Best Product Prospects in the Korea Food Service Market for U.S. Exporters

A. Products Present in the Market Which Have Good Sales Potential

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1. P ork meat (chilled and frozen belly cut): Due to the import ban on U.S. beef since December 2003, many beef restaurants have switched to pork menus, resulting in a strong demand for additional imports. ? Although Korea has a large domestic supply of pork meat, local demand is highly skewed to the belly cut, which has resulted in a strong need for imports. ? It is interesting to note that much of the meat is distributed frozen in the food service sector, as restaurants generally want longer shelf life. ? During 2005 through November, total pork meat imports increased 79 percent from the previous year, to $537 million. ? Imports from the United States during that same time period also showed an explosive growth of 269 percent to $120 million. ?

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2. Processed meats (sausages, hams): Due to easy application, a wide variety of local menus incorporate processed meat products. ? Fast food, bars and buffet restaurants are the main users of these products. ? Imports of sausages grew 39 percent in 2005 through November to $9.8 million (most of them from U.S.) while imports of preserved meat grew 118 percent to $42 million ($2.9 million from U.S.).

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3 . Chicken meat (frozen and processed): Although there still remains some safety concerns among consumers over poultry products due to the on-going Avian Influenza issue, Korea remains an excellent market for chicken meat products . ? In particular, the import ban on U.S. uncooked poultry products was lifted in 2005, resulting in a 588 percent increase of imports from the United States through November to $30 million, accounting for 37.6 percent of total poultry product imports. ? Demand for further processed poultry products is expected to grow gradually in the future, as more restaurants understand the cost savings of value-added products. ? Conversely, Korean food service sector is not a market for imported fresh chicken meat due to the short shelf life and strict sanitary standards (zero tolerance on E-coli contamination) on imported fresh meat. ?

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4 . Seafood (frozen and processed): Korea is an outstanding seafood market with good growth potential for imported products . ? The domestic supply is decreasing due to the depletion of near sea fishery resources and increased international restrictions on deep-sea fishing. ? Total imports of fishery products amounted to $2.1 billion in 200 5 (through November) , up 3.5 percent from the previous year, while i mports from the U nited S tates grew 10.5 percent to $ 130 million . ? Major species currently imported from the United States include: Alaska Pollack, Pollack surimi, Pollack roes, tuna, skate, mackerel, hagfish, halibut, scallop , c od , Pacific salmon, angler fish, rock fish, and prepared sea cucumber. ? It is notable that demand for processed products (fillet, dried, surimi, and cooked) are also rising. ? Processed products (fillet, dried and salted) accounted for about 24 percent of total seafood imports in 2005. ?

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5 . Processed f ruits and nuts: Processed fruits and nuts are gaining consumer popularity for their natural and healthy image . ? Introduction of new recipes that require processed fruit and nut ingredients is resulting in growing demand for more diverse products. ? I mports of processed fruits and nuts from the United States amounted to $16 million in 2005 through November. ? Products currently imported from the United States include: dried, frozen, or preserved prunes, cranberries, cherries, strawberries, grapes, figs, blueberries, walnuts, almonds, pistachios, pecans and peanuts. ? Fruit juices also have a big market in Korea, as U.S. products, at $33 million imports in 2005, took a 35 percent import market share.

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6. Fresh f ruits : Korea is an excellent market for U.S. oranges. ? Demand for imported oranges is increasing in both food service and retail sectors. ? Currently, U.S. , Australia and South Africa are allowed to export oranges to Korea. ? Orange imports from the United States in 2005 through November amounted to $116 million. ? Other U.S. fruits currently imported into Korea include table grapes ($7 million), lemons, cherries ($7 million) and grapefruits.

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7 . Vegetables (fresh, frozen, canned and prepared): Although Korea is self-sufficient in many varieties of fresh vegetables, seasonal fluctuations in the local supply and unfavorable growing condition for foreign varieties are resulting in an increased demand for imports. ? China has emerged as the leading supplier of vegetables to the Korean food service sector in both the fresh and processed category; however, there remains a solid demand for a limited variety of high-quality U.S. products. ? Major products imported from the United States include potatoes, onions, lettuce, tomatoes, broccoli, avocadoes and carrots. ? Imports of vegetables from the United States amounted to $21 million in 2005 through November, with an additional $49 million of imports of prepared vegetable products.

