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Global Analysis Report
Business Environment
South Korea
June 2015
EXECUTIVE SUMMARY*
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CONTENTS
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South Korea’s economy is the 14 -largest in the world with a
gross domestic product (GDP) of US$1.3 trillion in 2013, and is
forecasted to increase by 3.5% in 2014.
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South Korea has the 26 -largest population in the world with
just over 50.2 million habitants in 2013 and is expected to grow
to 51.4 million by 2020.
In March 2014, Canada signed its first Asia-Pacific free trade
agreement, the Canada-Korea Free Trade Agreement
(CKFTA), which will eliminate 86.8% of tariffs on agriculture
tariff lines (Prime Minister of Canada, CKFTA, New Release,
March 2014).
Executive Summary ........................ 1
Country Snapshot ........................... 2
Trade ............................................... 2
Retail Environment .......................... 3
Foodservice Environment ............... 4
Doing Business in South Korea. ..... 5
Tariffs and Labelling ........................ 7
Conclusion ...................................... 8
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South Korea’s grocery retail sector was valued at
US$144.2 billion in 2013 and is expected to increase by 11.8%
in 2014 and 5.5% in 2015 (Planet Retail, 2014).
•
Internet retailing sales in South Korea reached just under
US$27.0 billion in 2013 and are forecasted to reach
US$42.1 billion by 2018 (Euromonitor International, 2014).
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The South Korean consumer foodservice industry is the
ninth-largest in the world, reaching value sales of
US$67.3 billion in 2013. The industry will continue to grow at a
compound annual growth rate (CAGR) of 5.4% through 2018
(Euromonitor International, 2014).
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According to the World Bank Group, South Korea ranks
seventh out of 189 countries in terms of the overall ease of
doing business in the country (2014).
*Note: 2013 was the most recent data available at the time of writing this report
For More Information....................... 8
Resources ....................................... 9
Visit our online library of public
reports for more information on this
and other markets.
COUNTRY SNAPSHOT
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South Korea has the 14 -largest economy in the world and had a gross domestic product (GDP) of
US$1.3 trillion in 2013. Since the end of the recession in 2009, South Korea saw a large jump in its real
GDP growth in 2010 to 6.5%, but this has leveled out over that last few years to rest at 3.0% in 2013.
Euromonitor International forecasted that South Korea will experience a real GDP growth of 3.5% in 2014
and 3.6% in 2015. The agriculture sector employs 6.9% of the workforce and makes up 2.6% of the
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overall GDP (World Factbook, 2014). South Korea has the 26 -largest population in the world with
50.2 million people in 2013 and is forecasted to reach 51.4 million by 2020 (Euromonitor International,
2014). South Korea is one of the most urbanized countries in Asia and over half the population resides in
the six largest cities of Seoul, Busan, Incheon, Daegu, Daejeon, Gwangju (Planet Retail, 2014).
Total agri-food and seafood trade (imports and exports) in 2013 for South Korea was valued at
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US$34.9 billion. Canada’s portion of this was US$622.6 million, ranking it 30 among all South Korean
trading partners. In the same year, South Korea had a trade deficit of US$471.0 million with Canada with
exports valued at US$75.8 million and imports of US$546.8 million. Also, South Korea’s top five agri-food
and seafood imports from Canada were pork, wheat (non durum), lobster, canola seed and canola oil
(GTA, 2014).
Historic Economic Overview – South Korea
Indicator
Unit
Total GDP
US$ millions*
2009
2010
2011
2012
2013
1,052,052.9 1,155,823.5 1,217,366.8 1,258,268.1 1,304,707.3
Real GDP Growth
%
0.7
6.5
3.7
2.3
3.0
Inflation
%
2.8
3.0
4.0
2.2
1.3
Exports
US$ millions
363,533.6
466,383.8
555,213.7
547,869.8
559,632.4
Imports
US$ millions
323,084.5
425,212.2
524,413.1
519,584.5
515,585.5
Source: Euromonitor International, August 2014.
*Note: Current prices, fixed 2013 exchange rate
TRADE
In March 2014, Canada signed its first free trade agreement in the Asia-Pacific region. This agreement
was the Canada-Korea Free Trade Agreement (CKFTA) and will provide new access for Canadian
businesses to the world’s fourteenth-largest economy and the fourth-largest in Asia (DFATD, CKFTA,
2014, and Euromonitor International, 2014).
