Consumer and Market Insights: Bakery and Cereals Market in South Korea. CS1910MF March 2015

Transcription

1 Consumer and Market Insights: Bakery and Cereals Market in South Korea CS1910MF March

2 Report scope This report brings together multiple data sources to provide a comprehensive overview of the Bakery and Cereals sector in South Korea as part of our global coverage of the sector. This report draws on market data, analyzing value and volume data and category and channel distribution breakdown, also highlighting which categories are witnessing the biggest growth. Brand and Private Label analysis is also provided. It also contains top line foodservice transaction figures highlighting where the most opportunistic channels are for industry players in the country. Detailed packaging analysis is also provided, analyzing category trends and also packaging material and type. The report also contains qualitative analysis of the most influential consumer trends driving consumption occasions in the category, analyzing how these trends will evolve and highlighting best practice product examples to show how manufacturers are targeting the trend. Market data coverage: The overall market value and volume data included in the report is for the period Category coverage: This report provides information on 11 categories including Bread & Rolls, Cakes, Pastries & Sweet Pies, Cookies (Sweet Biscuits), Morning Goods and Breakfast Cereals. More extensive brand coverage: The report provides more extensive brand share coverage. Brand share data is also validated by inputs from industry experts. Distribution channel: The Distribution data included in the report covers 11 distribution channels including Cash & Carries & Warehouse Clubs, Dollar Stores, Variety Stores & General Merchandise Retailers, Hypermarkets & Supermarkets, Convenience Stores Time period: The report provides overall market value and volume data, including category level data for the period Distribution channel and brand share data is included for the year /6/ /04/2015 4/6/2015 2

3 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer trends Examples of new product development Appendix 3

4 A large share of adult and mid-lifers with higher disposable income is driving demand for packaged products in South Korea GDP Per Capita (KRW) Consumer Price Index Annual growth (%) Population (Million) Annual Growth (%) South Korea is one of the fastest growing economies in Asia. The country s large working population with high disposable incomes is driving growth in the consumer retail goods sector. GDP Per Capita 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000, The GDP per capita of South Korea showed an increasing trend in absolute value terms. It grew from KRW 23,417,244.3 in 2009 to KRW29,854,721.0 in Consumer Price Index 10% 8% 6% 4% 2% 0% Population The population growth in South Korea slowed down due to declining birth rate. The population of South Korea was 50.4 million in Age Profile % 0.6% 0.4% 0.2% 0.0% The consumer prices in South Korea have increased by 2.4% during , reaching basis points in The population matrix of South Korea is skewed towards older consumers with 50.4% of the population above 40 years of age

5 The retail and foodservice markets in the South Korea: an overview This slide provides an overview of the retail and foodservice markets in the South Korea, in which industry players in the Bakery and Cereals sector operate: Retail Foodservice Country indicator Units Value Total value of Food market, 2014 Total volume of Food market, 2014 Total Food volume growth Proportion of Bakery and Cereals as part of overall food volume, 2014 Biggest category within the Bakery and Cereals market as part of overall volume Private label penetration in Bakery and Cereals market, 2014 US$ millions 52,646.7 Millions of Kg 6,131.4 CAGR 3.3% % 8.6% % Bakery and Cereals % Bread & Rolls, 45.2% 0.6% Profit Sector Total number of transactions in the profit sector, 2014: 10,595.0 million Largest channel in the profit sector and transactions, 2014: Restaurants, 5,545.6 million Cost Sector Total number of transactions in the cost sector, 2014: 3,662.9 million Largest channel in the cost sector and transactions, 2014: Education, 2,356.1 million Figures for overall food 2014 are forecasts. 5

6 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer trends Examples of new product development Appendix 6

7 South Korea s Bakery and Cereals market is forecast to register higher growth in value terms compared to volume terms during The growth in consumption in the Bakery and Cereals market in South Korea was higher in value terms compared to volume terms during While it grew at CAGR 3.8% over in terms of value, volume growth was recorded at CAGR 3.1% over the same period. The consumption in terms of value is forecast to grow at a CAGR of 4.2% and at a CAGR of 3.3% in volume terms during Market value of the South Korea s Bakery and Cereals market, Market volume of the South Korea s Bakery and Cereals market, (Millions of Kg), KRW million US$ million ,324, , ,003, , ,926, ,667.6 CAGR CAGR % 7.9% 4.2% 4.2% CAGR % CAGR % 7

8 Introduction of innovative products with local flavors will drive the sales of Bakery & Cereals market in South Korea during Growth Rate (%) South Korea s Bakery and Cereals market will witness moderate growth at a CAGR of 4.2% during from KRW4,003,671.8 million (US$3,798.8 million) in 2014 to KRW4,926,013.8 million(us$4,667.6 million) in As rising number of consumers seek Bakery and Cereal products, manufacturers will launch new products with innovative ingredients which will drive the sales in this market. In US$ terms, the market registered volatile growth during due to fluctuations in exchange rates. This trend is expected to continue post 2014, with the market forecast to register stable growth during Market value (KRW million and US$ million) and volume growth of Bakery and Cereals market, % 15% 10% 5% Value (KRW) Value (US$ m) Volume (Kg m) 0% % -10% -15% 8

9 Consumers in South Korea are trading down to value-for-money products amidst growing food price inflation 2014 Annual Change % In 2014, the value of the Bakery and Cereals market grew by 4.0% (year-on-year) and volume grew by 3.2%. The market price grew by 0.8% whereas food inflation stood at 2.0%. Value sales are growing at a higher rate compared to volume consumption due to rising prices. Increasing food inflation in South Korea is primarily due to rising input costs. It has resulted in consumers trading down to value-for-money Bakery & Cereals products during Extent to which consumers are trading up or down in South Korea's Bakery and Cereals market 6% 4% 0.8% 2.0% -1.2% 2% 4.0% 3.2% 0% Value Change Volume Change Average price Change Food Price Inflation Trading up or down 9

