February 10, 2005

 

 

Impact of BSE ban on U.S. beef sales in Korea significant

 

In 2003, 68 percent of all imported beef was from the United States, which represented 45 percent of the total beef consumption in Korea.  Sales of U.S. frozen and chilled beef were over $800 million. 

 

Korean per capita consumption of beef was 8.7 kg in 2003 and was expected to grow even higher this year.  Of all the meats, red meat was the preferred meat of Korean consumers.  Koreans believe strongly that "you are what you eat."  This is a major reason they are so sensitive about food safety issues.

 

On December 24th, the Korean government announced a ban on U.S. beef as a result of the positive BSE case in Mabton, Washington.  The impact of the ban has been significant for all food sectors.  There are reportedly 1,033 containers of beef either on the water or uncleared in quarantine estimated at $80 million by the local trade.

 

Retail Sector:

 

Almost all retail outlets (department stores, grocery stores, etc.) have pulled U.S. beef from their shelves.  Most on-line shopping malls are no longer selling U.S. beef products.  It is not likely that they will put U.S. beef back on their shelves for the time being even though there is reportedly a two to four-month supply of beef in storage that was approved for sale before the ban was enacted.  Many retail outlets are even recalling beef sold before December 24th.  Trade comments indicate that in the minds of many Korean consumers, U.S. beef is now unsafe to eat. 

 

However, a shortage of quality beef at reasonable prices is anticipated as the ban continues.  Already the price of short ribs has increased 20 percent and chuck roll 45 percent.  Many consumers have stopped eating beef because they can no longer afford to buy it.  Although Korea has recently had an outbreak of highly pathogenic avian influenza and the consumption of poultry had dropped by 30 percent, consumption is now recovering rapidly.  Imported chicken especially, which was not typically sold in retail outlets, is now in demand.

 

The Lunar New Year Holiday season is at the end of January and Korean consumers traditionally purchase gift box sets of beef.   The retail sector may use some Australian beef for the gift sets; although many have said that it is not suitable as it lacks the characteristic of U.S. marbled beef.  Additionally, Australian beef is less preferred for Korean barbeque.  Several retail outlets have indicated that they may wait for the negative press to die down and then resume selling U.S. beef that was cleared before the ban.

 

Hotel, Restaurant and Institutional Sector:

 

Most restaurants stopped serving dishes made with U.S. beef and have either developed alternative menu items, such as seafood dishes, or are advertising that they are using Australian or locally produced Hanwoo beef.  According to the Yonhap News Service, total restaurant sales are down by 30 percent and specialty beef restaurants are down by 50 percent since the BSE outbreak in the U.S. 

 

Because it is anticipated that there will be a serious shortage of beef beginning in March or April, several distributors are trying to secure more locally available U.S. beef.  Since this beef entered Korea before December 24th, it is not illegal to sell it.  These distributors understand that the price will continue to rise and eventually there will be a demand for the cleared U.S. beef currently in storage.

 

Food Processing Sector:

 

Although not initially affected by the ban, many local processors are voluntarily recalling product that contains U.S. beef, such as flavor enhancers, fried rice and meat-based meals.  The processors are trying to differentiate their products by showing extreme concern for the consumer.  They have been able to effectively switch to alternatives very quickly.  For example, Nong Shim, the producers of Ramyeon Instant Noodles, announced that they would begin using beef from Australia or New Zealand for their production.  Concurrently, CJ, the nation's largest processed food manufacturer, does not plan to recall its product, Dashida (containing 4.1 percent U.S. beef); however, they will not source any additional beef product from the United States.