next morning around 7 a.m. Anything refrigerated or frozen goods is always carefully packed so as to keep them fresh and temperature-controlled, and you even have the option of using Rocket Fresh reusable bags for delivery.
Choosing an Import Partner
If you’ve read part 1 of this guide to exporting food and drink to South Korea, you’ll already be aware that there are 3 basic options for doing business in Korea, as well as their main pros & cons.
- Selling via the Coupang Global Retail Partner model
- Selling directly to a Korean offline retailer
- Doing channel sales via an import partner
Selling via the Coupang Global Retail Partner model can certainly be an option for smaller brands or if you are looking to test the market. (Contact me, I can help you with that).
Reaching out to potential partners
It can be difficult to reach out to potential partners in South Korea as cold calling can be pretty tough. Even renowned international importers tend to have automated answer machines in just Korean which don’t even direct you to an operator if you hang in there long enough, but instead just terminate the call. Even if you reach a person (I’m assuming it’s a person and not some kind of AI system), your cheery “good afternoon” might drive them to just put the phone down in a panic.
One answer to this is to have your national overseas chamber of commerce reach out on your behalf, or to work together with a consultant who has a range of established contacts.
Email outreach can work if you can get a personal email, but you can mostly save your energy if the address you have available is info@ or import@ . Any email needs to be followed up by a call anyway, & my recommendation (if you get an automated system talking at you in Korean) would be to work your way through the options 1, 2, 3 etc until someone picks up who is willing to transfer you to where you need to be. Entering the food and beverage market in Korea sometimes needs this kind of legwork.
Partner Search at the Seoul Food and Hotel Expo
Under normal circumstances, this can be a great opportunity to meet with potential import partners (& of course display your products). Many countries’ commercial representation also offer the option of a group stand where you don’t actually need to be present yourself, but where your brand can be displayed.
Seoul Food & Hotel is one of the biggest food fairs in Korea and visited by tens of thousands of people yearly. The fair is located just 20 minutes from Seoul and in the city of Goyang.
Products on display include (examples):
- Meat products
- Wines & spirits
- Tea & coffee
- Cheese & dairy products
- Organic food
- Health products
- Baby food
Application & Expenses
The application can be printed from their website, filled in, and sent to the email address of the organiser.
The expenses are determined differently from many other fairs. You pay for the area rented and the equipment needed (including carpets, walls, and tables for instance- check the details!).
Time & place
Usually in May, on an annual basis (Application deadline January 31st) – for 2021 it’s taking place at the end of July at the KINTEX (Korea International Expo).
Do the Due Diligence
- practically bankrupt
- being sued for serious fraud
- lying through their teeth to you
Of course, even getting credit reports or checking references from other partners are not a 100% guarantee, but it’s important to do what you can to mitigate risks. Korea is a pretty “friendly” place to do business as an exporter, but that doesn’t mean you should naively trust everyone you meet or blindly believe all you’re told.
Make sure that your proposed partner will be able to help you through the product registration and will participate in the labelling process for your products – see part 1 of this guide for more details.
Working with South Korean Importers
There are certainly a number of parallels between working with importers in South Korea and in other East Asian markets such as China or Japan.
Korean culture has clear hierarchical structures in it, and Korean work culture is no different. Even in the large conglomerates (chaebols) these are often family like structures where despite the clear hierarchy, all team members are expected to give their inputs.
Companies usually value closely knit teams with strong team work – this often extends to company dinners, drinks & potentially also karaoke. If you are visiting then you will also be expected to join in. Teams have high expectations of themselves and others, meaning they can rise to challenges if something goes wrong or during stressful periods. Just because the team works as a team and everyone gives their input in a suitable way, doesn’t mean that decisions are consensual. As a hierarchy driven culture, decisions in the end tend to be top down.
Long Working Hours
South Korea has some of the longest working hours in the world and presenteeism is often an issue (at least it was pre-pandemic – this may have started to change). It also means that if you send your partner a mail late at night in his time then chances are he (or one of the team) will be working on it immediately. You might want to think about using the “delay sending” function, or saving the draft till next morning to finish. Like Japanese (& Mandarin) the term gwarosa (과로사) exists in Korean which is used to refer to death by overworking…not a pleasant thought.
Like Vietnam and Japan, Korea is an extremely relationship based culture so it’s essential to invest the time to build relationships with your partners. This will pay off in the long term
As I mentioned above, decisions will probably be top down, so don’t force your discussion partner into a corner where he loses face by admitting that he may need to refer to someone else for the final go ahead. In family owned companies this can even happen when you believe you’re talking to the owner. If the father or uncle that he took the company over from is still alive then really major decisions may be referred to him in advance.
This is often a difficult topic for European companies to manage. Sometimes the situation in South Korea changes really fast so you need to stay flexible in order to adapt.
This is especially true at the beginning of the relationship where you are both working together on the product registration and customs requirements.
However, it’s also an ongoing requirement, especially if your importer is taking care of marketing for you. The more materials you can make available for your importer the better, however for Korea the usage may vary from what you are accustomed to so it pays to have a very open communication about what activities are planned.
Entering the Food and Beverage Market in Korea with the Right Partner
As with any market in the world, it’s important not just to have a partner, but to have the RIGHT partner. Otherwise you’ll regret it in the long term. South Korea can be a lucrative market with relatively low barriers to entry compared to say China, but as with anywhere else, selecting the right partner who is prepared to focus on your brand is a key to success.
Make sure you don’t limit yourself from the start by issuing an exclusive LOI to a person who claims to be able to introduce you to a powerful partner (see part 1 of this guideline for the details). Get references from other suppliers to be sure you’re making a good decision. (The 3 key questions that you should ask any importer you plan to work with apply equally in South Korea: does he have the competence to sell your products, does he have the contacts to list them and does he have the capacity to focus on your brand).
You as the exporter need to be prepared to invest in the relationship for the long term with regular market visits, and expect that they will include dinners & probably karaoke. This helps to develop trust and deepen the communication. Taking a long term approach can be lucrative for both sides of the partnership.
If you’re just looking to test the market, then an entry with Coupang might be the best option – you can read more about that here.
Of course, understanding the market and having the right partner are just 2 sides of the triangle to success: you also need to understand how the consumer “ticks” & I’ll take a look at that in part 3 of this series.
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If you are interested in doing business in South Korea, you might also find these posts helpful:
- A guideline to entering the food and beverage market in South Korea
- Understanding Consumers
- Entering the Korean Market by Selling on Coupang Global Marketplace
If you are working in the food and beverages industry, you might find these posts helpful:
- Your Gateway to SE Asia: a Guide to Exporting Food and Beverages to Malaysia
- Chinese Registration Regulations for Overseas Food Manufacturers from 2022
- 6 Food and Beverage Industry Trends in Vietnam 2022 to watch out for
- Food and Beverages Trends in China You Should be Evolving with