10 The Bread & Rolls category is the most consumed bakery product in South Korea Market volume of South Korea's Bakery and Cereals market, (Millions of Kg), 2014, by category Bread & Rolls Cakes, Pastries & Sweet Pies Cookies (Sweet Biscuits) Morning Goods Savory Biscuits Dough Products Baking Mixes Baking Ingredients Breakfast Cereals Cereal Bars The Bread & Rolls category is the largest category in volume terms, accounting for 45.2% of the market share. Cereal Bars are forecast to register fastest growth in volume terms at a CAGR of 4.7% during Market Volume, forecasted Compound Annual Growth Rate, Market Volume (Kg m) 2014 CAGR Bread & Rolls % Cakes, Pastries & Sweet Pies % Cookies (Sweet Biscuits) % Morning Goods % Savory Biscuits % 77.2 Energy Bars Dough Products % Baking Mixes % Baking Ingredients % Breakfast Cereals % Cereal Bars % Energy Bars % 10

11 The Bread & Rolls is the largest category in value terms in the South Korean Bakery and Cereals market Category Value in KRW CAGR (%) The Bread & Rolls is the largest category by value in the Bakery and Cereals market with 31.7% share in The Bread & Rolls category, valued at KRW1,267,773.3 million (US$1,202.9 million) in 2014 will register a CAGR of 5.3% during This is followed by Cakes, Pastries & Sweet Pies and Cookies (Sweet Biscuits) which accounted for 17.6% and 15.8% of the market share, respectively, in Market value of categories in the South Korea's Bakery and Cereals market 8% 6% 4% 2% 0% 0% 2% 4% 6% 8% Category Value in KRW CAGR (%) Bread & Rolls Cakes, Pastries & Sweet Pies Cookies (Sweet Biscuits) Morning Goods Savory Biscuits Breakfast Cereals Dough Products Baking Ingredients Baking Mixes Cereal Bars Energy Bars Bubble Size = 2014 Category value 11

12 Bread & Rolls is the leading category by value and will also register fastest growth in the Bakery and Cereals market Value (US$ Million) Value (US$ Million) Annual Growth (%) Annual Growth (%) Value (KRW Million) Value (KRW Million) Annual Growth (%) Annual Growth (%) Bread & Rolls US$ Market value of categories in the Bakery and Cereals market Bread & Rolls KRW 1,600 1, The Bread & Rolls category is forecast to grow at a CAGR of 5.1% during from KRW1,000,271.6 million (US$783.3 million) in 2009 to KRW1,643,723.7 million (US$1,557.5 million) in Sandwich Slices is the largest segment in the Bread & Rolls category and accounted for 18.9% in Cakes, Pastries & Sweet Pies US$ Value (US$) Annual Growth (%) Value (US$) Annual Growth (%) Cakes, Pastries & Sweet Pies KRW The Cakes, Pastries & Sweet Pies category is forecast to grow at a CAGR of 3.7% during from KRW593,230.6 million (US$464.6 million) in 2009 to KRW857,102.4 million (US$812.1 million) in Cakes is the largest segment in the Cakes, Pastries & Sweet Pies category and accounted for 35.2% in /6/ % 13% 8% 3% -2% -7% -12% 16% 8% 0% -8% -16% 2,000,000 1,500,000 1,000,000 06/04/2015 4/6/ ,000 1,000, , , , , Value(KRW) Annual Growth (%) Value(KRW) Annual Growth (%) 6% 4% 2% 0% 6% 4% 2% 0%

13 Chocolate Cookies will drive the growth in the Cookies(Sweet Biscuits) category during Value (US$ Million) Value (US$ Million) Annual Growth (%) Annual Growth (%) Value (KRW Million) Value (KRW Million) Annual Growth (%) Annual Growth (%) Market value of categories in the Bakery and Cereals market Cookies (Sweet Biscuits) US$ Cookies (Sweet Biscuits) KRW % 800,000 4% % 5% 600, % 400,000 2% 200-5% -10% 200, % % Value (US$) Annual Growth (%) Value(KRW) Annual Growth (%) The Cookies(Sweet Biscuits) category is forecast to grow at a CAGR of 3.0% during from KRW551,430.2 million (US$431.8 million) in 2009 to KRW739,494.7 million (US$700.7 million) in Chocolate Cookies is the largest segment in the Cookies(Sweet Biscuits) category and accounted for 43.5% in Morning Goods US$ Morning Goods KRW % 500,000 4% % 5% 0% -5% -10% 400, , , ,000 2% % % Value (US$) Annual Growth (%) Value(KRW) Annual Growth (%) The Morning Goods category is forecast to grow at a CAGR of 3.5% during from KRW326,828.4 million (US$255.9 million) in 2009 to KRW459,136.2 million (US$435.1 million) in Toaster Pastries is the largest segment in the Morning Goods category and accounted for 10.2% in /6/ /04/2015 4/6/

14 Cheese-Flavored Crackers is the largest segment in the Savory Biscuits category during Value (US$ Million) Value (US$ Million) Annual Growth (%) Annual Growth (%) Value (KRW Million) Value (KRW Million) Annual Growth (%) Annual Growth (%) Savory Biscuits US$ 400 Market value of categories in the Bakery and Cereals market Savory Biscuits KRW 16% 500,000 4% % 0% -8% 400, , , , Value (US$) Annual Growth (%) The Savory Biscuits category is forecast to grow at a CAGR of 3.2% during from KRW292,701.6 million (US$229.2 million) in 2009 to KRW401,227.8 million (US$380.2 million) in Cheese-Flavored Crackers is the largest segment in the Savory Biscuits category and accounted for 43.5% in Breakfast Cereals US$ Breakfast Cereals KRW Value (US$) Annual Growth (%) The Breakfast Cereals category is forecast to grow at a CAGR of 4.7% during from KRW211,859.5 million (US$165.9 million) in 2009 to KRW336,754.6 million (US$319.1 million) in Ready-to-Eat Cereals is the largest segment in the Breakfast Cereals category and accounted for 75.4% in /6/ % 20% 14% 8% 2% -4% -10% -16% 06/04/2015 4/6/ , , , , Value(KRW) Annual Growth (%) Value(KRW) Annual Growth (%) 2% 6% 4% 2% 0%

