Biscuit market in SOUTH KOREA – interesting mixture of tradition and modern trends
While consumers prefer healthier products, brands will utilize this consumer preference, by developing biscuits with premium or organic chocolates.
Biscuits saw retail value growth of 1% in spite of negative volume growth, to reach sales of Won966 billion in 2013. Overall biscuits has shown negative volume growth since 2012 due to the falling growth of savoury biscuits and crackers, cookies and sandwich biscuits. Retail value sales of savoury biscuits and crackers showed a decline of 1% in 2013, as local consumers prefer sweet biscuits for snacks. Moreover, manufacturers rarely develop new products in the category, since it is hard to differentiate them from existing products as value-added products.
Chocolate biscuits still in lead
Chocolate coated biscuits still showed the highest retail value growth with 5%, mainly due to the superior performance of Paepaero stimulated by “Paepaero Day” marketing. Continuing from the “Millennium Paepaero Day” promotion in 2011, its manufacturer Lotte Confectionery Co Ltd attempted to take advantage of this growth momentum in 2012 and 2013 with changed marketing activities. For example, the product was donated to charitable organisations in South Korea, reinforcing the firm’s social responsibility and brand loyalty at the same time. This traditional brand now held 71% value share in chocolate coated biscuits, as the best-selling product in the total biscuits category.
New consumers health trends
Filled biscuits and cookies recorded negative volume growth in 2013, caused by decreasing demand. Both categories have been saturated due to local consumers’ needs for healthy products and low new product development by major manufacturers. Only private label manufacturers are launching new products to compete with lowered price and fresh ideas.
Traditional brands in demand
However, local consumers tend to be influenced by promotional activities of traditionally popular brands like Homerun Ball and Lotte Butter Coconut, which supported positive value growth in 2013.
Manufacturers see the overall market as saturated, and look for niche segments to increase potential growth. Lotte Confectionery, for instance, targets the teatime snack market, which is likely to grow together with coffee and tea consumption in South Korea. Depending on expected performance of its recently introduced product Du:ffe, other market players will decide whether to follow this strategy or not.
Biscuits will see 1% CAGR (compound annual growth rate) in constant retail value terms over the forecast period (2013-2018), as both savoury biscuits and crackers and sweet biscuits will suffer from negative growth after 2013. In sweet biscuits, only chocolate coated biscuits will show positive constant value growth in the forecast years with 2% CAGR. Compared to other types of biscuit products, chocolate coated ones can give strong taste and deep flavour. Unlike other artificial flavours, consumers think chocolate is well matched with biscuits. In addition, they might feel having just chocolate itself can be too strong in taste, and biscuits seem to work as good neutralizers of the chocolate taste.
Overall demand of biscuits will be saturated as many consumers in South Korea are concerned about their health when choosing packaged foods. To utilize this consumer preference, manufacturers may develop biscuits with premium or organic chocolates. Also, a partnership strategy with well-known international brands can create more value-added products as consumers regard them as unique, such as Pocky by Haitai Confectionery & Foods Co Ltd.