Due to the surge in olive oil prices, the cost burden on franchise chicken brands is increasing. As the prices of other raw materials, including broiler chicken, have also risen, profitability is said to be worsening further. There is an atmosphere that a price increase is inevitable in order to protect performance, but they are suffering from the government’s request to refrain from raising prices for price stability and consumers, who are leading public opinion on the high chicken price controversy.
According to foreign media on the 11th, the price of Spanish olive oil has been rising rapidly recently. The consumer price in Spain, which was usually sold at 4 euros per liter, recently rose to 10 euros. This is because Spain, which accounts for 40-50% of the world’s olive oil production, suffered a sharp decline in production due to a drought at the beginning of the year and a summer heat wave. Olive production this year is expected to be only 660,000 tons, which is half of the average of 1.3 million tons.
Turkiye, which leads the production of olive oil along with Spain, announced a suspension of exports until November to stabilize domestic prices as Spanish olive안전놀이터 prices soared. There are predictions that olive oil prices may continue to rise.
In this situation, the burden on chicken brands that use olive oil as an ingredient increases. A representative example is BBQ , which uses entirely Spanish olive oil . According to BBQ , the average olive oil purchase price from 2016 to 2018 was 2,500 euros, but the current olive oil purchase price is 8,000 euros.
The problem is the subsequent contract. Due to the suspension of exports to Turkey, the current market price is trading at up to 10,000 euros per ton. If import prices rise like this, it becomes difficult for the head office to maintain the prices it supplies to franchisees. BBQ raised the supply price of one can of olive oil (15 kg) from 110,000 won to 115,000 won in February 2016, and then raised the price every three years. In January 2019, the increase was maintained at 5,000 won to 120,000 won, but in May last year, it was raised by 40,000 won to 160,000 won.
The price of chicken, the main ingredient in chicken, is still expensive. According to the Korea Broiler Association, as of the 7th, the price per 1 kg of broiler chicken (live, medium size, including transportation costs) is 2,390 won. It is a stable level compared to last April, when it rose to 3,190 won, but it is more expensive than 1,990 won in the same period last year. This is the result of the mass death of 1 million animals due to heavy summer rain and heat waves. Although the government is taking price stabilization measures, such as applying tariff quotas to imported chicken, it is evaluated that the effect is not as expected.
The chicken industry says that a price increase is inevitable as the cost increase factors are increasing, but they are not considering a price increase due to concerns about consumer backlash and government pressure. Kyochon F&B, which alone raised prices last April, was criticized by consumers after the increase and suffered from sluggish sales for four months, twice as long as expected. On the 8th, the Ministry of Agriculture, Food and Rural Affairs summoned 22 food companies, including the three chicken companies, and asked them to participate in stabilizing Chuseok prices.
An official from the chicken franchise industry said, “The cost burden continues to increase, but asking for a freeze on consumer prices is nothing more than asking them to bear all the losses. In order to suppress the increase in chicken prices, we also need to look at the prices of raw material suppliers.” .