15 Frozen Dough Products will drive the growth in the Dough Products Category during Value (US$ Million) Value (US$ Million) Annual Growth (%) Annual Growth (%) Value (KRW Million) Value (KRW Million) Annual Growth (%) Annual Growth (%) Dough Products US$ 200 Market value of categories in the Bakery and Cereals market Dough Products KRW 16% 200,000 4% % 0% -8% 150, ,000 50, Value (US$) Annual Growth (%) The Dough Products category is forecast to grow at a CAGR of 3.4% during from KRW129,867.9 million (US$101.7 million) in 2009 to KRW182,298.0 million (US$172.7 million) in Frozen Dough Products will register fastest growth at a CAGR of 3.9% in the Dough Products category and accounted for 19.7% share in Baking Ingredients US$ Baking Ingredients KRW Value (US$) Annual Growth (%) The Baking Ingredients category is forecast to grow at a CAGR of 3.6% during from KRW110,258.6 million (US$86.3 million) in 2009 to KRW156,535.2 million (US$148.3 million) in Baking Chocolate Chips & Morsels is the largest segment in the Baking Ingredients category and accounted for 15.2% in /6/ % 16% 9% 2% -5% -12% 06/04/2015 4/6/ , ,000 60,000 10,000-40, Value(KRW) Annual Growth (%) Value(KRW) Annual Growth (%) 4% 2% 6% 2% 0%

16 Dessert Mixes will drive the growth in the Baking Mixes category during Value (US$ Million) Value (US$ Million) Annual Growth (%) Annual Growth (%) Value (KRW Million) Value (KRW Million) Annual Growth (%) Annual Growth (%) Baking Mixes US$ Market value of categories in the Bakery and Cereals market Baking Mixes KRW The Baking Mixes category is forecast to grow at a CAGR of 3.2% during from KRW98,994.5 million (US$77.5 million) in 2009 to KRW135,440.2 million (US$128.3 million) in Dessert Mixes is the largest segment in the Baking Mixes category and accounted for 26.8% in Cereal Bars US$ Value (US$) Annual Growth (%) Value (US$) Annual Growth (%) Cereal Bars KRW The Cereal Bars category is forecast to grow at a CAGR of 4.8% during from KRW6,521.6 million (US$5.1 million) in 2009 to KRW10,459.6 million (US$9.9 million) in 2019.Granola/Muesli/Yogurt Bars is the largest segment in the Cereal Bars category and accounted for 54.8% share in /6/ % 9% 2% -5% -12% 18% 13% 8% 3% -2% -7% -12% 06/04/2015 4/6/ , ,000 50, ,000 10,000 8,000 6,000 4,000 2, Value(KRW) Annual Growth (%) Value(KRW) Annual Growth (%) 4% 2% 0% 6% 4%

17 Energy Bars is the smallest category by value in South Korea s Bakery and Cereals market Value (US$ Million) Annual Growth (%) Value (KRW Million) Annual Growth (%) Energy Bars US$ Market value of categories in the Bakery and Cereals market Value (US$) Annual Growth (%) 18% 14% 10% 6% 2% -2% -6% Energy Bars KRW The Energy Bars category is forecast to grow at a CAGR of 5.0% during from KRW 2,366.4 million (US$1.9 million) in 2009 to KRW3,841.6 million (US$3.6 million) in ,000 4,000 3,000 2,000 1, Value(KRW) Annual Growth (%) 6% 4% 2% 0% 4/6/ /04/2015 4/6/

18 Bread & Rolls will gain market share during Winners Change in market share in the Bakery and Cereals market Losers Category Change in market share, Category Change in market share, % 1 Bread & Rolls 1. 7% 1 Cookies (Sweet Biscuits) -0.8% The Bread & Rolls category is forecast to gain market share, growing from 31.7% in 2014 to 33.4% in % The Cookies (Sweet Biscuits) category will lose market share, declining from 15.8% in 2014 to 15.0% in Breakfast Cereals 0.2% 2 Savory Biscuits -0.4% The Breakfast Cereals category is forecast to gain market share, growing from 6.6% in 2014 to 6.8% in The Savory Biscuits category will lose market share, declining from 8.5% in 2014 to 8.1% in Cereal Bars 0.01% 0.1% 3 Morning Goods -0.3% The Cereal Bars category is forecast to gain market share, growing from 0.20% in 2014 to 0.21% in The Morning Goods category will lose market share, declining from 9.6% in 2014 to 9.3% in

19 Category level pricing Average category level prices (KRW) in South Korea s Bakery & Cereals market, 2014 Category Average Price/ Kg (KRW) Average Price/Kg (USD) Bread & Rolls Cakes, Pastries & Sweet Pies Cookies (Sweet Biscuits) Morning Goods Savory Biscuits Breakfast Cereals Dough Products Baking Ingredients Baking Mixes Cereal Bars Energy Bars /6/ /04/2015 4/6/

20 Loaves segment will gain market share in the Bread & Rolls category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Change 2014/2019 Sandwich Slices 18.9% -0.4% Bread & Rolls Cakes, Pastries & Sweet Pies Loaves 18.4% 0.2% Rolls 17.2% 0.1% Baguettes 14.3% 0.1% Burger Buns 11.1% 0.0% Other Breads 9.5% -0.1% Frozen Bread & Rolls 6.5% 0.0% Ciabatta 4.2% 0.0% Cakes 35.2% 0.2% Pastries 25.4% -0.3% Frozen Cakes & Pastries 20.1% -0.2% Sweet Pies 19.3% 0.3% Chocolate Cookies 43.5% 0.0% Cookies (Sweet Biscuits) American Cookies 9.8% 0.2% Butter-Based Cookies 8.9% -0.2% 4/6/ /04/2015 4/6/

