Sugar, flour prices drop on heels of Lee's 'collusion' warnings and pending price-fixing investigations

Sugar is displayed at a large supermarket in Seoul on Feb. 12.. [YONHAP]

 
Major sugar refiners and flour millers in Korea have cut prices in quick succession this month. Though they said they were reflecting declines in global raw sugar and wheat prices and aligning with the government’s push to stabilize inflation, the timing underscores mounting political and legal pressure on an industry long accused of coordinated pricing.
 
The move in fact comes days after President Lee Jae Myung warned of “anti-market collusion” in essential food industries and prosecutors disclosed an investigation into 10 trillion won ($6.91 billion) worth of price-fixing activities. Lee first raised concerns about high prices driven by monopolistic practices on Feb. 5. He renewed that focus on Thursday during a senior secretaries' meeting at the Blue House in central Seoul.
 

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“Anti-market collusion has taken root across industries, including sugar, flour, meat, school uniforms and real estate,” Lee said Thursday. “We must root out these harmful practices if we want the economy to grow stronger and more competitive.”
 
The remarks underscored Lee’s continued push against collusion by dominant firms that coordinate prices or market behavior instead of competing fairly. 
 
Daehan Flour cut flour prices by an average of 4.6 percent earlier this month. Major companies including CJ CheilJedang and Samyang also announced on Feb. 5 that they would lower prices of commercial and retail flour products by an average of 4 to 6 percent.
 

Flour is displayed at a large supermarket in Seoul on Feb. 8. [YONHAP]

 
Whether cheaper raw materials will lead to lower prices for bread, snacks and noodles remains unclear.
 
Raw materials account for a significant share of food production costs, according to a Fair Trade Commission (FTC) report.
 
As of 2022, raw materials made up 50.1 percent of production costs for bread and 57.9 percent for snacks. For noodles, the ratio reached 75.1 percent.
 
Because raw materials represent more than half of total costs in many categories, lower input prices could ease pressure on finished goods. Past experience, however, suggests that lower input costs do not always lead to lower consumer prices.
 
In 2006, the FTC uncovered collusion among eight flour millers and imposed 43.5 billion won in fines along with orders to recalculate prices. Although the companies adjusted their prices at the time, those within the industry said food prices did not show a clear downward trend afterward.
 
“It’s difficult to lower prices in a way consumers can really feel because labor, shipping and currency costs still remain,” a food industry source said.
 
Another source said companies accepted lower profits when a weaker won made imported ingredients like cocoa and cooking oil more expensive.
 

Flour is displayed at a large supermarket in Seoul on Feb. 6. [NEWS1]

 
“If sugar and flour prices fall only temporarily, it will be difficult to lower prices of finished products such as bread and snacks,” the source said.
 
Some experts said the move could go beyond lowering finished product prices by making pricing structures more transparent and preventing excessive price increases.
 
“Consumers could not fully see how unfair practices influenced finished product prices,” said Hong Yeon-ah, a professor at Kongju National University, who authored the FTC report. “This measure provides an opportunity to examine the entire process. If structural adjustments follow, it will help prevent future price hikes.”


This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY NOH YU-RIM [paik.jihwan@joongang.co.kr]