The CKFTA will help Canadian agriculture exports by eliminating tariffs on 86.8% of agriculture tariff lines.
The elimination of such tariffs puts Canada on a level playing field with other Korean FTA partners and
gives agriculture products such as beef, pork, fish and seafood, canola and grains, preferential access to
the Korean market (Prime Minister of Canada, CKFTA, New Release, March 2014).
In 2013, agri-food and seafood trade for South Korea was up by US$345.5 million over 2012, and rested
at US$27.9 billion (Global Trade Atlas, 2014). South Korea’s main agriculture and agri-food imports from
the world were corn, wheat, soybean oilcake, sugar cane and food preparation. Canada made up just
under 2.0% of total South Korean imports from the world in 2013.
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South Korea’s Agri-Food and Seafood Imports, 2013 (in million US$)
World
Agri-food and seafood
Corn
Wheat
Soybean oilcake
Cane sugar
Food preparations
Canada
27,878
2,673
1,773
915
806
777
Canada’s share
547
0
83
0
0
26
1.96%
0.00%
5.13%
0.00%
0.00%
3.38%
Source: Global Trade Atlas, 2014
RETAIL ENVIRONMENT
According to Planet Retail, South Korea’s total retail sector (grocery and non-grocery) was valued at
US$290.6 billion in 2013, and was expected to increase by 5.9% in 2014 and 2015. Over the 2014 to
2019 forecast period, as the economy continues to recover, the sector’s total sales will continue to gain
traction with a CAGR of 5.9%, to reach US$432.7 billion.
The grocery retail format accounted for sales of US$144.2 billion in 2013, or 50.3% of the total retail
sector. Grocery sales are also expected to increase in 2014 and 2015 year-over-year (by 11.8% and
5.5%, respectively), and are forecasted to continue increasing through 2019 at around the same rate as
the total retail sector. The grocery format is expected to reach US$210.8 billion by 2019 (Planet Retail,
2014).
US$ Billions
Retail Format Sales in South Korea, Historic/Forecast 2000-2018
450
400
350
300
250
200
150
100
50
0
2000
2003
2006
2009
2012
2015
2018
Year
Total Retail Format Sales
Total Grocery spending
Source: Planet Retail, October 2014.
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Internet Retailing
Euromonitor’s report on “Internet Retailing in South Korea” states that in 2013, South Korean internet
retailing sales reached just under US$27.0 billion with food and drink sales making up 14.6% or roughly
US$3.9 billion of the total. Internet retailing is forecasted to reach US$42.1 billion by 2018. At the same
time, online food and drink sales are also forecasted to continue to grow through 2018 to reach estimated
sales of US$6.3 billion.
In 2013, the top three internet retailing companies in South Korea were eBay Korea Co Ltd, with the
brands G Market and Auction, which held 22.1% of the overall market, followed by Lotte Shopping Co Ltd
(4.4%) and their brand Lotte.com and finally GS Homeshopping Co Ltd (3.7%) and the brand of GseShop
(Euromonitor International, 2014).
Top Companies in Grocery Retail
According to Planet Retail, the South Korean grocery market is relatively fragmented with the top five
retailers accounting for around a quarter of the market. In terms of grocery banner sales, in 2013 Lotte
Shopping was the largest hypermarket chain in the country, and had sales of US$10.4 billion or a 7.2%
share of the total market. Planet Retail is forecasting that Lotte Shopping will have remained the leading
grocery retailer through 2014 with a slight increase in banner sales and market share. As the South
Korean hypermarket has become more saturated there has been a shift towards smaller stores such as
convenience stores and supermarkets. This shift has caused the top retailers to alter their expansion from
hypermarkets to the smaller grocery store sector of supermarkets and convenience stores (Planet Retail,
2014)
Top Five Grocery Retailers in South Korea – 2014 Forecast
Company
Lotte Shopping
Shinsegae
Tesco
GS Retail
BGF Retail
Number of
Outlets
7,733
894
735
8,370
8,172
Total Sales
Area
(Square feet)
32,555,802
23,821,072
14,341,791
10,239,277
6,157,387
Average Sales
Area
(Square feet)
391
2,475
1,813
114
70
Grocery
Banner Sales
(US$ millions)
11,914
10,526
7,709
4,749
2,861
Total Grocery
Market Share
(%)
7.33
6.47
4.78
2.95
1.78
Source: Planet Retail, October 2014.