21 Toaster Pastries is the largest segment in the Morning Goods category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Change 2014/2019 Cream Filled 7.8% -0.1% Other Cookies 7.4% 0.2% Wafer Biscuits 7.2% -0.3% Cookies (Sweet Biscuits) Plain Cookies 7.1% -0.2% Assortments 6.4% 0.3% Artisanal Cookies 1.8% 0.1% Egg-Based 0.0% 0.0% Toaster Pastries 10.2% 0.3% Pain Au Chocolate 8.7% -0.2% Dohnuts 8.4% 0.3% Morning Goods Scones 8.3% -0.3% Buns & Teacakes 7.8% -0.3% Waffles 7.7% 0.4% Pain Au Raisan 7.0% -0.1% 4/6/ /04/2015 4/6/

22 Plain Crackers will gain the maximum market share in the Savory Biscuits category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Change 2014/2019 Madeleines 6.9% 0.1% Pancakes 6.6% 0.0% Frozen Morning Goods 6.5% -0.4% Morning Goods Muffins 5.7% 0.1% Croissants 4.8% -0.1% Breakfast Cakes 4.5% 0.1% Other (Morning Goods) 3.6% 0.1% Crumpets 3.3% 0.0% Savory Biscuits Cheese-Flavoured Crackers 43.5% -0.2% Plain Crackers 26.5% 0.2% Bread Substitutes 17.1% -0.2% Other Crackers 12.9% 0.1% 4/6/ /04/2015 4/6/

23 Frozen Dough Products will gain market share in the Dough Products Category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Change 2014/2019 Breakfast Cereals Ready-to-Eat Cereals 75.4% 0.1% Hot Cereals 24.6% -0.1% Prepared Pastry (other) 32.9% -0.2% Dough Products Pizza Bases 25.3% -0.2% Pie & Pastry Shells 22.2% 0.0% Frozen Dough Products 19.7% 0.3% Baking Chocolate Chips & Morsels 15.2% -0.5% Cake Decorations & Icing 14.5% 0.4% Baking Ingredients Dessicated Coconut 13.6% 0.0% Baking Powder/Soda 10.2% -0.3% Non-Chocolate Baking Chips 9.7% 0.0% Fruit Pectins and Glazed Fruit 9.1% 0.2% 4/6/ /04/2015 4/6/

24 Brownie Mixes will gain the maximum market share in the Baking Mixes category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Baking Ingredients Change 2014/2019 Other Baking Ingredients 9.0% -0.3% Corn & Potato Starch 7.4% 0.2% Dry Yeast 5.7% 0.2% Cocoa-Baking 5.6% 0.0% Dessert Mixes 26.8% -0.5% Cake Mixes 23.4% 0.2% Brownie Mixes 13.6% 0.3% Baking Mixes Pancake Mixes 9.4% 0.2% Bread Mixes 9.0% -0.3% Other Baking Mixes 8.2% 0.0% Rolls/Biscuit Mixes 7.5% 0.0% Muffin Mixes 2.1% 0.1% 4/6/ /04/2015 4/6/

25 Granola/Muesli/Yogurt Bars is the largest segment in the Baking Ingredients category Segment s share of the overall category by value and change in market share in South Korea s Bakery and Cereals market, 2014 Category Segment Segment s Share, 2014 Cereal Bars Change 2014/2019 Granola/Muesli/Yogurt Bars 54.8% 0.1% Other Cereal Bars 45.2% -0.1% Energy Bars Energy Bars 100.0% 0.0% 4/6/ /04/2015 4/6/

26 Table of Contents Country Context Market overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer trends Examples of new product development Appendix 26

27 Leading Profiles of retailers: selected Grocery Retailers Leading retailers in the South Korea Food market, 2014 Leading retailers, South Korea Company Name E-mart Overview E-mart is the largest and the oldest discount retailer in South Korea, with over 140 stores across the country. Home plus Home plus is a South Korean discount retail chain wholly owned by Tesco. Tesco has around 520 stores operating in different formats across South Korea. 7-Eleven 7-Eleven, owned by Lotte group, has a major presence in the South Korean convenience store market with 7,064 stores. Family Mart Family Mart is the largest convenience store chain in South Korea with 7,964 stores across the country. GS retail is one of the leading supermarket chains in South Korea owned GS retail by GS group with around 230 stores. 4/6/ /04/2015 4/6/

28 Hypermarkets & Supermarkets is the leading distribution channel in South Korea s Food market Value (US$ billion) Leading distribution channels in South Korea s Bakery and Cereals market, 2014 Leading distribution channels Overall Food Leading distribution channels Bakery and Cereals % 2% Hypermarkets & Supermarkets 44% Food & Drinks Specialists 10 Convenience Stores 0 Hypermarkets & Supermarkets Food & Drinks Specialists Convenience Stores Others 42% Others Bakery and Cereals as a percentage of overall Food: Bakery and Cereals products accounted for 7.3% of the total Food retail in South Korea in Hypermarkets & Supermarkets is the leading distribution channel for Food in South Korea accounting for 71.1% of the market share by value in 2013 and registered growth at a CAGR of 5.3% during This is followed by Food & Drinks Specialists which accounted for 16.8% of the market share. The Bakery and Cereals market in South Korea follows a similar trend as the overall food distribution with Hypermarkets & Supermarkets leading in terms of distribution and accounting for 44.3% of the market share by value in This is followed by Food & Drink Specialists and Convenience Stores with a market share of 42.3% and 11.8%, respectively, during the same year. 28

