South Korea’s convenience stores are emerging from just being tobacco stores as an increasing number of people are opting to buy food there due to soaring prices of popular menus served at restaurants following the Covid-19 pandemic.

While cigarette prices have remained the same for eight years since the 2,000 won ($1.52) increase in 2015, food prices have continued to rise, driving up processed food sales at convenience stores.

According to multiple sources from the retail industry on Sunday, the share of cigarettes in convenience store sales has recently fallen below 40 percent. In the case of local convenience store chain CU run by BGF Retail Co., cigarettes accounted for 37.8 percent of total sales last year, which represented a sharp decrease from 41.0 percent in 2018.

Another corner store chain GS25, run by GS Retail Co., also had around 30 percent of the share of cigarettes last year, with other convenience store chains showing a similar trend. On the other hand, the share of processed foods sales at convenient stores is on the rise. In 2018, processed food products accounted for 39.9 percent of CU sales, but it rose to 42.8 percent last year.

Prices of processed food products, which are mainly sold at convenience stores, have risen rapidly over the past five years. Paldo King Cup Noodle, which is considered one of representative steady seller cup noodles, was priced at 1,050 won in 2018, but this year it has increased by 33.3 percent to 1,400 won, according to the Korea Consumer Agency.

The same goes for snacks. The price of Binggrae Co.’s banana flavored milk has surged to 1,700 won from 1,300 won in 2018. Soju, one of the most popular alcoholic drinks in Korea, has also seen its price rise sharply. The price of Chamisul Fresh soju was 1,650 won per bottle at convenience stores in 2018, but it recently rose to 1,950 won and is now on the verge of surpassing 2,000 won.



An official from the retail industry said that cigarettes are no longer the main product for convenience stores not only because the adult smoking rate fell below 20 percent for the first time in 2021 but also because of the soaring prices of processed food products.

The retail industry describes processed food products sold at convenience stores as “products for a recession.” In the so-called stagflation period, when prices continue to rise whereas economic growth slows, consumers are turning to processed foods that can be bought at lower prices. As such, these products have low price elasticity of demand, because people need these products regardless of price. This is why some point out that appropriate control is needed as it is difficult for the food industry to resist the temptation to raise prices.

Convenience stores are responding to food price hikes by increasing the proportion of their own ultra-low priced private-label brand (PB) products because unless they keep their food prices low, the incentives to attract consumers will disappear.

“Ultra-low-priced PB products do not generate profits, but they serve as bait products that attract people to convenience stores,” said a retail industry official. “In addition, as consumers tend to buy PB products along with other products, such products contribute to increasing overall sales at convenient stores from a broader perspective.”

CU is selling iced americano 500ml, which was sold at 2,000 won, for 200 won for the month of May, and also introduced 1,000 won Makgeolli, a Korean traditional rice wine, and 400 won ice cream. GS25 sold hamburgers priced at 3,900 won for 780 won and stir-fried pork lunch boxes priced at 4,500 won for 350 won last month. Korea Seven’s corner store chain 7-Eleven offered triangle kimbap and cider at 550 won with a 78 percent discount.

By Kim Gyu-sik and Yoon Yeon-hae

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]