Bakeries raise prices again despite public backlash over costs

Major bakery chains are raising prices one after another — Paris Baguette joining Tous les Jours and Samlip in hiking costs. The companies had cut prices in the first half of the year in line with the government's push to stabilize consumer prices, but rising costs for flour, eggs and other ingredients have prompted them to revise their price tags in less than six months.

Paris Baguette, operated by Paris Croissant — an affiliate of Sangmidang Holdings, formerly SPC Group — said Tuesday it will raise prices on some products by an average of 5.0% starting Tuesday. The increase covers 127 items, including 86 types of bread and 41 types of cakes and desserts. "We were compelled to adjust prices due to rising ingredient costs and various other expenses," a Paris Baguette official said.

Earlier, Samlip, another affiliate of Sangmidang Holdings, announced it will raise prices on about 50 bread products by an average of roughly 9% starting Sept. 1. Its flagship product, "Jeongtong Boreumdal," will go up 11.1% — from 1,800 won to 2,000 won at convenience stores. BR Korea raised prices on 39 Dunkin' donut varieties by an average of 6.5% starting Aug. 2. Tous les Jours, operated by CJ Foodville, raised prices on 76 items by an average of 8.2% starting July 31.

The bakery industry cites rising input costs as the reason for the increases. Samlip posted consolidated sales of 847.8 billion won ($599 million) in the second quarter of this year, up 2.9% from a year earlier. Over the same period, its cost of sales rose 4.5% to 736.9 billion won, outpacing revenue growth.

As a result, Samlip's cost-of-sales ratio climbed 1.2 percentage points — from 85.7% in the second quarter of last year to 86.9% in the second quarter of this year, meaning the company spent 86.9 won out of every 100 won in revenue on input costs, up from 85.7 won. Samlip's operating profit plunged 98.7% year on year to 110 million won.

According to the Korea Agro-Fisheries and Food Trade Corporation, the average price of wheat at the Chicago Mercantile Exchange this month stood at $266.31 per ton, up 39.1% from the same month last year. Wheat prices have been rising recently, driven by supply disruption concerns in the Black Sea region and crop worries stemming from heat waves and drought in major producing areas.

Prices for other baking ingredients are also elevated. The international price of palm oil used in baking soared 14.6% — from $909.28 per ton in February to $1,041.68 this month — driven by demand for biodiesel in Indonesia and rising global crude oil prices. The international price of raw sugar, the base ingredient for refined sugar, rose 12.7% over the same period, from $313.49 per ton to $353.40. Eggs remain expensive as well: the average retail price of a 30-pack of domestic XL eggs stood at 7,328 won on Sunday, up 5.0% from a year earlier and 11.2% above the average for normal years.

Paris Baguette, Tous les Jours, Samlip and other bakery chains had cut prices on some products in March, after sugar and flour makers including CJ CheilJedang, Samyang, Daehan Flour Mill and Sajodongaone lowered their prices following a price-fixing investigation, and as the government pushed the industry to ease the burden on consumers.

Remarks by President Lee Jae-myung also contributed to the earlier price cuts. At a senior secretaries meeting in February, Lee said bread prices in South Korea were "enormously expensive compared to other countries." After sugar and flour makers lowered their prices, he added that "the benefits of falling raw material prices such as sugar should be passed on to consumers." The effect of those price cuts did not last long, however, as the industry's cost burden grew with the combination of Middle East tensions and a high exchange rate.

Confectionery and ramyun makers, which use similar ingredients, face the same pressures and have also been raising prices. Nongshim raised factory prices on 43 product lines — including major cup ramyun, snacks and beverages — by an average of 5.8% starting Aug. 1. According to Nongshim's disclosure filings, the average purchase price of wheat it imported in the first half of the year was $214 per ton, up 9.2% from last year, while palm oil rose 9.2% over the same period to $1,139 per ton. Ottogi also announced it will raise factory prices on 29 products across 11 cup ramyun brands by an average of 6.7% starting Sept. 7.