FOODSERVICE ENVIRONMENT
The South Korean consumer foodservice industry is one of the ninth-largest in the world, reaching value
sales of US$67.3 billion in 2013. The industry will continue to grow at a CAGR of 5.4% through 2018 and
will continue to present profitable categories such as 100% home delivery/takeaway and fast food.
Although the South Korean economy rebounded in 2013, consumers still remain cautious of spending
money on dining out (Euromonitor International, 2014).
The South Korean consumer foodservice industry is dominated by independent operators who account
for 80% of total outlets and 65% of total foodservice sales. The leading type of foodservice location, with
a 79% market share, is standalone. The standalone location made up US$53.0 billion of overall consumer
foodservice sales in 2013. This is an indication that standalone locations have matured and penetration
may be difficult in the future, so operators should focus on other locations such as retail and travel outlets
(Euromonitor International, 2014).
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South Korea’s chained foodservice industry is very fragmented with the top five chained operators making
up only 5.8% of the market. The top five chained operators are SPC Group (Paris Baguette), Lotte Group
(Lotteria), McDonald’s Corp, Genesis Co Ltd (BBQ) and Starbucks Corp (Euromonitor International,
2014).
In 2013, South Korea’s Fair Trade Commission (FTC) implemented a new regulation which limited the
expansion of large consumer foodservice franchises (bakery, pizza, chicken, convenience store,
speciality coffee shops) by imposing a distance between how far a new outlet could be opened from an
existing outlet. Also, in order to protect small businesses, the National Commission for Corporate
Partnership (NCCP) announced a new guideline that advised large consumer foodservice companies to
not open new outlets between April 2013 and March 2016. This new regulation and guideline allowed
small- and medium-sized chain outlets to see strong growth and is causing large consumer foodservice
chains to expand into the provinces and non-standalone locations (Euromonitor International, 2014).
South Korea’s Historic and Forecast Consumer Foodservice by Type – Market Sizes in
US$ Millions, Current Prices – Fixed 2013 Exchange Rate
Market Value (US$ millions)
Category
2008-13
2013-18F
87,455.6
2.0
5.4
44,003.1
23,326.8
54,767.0
32,688.6
0.2
6.0
4.5
7.0
42,822.4
13,606.9
8,729.9
1,946.2
169.0
55.5
1,542.0
56,113.5
15,769.0
12,439.9
2,903.3
167.7
62.3
1,910.2
1.4
0.7
7.7
3.3
-3.0
-3.7
1.1
5.6
3.0
7.3
8.3
-0.2
2.3
4.4
2008
2013
60,995.0
67,329.9
Independent consumer foodservice
Chained consumer foodservice
43,580.8
17,414.2
Full-service restaurants
Cafés/bars
Fast food
100% Home Delivery/Takeaway
Street Stalls/Kiosks
Self-Service Cafeterias
Pizza consumer foodservice**
39,908.3
13,157.6
6,012.9
1,652.3
196.9
66.9
1,462.9
Total consumer foodservice
CAGR* (%)
F
2018
Source: Euromonitor International, 2014
*CAGR: Compound Annual Growth Rate
**Note: Pizza consumer foodservice is the aggregate of three sub-sectors: pizza fast food, pizza full-service restaurants and pizza
100% home delivery/takeaway. These three pizza sub-sectors are also already included within the fast food, full-service restaurants
and 100% home delivery takeaway sectors.
DOING BUSINESS IN SOUTH KOREA
Transactional Trends
The World Bank’s “Doing Business: Republic of Korea Report (2014)” assesses the number of
procedures and length of time it takes for a small- to medium-sized company to start a business in South
Korea. Measures range from registering a company to obtaining electricity, and the ease of paying taxes.
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In its latest report from 2014, South Korea ranked 7 out of 189 countries, which is one ranking lower
than the previous year.
From 2013 to 2014, South Korea had three ranking changes that are worth highlighting:
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First, with the largest drop from the previous year, was the ease of starting a business ranking
rd
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which fell from 23 to 34 place, requiring five procedures and five and half days. However, this
ranking is still above the Organisation for Economic Co-operation and Development (OECD)
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average of 60. In comparison, New Zealand received the number one ranking requiring just one
procedure and half a day to start a business (World Bank Group, 2014).