29 Food & Drink Specialists is the leading distribution channel for Bread & Rolls and Cakes, Pastries & Sweet Pies categories Key distribution channels Bread & Rolls 13% 1% Leading distribution channels by category in the Bakery and Cereals market, 2014 Food & Drinks Specialists Key distribution channels Cakes, Pastries & Sweet Pies 12% 2% Food & Drinks Specialists 16% Hypermarkets & Supermarkets 16% Hypermarkets & Supermarkets Convenience Stores Convenience Stores 70% Others 70% Others Key distribution channels Cookies (Sweet Biscuits) Key distribution channels Morning Goods 12% 2% Hypermarkets & Supermarkets 10% 2% Hypermarkets & Supermarkets 18% Food & Drinks Specialists 19% Food & Drinks Specialists Convenience Stores Convenience Stores 68% Others 69% Others 29

30 Hypermarkets & Supermarkets are the leading retailers across all major categories Leading distribution channels by category in the Bakery and Cereals market, 2014 Key distribution channels Savoury Biscuits Key distribution channels Breakfast Cereals 9% 2% 9% 2% 16% Hypermarkets & Supermarkets Food & Drinks Specialists 9% Hypermarkets & Supermarkets Food & Drinks Specialists Convenience Stores Convenience Stores 73% Others 80% Others Key distribution channels Dough Products 11% Key distribution channels Baking Ingredients 14% Hypermarkets & Supermarkets 13% 8% 2% Hypermarkets & Supermarkets Food & Drinks Specialists Convenience Stores Convenience Stores 75% Food & Drinks Specialists 77% Others 30

31 Food & Drinks Specialists is the second leading distribution channel for Baking Mixes and Cereal Bars Categories Leading distribution channels by category in the Bakery and Cereals market, 2014 Key distribution channels Baking Mixes Key distribution channels Cereal Bars 14% 1% Hypermarkets & Supermarkets 13% 2% Hypermarkets & Supermarkets 16% Food & Drinks Specialists 16% Food & Drinks Specialists Convenience Stores Convenience Stores 69% Others 69% Others Key distribution channels Energy Bars 5% 2% Hypermarkets & Supermarkets 16% Convenience Stores 77% Food & Drinks Specialists Others 31

32 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer trends Examples of new product development Appendix 32

33 Flexible Packaging is the most commonly used packaging material while Bag/Sachet is the frequently used container type in the Bakery & cereals market Overview of South Korea s Bakery and Cereals market by type of packaging in 2014 Key Packaging Materials Key Packaging Materials by category Flexible Packaging Rigid Plastics Others Flexible Packaging Rigid Plastics Paper & Board 4.1% 14.9% 80.7% 5% 2% 4% 10% 20% 84% 98% 76% 12% 57% 31% 2% 6% 5% 3% 3% 8% 5% 9% 26% 91% 88% 86% 97% 70% 100% 100% Flexible Packaging is the most commonly used packaging material in the Bakery and Cereals market in South Korea followed by Rigid Plastics. Key Container Types 13% 2% 5% Bag/Sachet 40% Film Tray Savory Biscuits Bread & Rolls Cookies (Sweet Biscuits) Flexible Packaging is commonly used for the packaging of the Bread & Rolls, Morning Goods and Dough Products categories. Key Container Types by category 16% 75% 2% 8% 90% Cakes, Pastries Morning Goods & Sweet Pies Bag/Sachet Film Others 24% 60% 69% Dough Products 3% Baking Ingredients Baking Mixes 9% 12% Breakfast Cereals 20% 24% 20% 6% 67% 69% 73% Cereal Bars 11% 89% Energy Bars 40% Others 9% 16% 28% Bag/Sachet is the most commonly used container type in the Bakery and Cereals market and accounted for 40.4% of the containers used in 2014 followed by Film. Savory Biscuits Bread & Rolls Cookies (Sweet Biscuits) Cakes, Pastries Morning GoodsDough Products & Sweet Pies Baking Ingredients Baking Mixes Bag/Sachet is mostly used for the packaging of Bread & Rolls, Baking Mixes, Baking Ingredients and Dough Products categories. 33

34 Plastic Tie is the most commonly used closure type in the Bakery and Cereals market Overview of South Korea s Bakery and Cereals market by packaging closure/outers used in 2014 Key Packaging Closures Key Packaging Closures by category Plastic Tie Film Others 1 Plastic Tie 2 Film 3 Prize Off Plastic Tie closures was the most commonly used closure type and accounted for 13.5% of the market share in 2014, followed by Film closures with 3.2%. Key Packaging Outers 1 Box 2 Bag 3 Shrink Wrap 13.5% 3.2% 1.2% 8.3% 4.8% 0.3% 8% Savory Biscuits Plastic Tie is mostly used for the packaging of Bread & Rolls Category whereas Film has been in use for Breakfast Cereals category 2% 10% 2% 60% Key Packaging Outers by category 1% 7% Bread & Rolls Cookies (Sweet Biscuits) 2% 13% * Data for Bakery and Cereals using Closures. 35% 6% 5% 8% 5% Cakes, Pastries Morning Goods & Sweet Pies Box Bag Others 17% Dough Products 73% Labels not clear 17% Baking Ingredients 56% 3% Baking Mixes 26% Breakfast Cereals 1% 4% Box outer was the most commonly used outer type for the Bakery and Cereals products in South Korea and accounted for 8.3% of the market share in Savory Biscuits Cookies (Sweet Cakes, Pastries Biscuits) & Sweet Pies Dough Products Baking Ingredients Baking Mixes Breakfast Cereals Box outers was most commonly used for the packaging of Baking Mixes. * Data for Bakery and Cereals using outers. Cereal Bars Energy Bars 34

