Import-reliant food industry sweats under strong dollar

Bundles of instant noodles are displayed on the shelves of a large supermarket in Seoul

Shrinking margins clash with gov't pressure to bring down prices

Cost pressures are mounting across Korea's import-heavy food sector as the won continues to weaken against the dollar and domestic demand remains sluggish, industry officials said Wednesday.

With the government pushing back against price hikes, manufacturers are squeezed between eroding margins and limited room to maneuver — whether by raising prices or shrinking product sizes.

Most Korean food companies hedge against currency swings by stockpiling several months' worth of raw materials. But that buffer has eroded after a prolonged period of dollar strength, fueled by escalating geopolitical tensions and U.S. trade tariffs.

The won has weakened from the low-1,400s in early September to around 1,460 per dollar as of Wednesday.

Export-oriented firms can cushion currency losses by converting overseas earnings into won, but domestically focused companies are bearing the full brunt of rising import costs.

Only 31.9 percent of raw materials used by Korean food manufacturers in 2023 were domestically sourced, according to a February report from the Korea Agro-Fisheries & Food Trade Corp., leaving nearly 70 percent exposed to foreign exchange volatility.

The financial toll is already visible. In a disclosure Friday, CJ CheilJedang said a 10 percent rise in the won-dollar exchange rate would cut its quarterly net profit by 1.3 billion won ($886,887). Lotte Wellfood projected a 3.5 billion won hit to its quarterly pretax earnings from a similar currency move.