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Second, on the positive side, dealing with construction permits takes 29 days in South Korea to
st
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fully complete 11 procedures. This is an increase in ranking for South Korea from 21 to 18 .
The top spot belongs to Hong Kong SAR, China which requires 26 days to complete only six
procedures. (World Bank Group, 2014).
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Lastly, and again on the positive side, South Korea improved by four spots in paying taxes,
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landing at 25 . South Korea requires 10 payments per year taking up to 187 man hours, whereas
the top ranked country (United Arab Emirates) requires just 4 payments per year and 12 man
hours (World Bank Group, 2014).
Doing Business in South Korea – World Bank Group Ranking 2013-2014
2014 Rank
2013 Rank
Overall
Starting a Business
Dealing with Construction Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
7
34
18
2
75
13
52
6
23
21
1
73
11
51
Change in
Rank
-1
-11
+3
-1
-2
-2
-1
Paying Taxes
Trading Across Borders
Enforcing Contracts
Resolving Insolvency
25
3
2
15
29
3
2
14
+4
No change
No change
-1
Source: Doing Business, World Bank Group, 2014.
Positive change= Making it easier to do business.
Negative change= Making it more difficult to do business.
Business Etiquette
It is important to the success of your company, when doing business in South Korea, to understand how
culture influences business practices. The following section will provide a brief overview of what to keep
in mind when doing business in South Korea. For more information on Korean business etiquette, please
visit the Canadian Trade Commissioners Service website, “Doing Business in Korea: Business Etiquette”.
Confucian Influence
Koreans follow Confucian traditions, which means they put great emphasis on respecting education,
authorities, and those who are older. In following these traditions, Koreans intuitively establish
hierarchical relationships based upon the age, position, status and educational background of other
people relative to themselves. That being said, Canadian exporters should not be surprised to receive
questions concerning age, marital status or educational background. These are tools that Korean
businesspeople use to place you within this hierarchical structure. In addition, Koreans are more
comfortable doing business with people they feel personally connected to and a mutual intermediary can
be very helpful in establishing business connections (DFATD, 2015).
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Korean Names
A Korean name consists of a family name, usually of one syllable, plus a given name, usually of two
syllables. In the beginning, until familiarity and very good terms are established between the exporter and
Korean counterpart, the use of the family name preceded by a title such as Mr., Mrs. or Miss should
always be used. When in a formal setting that calls for great respect, while addressing a Korean
counterpart, the use of their formal title and surname (Chairman Lee, for example) is appropriate (DFATD,
2015).
Meetings
Just like doing business in other countries, when meeting a Korean counterpart it is important to arrive
on-time or early and notify them should you need to arrive late for unforeseen reasons. Also, engaging in
small talk, such as overall impressions of Korea, family, and sports, may occur at the initial meeting and
should be something you’re prepared for. In addition, socializing outside the business environment with
your Korean counterparts is a very common way to build business relationships and establish a stronger
personal relationship, which will fortify your business dealings (DFATD, 2015).
Business Cards
The exchange of business cards is important and usually happens at the initial meeting. The exchange
allows the hierarchical structure to be identified and determines position and title. The formal and
appropriate way to do this exchange in Korea is while standing, the Canadian businesspeople should
politely hand a business card over with two hands, and receive one in return. Should you be sitting down
when this exchange is to happen, you need to place the business card on the table in front of you for the
duration of the meeting. Canadian businesspeople travelling in Korea should carry business cards that
include Korean text (DFATD, 2015).
Bowing and Handshakes
Koreans are accustomed to bowing to those senior to them as a form of greeting and to show respect.
The junior person initiates the bow. Then the senior person will acknowledge by returning a less
accentuated bow. Bowing in Korea is not as prominent as in other countries, such as Japan (DFATD,
2015).
Just like other exchanges, such as business card, the handshake is done with two hands. The handshake
is done by extending the right hand and cupping the left hand below and around the right elbow.
Canadian businesspeople should not be surprised by receiving a two-handed handshake and a bow at an
initial meeting with a Korean counterpart (DFATD, 2015).