35 Plastic Tie closures will register fastest growth in the Bakery and Cereals market in South Korea during Million Units Million Units Million Units Million Units Overview of South Korea s Bakery and Cereals market by type of packaging in 2019 Key Packaging Materials Key Container Types 3,000 2,500 2,000 1,500 1, Flexible Packaging Rigid Plastics Paper & Board 1,400 1,200 1, Bag/Sachet Film Tray Flexible Packaging is forecast to grow at a CAGR of 3.8% during to reach million units in Key Packaging Closures Plastic Tie Film Prize Off Plastic Tie closures is forecast to register a CAGR of 4.1% during reaching million units in The use of Bag/Sachet containers is forecast to grow at a CAGR of 3.9% during , to reach million units in Key Packaging Outers Box Bag Shrink Wrap Box will register a CAGR of 3.2% during reaching million units in

36 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer trends Examples of new product development Appendix 36

37 Artisanal Producers have the leading market share in the Cookies(Sweet Biscuits) category Bread & Rolls Brand share Leading brands market share Cakes, Pastries & Sweet Pies Brand share Leading brands market share 2.8% 3.4% 4.2% 15.8% 64.6% Artisanal Producers Shany Lotte SamLip Private Label Others 3.8% 3.9% 25.4% 62.9% Artisanal Producers Shilla - Overall Orion Lotte Others Cookies(Sweet Biscuits) Brand share Morning Goods Brand share Leading brands market share Leading brands market share 17.4% 14.1% Haitai Oreo Lotte-Others Crown-Others 49.1% 37.6% Artisanal Producers Shilla - Overall 1.6% 6.6% 6.8% Private Label Others 13.3% Others 37

38 Kellogg s is the leading brand in the Breakfast Cereals category Savory Biscuits Brand share Leading brands market share Breakfast Cereals Brand share Leading brands market share 23.4% 9.1% 9.4% 10.5% Haitai Gosomi Ace Lotte-Others Others 1.0% 2.0% 1.6% 44.5% Kellogg's Seitenbacher Hahne Bohlsener Post Others Dough Products Brand share Leading brands market share Baking Ingredients Brand share Leading brands market share 88.2% 11.8% Shany Others 6.0% 5.6% 3.9% 1.9% Q.One Chung Jung Won Ruf Backpulver Others 38

39 Chung Jung Won is the leading brand in Baking Mixes category Baking Mixes Brand share Leading brands market share Cereal Bars Brand share Leading brands market share 22.0% 7.8% 4.1% 1.6% Chung Jung Won Ottogi Q.One Orgran Others 74.4% 11.8% 7.8% 4.8% 1.2% Kashi Weetabix Kind Plus Nature Valley Others Energy Bars Brand share Leading brands market share 10.4% Dr You 89.6% Others 39

40 Artisanal Producers lead the sales in the Bread & Rolls and Cakes, Pastries & Sweet Pies categories Brand shares in the Bakery and Cereals market, 2014 Bread & Rolls Brand Share of category, 2014 Artisanal Producers 64.6% Shany 15.8% Lotte 4.2% SamLip 3.4% Paris Baguette 2.8% Private Label 1.2% Others 8.0% Cakes, Pastries & Sweet Pies Brand Share of category, 2014 Artisanal Producers 62.9% Shilla - Overall 25.4% Orion 3.9% Lotte 3.8% Quaker 6.5% Others 4.0% 40

41 Haitai is the leading brand in the Cookies(Sweet Biscuits) category Cookies(Sweet Biscuits) Brand shares in the Bakery and Cereals market, 2014 Morning Goods Brand Share of category, 2014 Haitai 17.4% Oreo 14.1% Lotte-Others 6.8% Crown-Others 6.6% Brand Share of category, 2014 Artisanal Producers 37.6% Shilla - Overall 13.3% Others 49.1% Choco Chips 3.4% Chic-Choc 3.2% Danesita 2.7% Dr You 2.4% Arnott's 1.4% Margaret 0.9% Choco Homerun Ball 0.9% Kanch'o 0.6% Binch 0.4% Private Label 1.6% Others 37.7% 41

42 Kellogg s is the leading brand in the Breakfast Cereals category Brand shares in the Bakery and Cereals market, 2014 Savory Biscuits Breakfast Cereals Brand Share of category, 2014 Brand Share of category, 2014 Haitai 23.4% Kellogg's 44.5% Gosomi 10.5% Seitenbacher 2.0% Ace 9.4% Hahne 1.6% Lotte-Others 9.1% Bohlsener 1.5% Ritz Bits 5.4% Bio Zentrale 1.0% Diget 4.7% Weetabix 0.9% Sky Flakes 2.9% De Halm 0.7% Nabisco 1.6% Post 0.0% Zec 1.6% Others 47.7% Crich 1.0% McVitie's 0.9% Harvest 0.8% Carr's 0.4% Others 28.4% 42

43 Q.One is the leading brand in the Baking Ingredients category Brand shares in the Bakery and Cereals market, 2014 Dough Products Baking Ingredients Brand Share of category, 2014 Brand Share of category, 2014 Shany 11.8% Q.One 6.0% Others 88.2% Chung Jung Won 5.6% Ruf 3.9% Backpulver 1.9% Zucker 1.7% Xing Hua 1.2% Others 79.7% 43

44 Chung Jung Won is the leading brand in the Baking Mixes category Brand shares in the Bakery and Cereals market, 2014 Baking Mixes Cereal Bars Brand Share of category, 2014 Brand Share of category, 2014 Chung Jung Won 22.0% Kashi 11.8% Ottogi 7.8% Weetabix 7.8% Q.One 4.1% Kind Plus 4.8% Orgran 1.6% Nature Valley 1.2% Morinaga 1.3% Others 74.4% Others 63.2% Energy Bars Brand Share of category, 2014 Dr You 10.4% Others 89.6% 44

45 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer Trends Examples of New Product Development Appendix 45

