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‘Food companies raised prices despite falling costs’

PUBLISHED : June 12, 2017 - 18:24

UPDATED : June 12, 2017 - 18:24

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[THE INVESTOR] Eight out of 10 food and beverage companies that raised consumer prices since last November did so despite falling manufacturing costs, according to an analysis released by a business tracker on June 12.

Business tracker CEO Score said on June 12 that manufacturers of consumer food products such as instant noodles and soft drinks raised their prices although their proportions of manufacturing costs to sales declined.

Nongshim and Samyang Food, major producers of instant noodles, raised consumer prices by about 5.5 percent for certain brands, though their cost-to-sales ratios fell 1.4 percentage points  and 1 percentage points, respectively, year-on-year.

AB InBev’s OB, Hite Jinro, Coca-Cola and Lotte Chilsung Beverage raised prices for soft drinks and beer by up to 7.5 percent, while their cost-to-sales ratios fell by 0.6-1.4 percentage points.

Of the 10 companies analyzed, Dongwon F&B and SPC Samlip were the only two that saw their cost ratios rise, by 1.7 percentage points and 3.4 percentage points, respectively.

“It will be hard for these companies to avoid criticism that they raised prices while the country was distracted by recent political confusion,” an official at CEO Score said.

However, manufacturers say the price increases reflect real rises in costs in delivery and manufacturing over the past few years.

“We raised our prices for the first time in five years last year, so looking at the cost ratio difference over the past year alone is misleading,” said a spokesperson with Nongshim. “The production costs are also not the only factor in determining price. Other factors such as the cost of labor and delivery, which have been going up each year, must also be taken into consideration.” 

By Won Ho-jung/The Korea Herald (hjwon@heraldcorp.com

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