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8 . Dairy Products (milk concentrate, cream, whey, butter and cheese): Diverse recipes with dairy ingredients are steadily being introduced, resulting in a growing demand. ? In addition, there is an increased demand for imported dairy products from the thriving bakery industry. ? Imports of milk concentrate and cream grew 80 percent in 2005 (through November) to $17 million (unfortunately, only $192,000 came from the United States). ? Imports of whey grew 25 percent to $80 million, while U.S. products grew 105 percent to $21 million. ? Imports of butter grew 49 percent to $12 million (only $65,000 from U.S.). ? Imports of cheese amounted to $128 million, up 19 percent from the previous year, while imports from the United States also grew 28 percent to $23 million. ?

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9 . Alcohol Beverages ( wine, b eer and h ard liquors ): With the large number of bars and pubs, imported alcohol beverages maintain a sizable market in the food service sector. ? Especially demand for products with health benefits and lower alcohol content is rapidly growing. ? Wine imports increased 16 percent in 2005 through November to $60 million, setting a record-high. ? Imports from the United States also set a new high at $8.5 million, up 15 percent. ? Among the $15 million of beers imported in 2005, U.S. products, at $4 million, took 27 percent of the market. ? Imports of U.S. hard liquor products totaled $3.3 million in 2005, which constituted only 1.4 percent of total hard liquor imports. ?

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? 10 . Coffee : On-going expansion of franchise coffee shop chains results in an increased demand for imported coffee. ? Imports of coffee from the United States grew 27 percent during 2005 through November to $5.7 million.

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11. Sauces and Condiments: With introduction of more diverse foreign recipes, demand for imported sauces and condiments is rising. ? Imports from the United States in 2005 through November grew 18 percent from the previous year to $13.4 million.

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B. Products Not Present in Significant Quantities But Which Have Good Sales Potential

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1. Deboned skeletal beef meat: ? Korean government lifted import ban on deboned skeletal beef meat from the United States in January 2006. ? The new regulation states that only beef meat, free of any bone or SRM, from cattle under 30 months old from pre-approved slaughter houses/packing plants in the U.S. are allowed.

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2. Rice: The new rice trade agreement that Korea signed with exporting countries will allow imported rice to be distributed commercially through retail channel starting in early half of 2006. ? It is expected that some portion of the imported rice, including U.S. rice, will be used by the food service sector. ? Imported rice will gain more price competitiveness over the coming years, as the agreement is made to gradually increase the volume of imported rice with access to the commercial retail market.

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3. Pasta: Increased popularity of Italian recipes is resulting in a rapid import increase of products related to the cuisine, including Pasta. ? Unfortunately, among the $50 million of pasta products imported in 2005 through November, imports from the United States amounted to a mere $500,000. ?

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4. Ingredients for Mexican cuisine: ? Many industry experts predict that Mexican cuisine has a great potential in Korea, as the cuisine contains a lot of hot, spicy dishes. ? However, unfortunately, there are very few chefs and restaurants in the market where good Mexican food can be found. ???

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5. Processed turkey meat: Somehow, local mainstream consumers still maintain a negative view on turkey meat. ? However, with millions of Koreans traveling to the United States every year, processed turkey meat products continue to gain some support, especially from young consumers. ? Turkey ham sandwiches are already getting popular among affluent, young consumers. ???

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6. Premium seafood: Products such as lobster, crab s ( K ing, S now , and Dungeness), black cod and wild-caught Sockeye salmon have good potential in Korea as affluent consumers are looking for new, premium and healthier alternatives to beef and pork. ? These premium products also have a good potential as gift items.

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7. Processed eggs (fluid, frozen and flour): More restaurants and bakery shops are expected to switch to processed egg products from shelled eggs.

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8. Prepared processed food: Demand for prepared products, such as frozen soups and fully cooked meals, is gradually picking up in the food service sector. ? As more restaurants understand the economic benefit and quality of prepared products, interest in U.S. products is likely to increase.

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9. Ingredients for micro-brew beer: Demand for ingredients for micro-brew beer is likely to increase with the addition of more micro-brewery restaurants, which are gaining in popularity.

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10. Processed Organic products: ? The demand for processed organic products continues to increase due to the strong interest of affluent consumer groups and young mothers. ?

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11. Many imported agricultural products , including honey, fresh potatoes, fresh onions and popcorn, are subject to high tarriffs and tariff rate quotas (TRQs) that restrict import volumes. ? However, on-going trade negotiations are likely to reduce some of these barriers in the coming years.

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