46 Canadean has identified nine mega-trends that drive consumers and these can be broken down into 20 sub-trends Trust Better Value Changing Age Structures Changing Lifestages MEGA-TRENDS: CHANGING LIFESTAGES Personal Space & Time New Gender behaviors CONNECTIVITY Individualism Urbanization & Migration CONVENIENCE Health ETHICS Beauty Aspiration EXPERIENCE & ENJOYMENT Quality Seeking Media Connection HEALTH & WELLNESS INDIVIDUALITY Indulgence Technology TRUST Fun & Enjoyment Busy Lives VALUE Experience Seeking Ethics 46

47 An explanation of the sub-trends Sub-trend Aspirations Beauty Better Value for Money Busy Lives Changing Age Structures Changing Life Structures Explanation The trend towards consumers having more aspirational desires and wanting this reflected in the products that they consume. The trend towards consumers being increasingly interested in their beauty and grooming and, as a result, seeking to achieve more of their beauty aims and ambitions. Particularly important in the current economic environment, this trend reflects growing consumer desire, particularly in Western economies, for Better Value for Money from their purchases. This can cover not only trading down to lower priced items, but also trading up to higher priced ones when a consumer feels there is value in doing so. The trend for consumers increasingly fitting more activities into the same amount of time in a day. Working hours are increasing for certain groups, but many consumers similarly have increasingly Busy Lives as they attempt to juggle work, home life, personal ambitions, and the desire to be close to friends and family. As highlighted below, for this trend we also identify specific consumer groups. A socio-demographic trend, the age structures of many countries are evolving, having a significant impact on the marketing landscape. It s not just the aging of populations in Western, developed countries either, the rapid increase in younger generations in developing countries also challenges pre-conceptions about who the main consumers for products are. Another socio-demographic trend, and one related to Changing Age Structures. Combined with altering age group dynamics, the marketing landscape is altered in many countries as people increasingly delay settling down, marriage, and childbirth. The traditional pattern of life-stages is evolving and, as a result, so are the sizes of these groups and their needs from CPG purchases. As highlighted below, for this trend we also identify specific consumer groups. 4/6/ /04/2015 4/6/

48 An explanation of the sub-trends Sub-trend Connection Ethics, Responsibility & Spirituality Experience Seeking Fun & Enjoyment Health Individualism Indulgence Explanation Flexible labor markets, increased work and pleasure travel, Busy Lives and the breakup of traditional family structures in many countries leaves many people with a growing desire to rectify the downturn in the types of personal connections those in previous generations had. The desire to be close to friends, family, or those with similar interests combines with evolving technologies to create an explosion in the desire for people to feel somehow connected to what s important to them. Social networking, growth in the desire to spend more time with family and friends, and the desire to improve the quality of that time, are all manifestations of this trend. Increasingly, a growing number of consumers are concerned (even if they don t always act upon these concerns) about their own ethics and spirituality. In turn, many consumers are increasingly critical of the ethical and related credentials of the products or services they buy, and the providers of them. Many consumers are seeking to go beyond the simple act of owning and consuming products and instead are seeking to attain greater value by seeking products and services that somehow offer rewarding experiences. This can take many forms and can be related to other trends. For example, consuming a very high quality food or drink may not only satisfy a need for quality, but the act of consumption itself may also have value as an experience that will not soon be forgotten. Many consumers, young and old, and not least in these challenging economic times, are seeking additional fun and enjoyment and some will often choose CPG products as a result of these needs. In almost every country, consumers are increasingly worried about their overall wellbeing and specifically their health. The wider social effects of growing obesity rates and sedentary lifestyles have led to growth in consumer concern about their own health and impacted their willingness to choose products and services that might result in health benefits. In an age of mass consumerism, global brands, and rules and regulations, many people often seek to express their individual identities, personalities, needs, and wants when the opportunity arises. As a result, products and services can tap into this trend by offering people ways of achieving these desires. From little rewards to big ones, consumers are increasingly seeking ways in which they can indulge their desires and achieve the feel good this can create, even if only temporary. 4/6/ /04/2015 4/6/

49 An explanation of the sub-trends Sub-trend Media New Gender Behaviors Personal Space & Time Quality Seeking Technology Uptake Trust Urbanization & Migration Explanation Fragmentation of the Media may mean that any one Media outlet s or outlets influence may be declining, but the growth of 24/7 Media access from almost any location means that Media influence continues to extend and increasingly shape consumers habits even if they are seeking to react against Media trends. This trend refers to the blurring of traditional gender roles and behaviors, and is related to the changing nature of modern life for many people. From stay-at-home dads to career women, the old ways of doing things is changing and with it so are people s views of themselves, and therefore the products and services that meet their needs. It s not all new age though as within this trend is also the counter-perspective of people seeking more traditionally masculine and feminine products. The pace of modern life and all the demands it brings means that many people are seeking to create their own bubble of space and time where they are in control, are able to relax and unwind, and are free from the constant flow of things to do, even if it is just for five minutes. This is the trend towards trading up to higher quality products and services, even if in challenging economic times this is a less of the best approach. The pace of technological change (not just in communication, but in other areas too) means many are keen to try out the latest that s on offer and are willing to experiment in order to gain the benefits, and, for some, be among the first to experience them. Or often, a growing lack of it, is increasingly important and is also a very broad trend. From the breakdown in trust in institutions, governments, and companies, to concerns over specific ingredients in consumer goods, trust is increasingly a major concern for consumers, and therefore marketers as well. Shifting patterns of urbanization as major economies develop and people move to where the work is plays a role in fundamentally shaping people s needs especially when it comes to CPG purchases. The packaged food and drinks needs of the average urban dweller can differ remarkably to those of the rural dweller, shifting the balance between which types of products are best placed in the market. As highlighted below, for this trend we also identify specific consumer groups. 4/6/ /04/2015 4/6/