TARIFFS AND LABELLING
Tariffs
The Canada-Korea Free Trade Agreement (CKFTA) came into effect on January 1, 2015 and will have a
large effect on the elimination of tariffs between Canada and South Korea. The CKFTA, when fully
implemented, will see South Korea removing 98.2% of tariff lines and Canada removing duties on 97.8%
of tariff lines. This will be a huge benefit/advantage to Canadian exporters because on average, at this
time, South Korea tariff rates (13.3%) are three times higher than Canada’s (4.3%) (DFATD, 2015).
Page | 7
Labelling
All product labels need to be in Korean and can have extra suggestions in English. The product label
needs to contain metric measures and weight. The “made in” (origin of product) is mandatory and should
be in Korean, Chinese or English. Below is a list of some of the labelling requirements in South Korea
(Santander Trade, 2015):
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•
•
•
•
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Product name
Name and address of Korean manufacturer, or importer and original manufacturer in case of
imported products
Name and address of distributor of imported products, in case that importer and distributor are
different
Materials
Size or volume
Production number or date (or limited using period)
Additional information on labelling requirements and regulations can be found on the Korean Ministry of
Environment website or on the Korea Customs Service website.
CONCLUSION
The Korean market will continue to show potential for growth over the coming years whether it is in retail
or foodservice. Both the retail and foodservice industries in Korea are very fragmented, and the market
does not have a dominant retailer or foodservice provider. Additionally, its top ten country ranking in ease
of doing business, and position as part of the dynamic and fast-growing Asia-Pacific region, will offer
good possibilities for new entrants to gain market share. When doing business in South Korea, importers,
investors and businesses should keep in mind proper business etiquettes and protocols, and adhere to
tariffs and labelling regulations, to ensure successful market access.
FOR MORE INFORMATION
International Trade Commissioners can provide Canadian industry with on-the-ground expertise
regarding market potential, current conditions and local business contacts, and are an excellent point of
contact for export advice.
•
Overview of Trade Commissioner Services in South Korea
http://www.tradecommissioner.gc.ca/eng/office.jsp?oid=242&cid=517
•
Find a Trade Commissioner
www.tradecommissioner.gc.ca/eng/find-trade-contacts.jsp
For additional intelligence on this and other markets, the complete library of Global Analysis reports can
be found under Statistics and Market Information at the following link, arranged by sector and region of
interest:
•
ats-sea.agr.gc.ca
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RESOURCES
Department of Foreign Affairs and Trade Development (DFATD) Canada (2014).
• Canada-Korea Free Trade Agreement (CKFTA), retrieved September 2014 from:
o http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/koreacoree/index.aspx?lang=eng
o http://international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/korea-coree/overviewapercu.aspx?lang=eng
• Doing Business in South Korea: Business Etiquette, retrieved January 12, 2015 from:
http://www.tradecommissioner.gc.ca/eng/document.jsp?did=87892&cid=517&oid=242
Euromonitor International (2014).
• Business Environment: South Korea
• Country Pulse: South Korea
• Country Profile: South Korea
• Internet Retailing in South Korea
• Consumer Foodservice by Location: South Korea
• Foodservice in South Korea
Global Trade Atlas (2014). Trade data.
Korea Customs Service
http://english.customs.go.kr/kcshome/site/index.do;jsessionid=L9VvJ1NhjSn2yn8vwC1Gbgqtq3vrWxG
6vBXZZmYKpXng5G51Y4Lt!-2026706089?layoutSiteId=english
Ministry of Environment (Korea)
http://eng.me.go.kr/eng/web/main.do
Prime Minister of Canada – Canada-Korea Free Trade Agreement (CKFTA) Benefits – New Release,
March 11, 2014, retrieved September 19, 2014 http://www.pm.gc.ca/eng/news/2014/03/11/canadakorea-free-trade-agreement-ckfta-benefits
Planet Retail (October 2014).
• Country Report: South Korea.
• Retail Market Data.
Santander Trade: South Korea – retrieved January 21, 2015
https://en.santandertrade.com/international-shipments/south-korea/packaging-and-standards
The World Bank Group (2014). Doing Business 2014 – Economy Profile: South Korea
World Factbook (2014), South Korea
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Business Environment: South Korea
Global Analysis Report
Prepared by: Stephanie Clarke, Market Analyst
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represented by the Minister of Agriculture and Agri-Food (2015).
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