Amid fried chicken craze, foreign firms ruffle Korean feathers

Harim Co

16/10/2016 04:00

* Taste for fried chicken and beer takes off in South Korea 
    * "Chimaek" boom fuels market share scrap among local 
producers 
    * U.S., Thai imports set to add to oversupply pressure 
    * South Korean per capita chicken consumption low, on the 
rise 
 
    By Jane Chung 
    SEOUL, Oct 16 (Reuters) - Don't count your chickens before 
they hatch. 
    Global poultry producers hoping to cash in on South Korea's 
craze for fried chicken and beer face a market crowded with 
local birds that have clipped prices and profits for Korean 
growers. 
    The popularity of the combination, known as "chimaek", has 
boomed in recent years, fuelled by its appearance in a hit South 
Korean television drama and an explosion of restaurant chains.   
   
    Chimaek stores now dot Korea and their ubiquitous delivery 
services shuttle freshly fried chicken and beer to homes, 
offices and picnics.  
    At a Seoul outlet of the popular BBQ chain recently, Kim 
Chang hoo said he and his colleagues had planned to go to a 
sushi restaurant for a company dinner, but decided instead on 
chimaek - a mashup of chicken and maekju, the Korean word for 
beer. 
    "I cannot help think of chicken, even when I'm eating 
sushi," Kim, 24, said. "I don't know if it's just me, but 
chicken always comes to my mind and is always delicious." 
    The craze has pitted domestic chicken producers in an 
increasingly tough battle for market share, prompting an 
over-supply and a drop in farm prices. 
    Now imports are set to rise as South Korea lifts bans on 
overseas suppliers who are attracted by still low per capita 
consumption rates. 
    South Koreans ate 14.2 kg (31 pounds) of poultry meat each 
in 2015, a near three-fold increase since 1990 according to OECD 
data, but only half the global average of 28.6 kg per person. 
    South Korea's market for chicken is expected to grow 5 
percent to 1.01 million tonnes this year and a further 3 percent 
in 2017, according to the U.S. Department of Agriculture (USDA), 
boosted by the chimaek craze.  
     
    GAME OF CHICKEN 
    Supply is currently dominated by the country's three biggest 
producers - Harim Co Ltd  136480.KQ , Dongwoo Co Ltd  088910.KQ  
and Maniker Co Ltd  027740.KS . 
    All have seen their earnings hit in the first half of this 
year as they ramp up production to secure market share.  
    Park Ju-No, the managing director at Harim, acknowledged 
producers were engaged in a "game of chicken", each holding a 
potentially dangerous course in the hope their rivals flinch 
first. 
    "We think it's more crucial to focus on quality 
differentiation to survive instead of adjusting production, even 
though it contributes to a glut," said Park. 
    Park expects the imbalance to ease in the second half as the 
number of slaughtered chickens drops in summer, but sees the 
market over-supplied again next year as imports from the United 
States and Thailand resume.  
    In July, Asia's fourth-largest economy lifted ban on chicken 
imports from the United States, imposed due to a bird flu 
outbreak in 2015.  
    It is likely to resume imports in November from Thailand, 
banned since a 2004 bird flu outbreak, according to Korea's 
Animal and Plant Quarantine Agency. 
         
    FLY ABROAD 
    Overall South Korean chicken imports are expected to rise 9 
percent to 130,000 tonnes this year, and a further 8 percent in 
2017, due to the resumption of U.S. chicken imports, the USDA 
report showed. 
    Analysts said the increase in chicken imports could squeeze 
domestic producers with lower prices. U.S. suppliers might also 
find conditions challenging.  
    "It's going to be a tougher market because the U.S. only had 
to compete against Brazil before, but now there are more 
competitors like Denmark and sooner or later Thailand," said 
Jenis Bae, manager at KTSC, who has imported U.S. chickens for 
almost 20 years. 
    Still, the competition is good for consumers and restaurants 
drawn to the chimaek boom.       
    Even global giant KFC  YUM.N  recently opened its first  
"KFC Chimaek" outlets in South Korea, offering set menus such as 
two pieces of fried chicken, cheese fries and a glass of draft 
beer for 7,500 won (around $7). 
    Major Korean franchises are now expanding their overseas 
stores, particularly in China where the TV show "My Love from 
the Stars" is wildly popular and its heroine's chimaek cravings 
strike a chord with viewers.  
    "We learned the food culture of South Korea from Korean 
soaps," Gu Chenghu said at a chimaek outlet in Shanghai. "Also 
many young people are willing to try something fresh. So it's 
very popular." 
    Genesis BBQ, Korea's top fried chicken franchise now has 350 
stores abroad in 30 countries including China and the United 
States. It wants to grow to 50,000 stores by 2020, company 
director Kwak Sung-kwon said.   
    "Our aim is to having more stores globally than McDonald's 
 MCD.N ," he said. 
    ($1 = 1,114.7500 won) 
 
 (Additional reporting by Xihao Jiang in Shanghai; Editing by 
Jack Kim and Lincoln Feast) 
 ((jane.chung@thomsonreuters.com; +82 2 3704 5667; Reuters 
Messaging: jane.chung.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUTHKOREA CHICKEN/