South Korea has one of the lowest birth rates in the world and confectioners must think about how they can cater to an increasingly aging population, according to Leatherhead Food Research.
Jonathan Thomas, primary market analyst for Leatherhead, told ConfectioneyNews that functional sweets or chewing gum geared towards older consumers was one such market opportunity.
“With the country’s rapidly ageing population, there will be fewer opportunities to target children and younger consumers, while functional sweets (as in Japan) seem to be fairly popular amongst South Koreans.”
Lotte leave little room for Westerners
Asian companies dominate the market. Domestic company Lotte commands a 55% share of the chocolate segment, while home-grown firms Crown Confectionery and Orion Confectionery provide the competition.
“Owing to the taste differences amongst consumers, the market will be challenging for western confectionery manufacturers to penetrate,” said Thomas.
“If any target the market, I expect them to pursue a strategy similar to Hershey, i.e. forming partnerships or strategic alliances.”
South Korea has the fourth lowest fertility rate (1.21 births per women) behind only Macau, Hong Kong and Belarus, according to a 2009 report by the United Nations. By comparison, the US has a 2.05 rate, the UK 1.82, while Niger has the highest rate at 7.19.
The only Western firm with a significant presence is Mars, which holds 8% of the chocolate sector.
Thomas said that Hershey’s freshly built innovation center in Shanghai, China may eventually boost its presence in other Asian markets, including South Korea.
Mature people, mature market
According to the analyst, the overall Asia-Pacific confectionery market is set for growth, but demand is perhaps not quite as robust as had been expected in some quarters during the 2012/2013 period.
The South Korean market is the second largest in the region behind Japan and is consequently more mature than other countries such as China and Indonesia.
“To that end, I expect growth rates in South Korea to hover a little below the regional average over the coming years,” said Thomas.
Value and volume data
In its latest Confectionery Industry Update, Leatherhead said that chocolate accounted for 44% of market value in South Korean confectionery, ahead of chewing gum (29%) and sugar confectionery (27%).
The chocolate sector has also grown fastest at nearly 44% since 2008 however per capita consumption (0.7 kg,) in the country is still below Japan (1.9 kg).
Sugar confectionery in South Korea is larger in volume terms (48,000 metric tons), accounting for 47% of the market ahead of chocolate (36%) and chewing gum (17%).
Overall volumes in 2012 were 103,000 MT, up almost 15% since 2008, mainly due to an increase in imports from China, the US and Australia, said Leatherhead.