50 Trend 1: Changing Age Structures: Consumers will prefer products that cater to their age aligned needs Changing Age Structures How the Changing Age Structure trend will influence Bakery & Cereals consumption in South Korea Addressing age-specific needs is an important attribute to increase consumption in the Bakery & Cereals market. South Korea s parents seek for products that align with their kids nutritional needs, such as being rich in calcium to support bone health or protein to support growing muscle mass. Similarly, sizeable section of older consumers also seeks age-aligned needs. For example, products rich in fiber and aid gut health that can deteriorates with age. Marketers are launching products targeting the age aligned needs, such as the need for fun among kids. For instance Oreon launched Choco Boy - a mushroom shaped biscuit enriched with DHA that is crucial for brain development, primarily targeted at kids. Key demographics to target Both All age groups Urban Key categories to target All Categories Rate at which the trend will evolve Slow 4/6/ /04/2015 4/6/

51 Trend 2: Indulgence: Bakery & Cereals products that are promoted as enjoyable and indulgent are more popular Indulgence How the Indulgence trend will influence Bakery & Cereals consumption in South Korea Indulgence is the key motivator driving consumption in the Bakery & Cereals market. Taste concerns are important for consumers across age groups in South Korea. Consumers seek for indulgent product experiences across categories of Bakery and Cereals which can range from novel taste experiences to indulgent textures and fillings. Marketers need to develop products which can be consumed not only as staple food, but can also provide consumers with an indulgent experience. For instance, Oreo-O s, O-shaped cereals with an extreme cream taste, were specifically developed for the South Korean market. Key demographics to target Both Aged Urban & Rural Key categories to target Cakes, Pastries & Sweet Pies Cookies (Sweet Biscuits) Breakfast Cereals Cereal Bars Rate at which the trend will evolve Moderate 4/6/ /04/2015 4/6/

52 Trend 3: Personal Space & Time: Bakery & Cereals products are often chosen for consumption in individuals Personal Space & Time Personal Space & Time How the Personal Space & Time trend will influence Bakery & Cereals consumption in South Korea The fast pace of modern life is forcing South Korean consumers to create their own Space & Time where in they can relax and unwind. Brands ability to communicate the creation of personal space, where consumers are able to relax is one of the key factors behind consumer product choices. South Korean consumers are purchasing Bakery & Cereals products that are available in single serve packaging which can be enjoyed at any time of the day, whether at work, or during free time. Lotte launched Sand Rock biscuits with mint cream, sandwiched between cocoa cookies and claims to provide a refreshing taste. It is targeted at consumers who wish to take a break from their busy work schedule and is available in a single serve packaging of 50g. Key demographics to target Both Aged Urban Key categories to target Bread & Rolls Cakes, Pastries & Sweet Pies Cookies (Sweet Biscuits) Savory Biscuits Morning Goods Rate at which the trend will evolve Moderate 4/6/ /04/2015 4/6/

53 Trend 4: Quality Seeking: South Korean consumers with high disposable incomes seek high-quality products Quality Seeking How the Quality Seeking trend will influence Prepared Meals consumption in South Korea Consumers in South Korea have become more affluent and are willing to spend extra money on superior quality products which is driving the demand for premium range of Bakery and Cereals. South Korean consumers associate natural ingredients and ethical claims with higher quality. They consider such products more fresh, pure, and authentic. For example, organic products are considered to be a higher quality due to perceived stringent production standards. In response, manufacturers can focus on the quality aspect by using superior quality ingredients and including the source of origin on the product label to win the trust of consumers. Key demographics to target Men and Women Aged Urban Key categories to target All Rate at which the trend will evolve Moderate 4/6/ /04/2015 4/6/

54 Innovative product launches will drive sales in the Bakery & Cereals market in South Korea Canadean predicts that the following drivers will rise in importance over the next five years to become increasingly influential motivators of consumption within the market. Innovation will be a key to the success of new products: South Korean Consumers are looking for new and innovative flavor combinations in Bakery & Cereals products. Cookies and sandwich biscuits with green tea, apple, black bean, and blueberry are gaining popularity. Manufacturers of. Bakery & Cereals are innovating across categories by launching Bakery products in new shapes, flavors with creative packaging. For instance Lotte launched 2 in 1 Tea biscuits that contain two different type of biscuits in a single packaging that can be enjoyed with the preferred beverage type.i.e. tea or coffee. Increase in demand of premium products: South Korea represents an affluent market of packaged food consumers, who prefer to purchase premium products of high quality. Rising number of South Korean consumers associate smaller production scale and freshness with quality and are turning away from standard bakery products to the high end ones. To catch up with this trend manufacturers are using premium ingredients in their production process to offer quality products to consumers. Cheong Woo Bakery and Cereals Co. Ltd. launched Monaca domestic king cookies, made with nuts and glutinous rice to offer a differentiated taste. 4/6/ Cereal based products with added nutritional benefits will drive sales: Breakfast Cereals and Cereal Bars categories are forecast to register high growth in coming years due to the rising popularity of convenient food products among the busy South Korean consumers. Consumers in Korea are generally health conscious and seek products that are low in calories and provide health benefits. Manufacturers are launching products fortified with vitamins and minerals that improve the health efficacy of these products. Ssial Food launched Red Ginseng Flakes, a breakfast cereal with ginseng powder, and Hwanggi Flakes with oriental medicinal extracts from hwanggi and jujube. 06/04/2015 4/6/

55 Table of Contents Country Context Market Overview Retail Landscape and Key Distribution Channels Packaging Brand Share Consumer Trends Examples of New Product Development Appendix 55

56 Examples of new product development in the South Korean Bakery & Cereals market Brand: Samyang Manufacturer: Samyang Genex Corp. Samyang Genex corp recently introduced Nutrition cookie mix fortified with nutrients. The cookies are targeted at kids, and appeal to parents who wish to bake healthy cookies for kids. Trend alignment: Changing Age Structures Brand: Orion Manufacturer: Orion Confectionery Co, Ltd. Orion recently launched Chiffon Puff Cake cookies which claim to have an "extra soft" texture and contain custard filling at the center to offer an indulging taste experience to the consumers. Trend alignment: Indulgence Brand: Haitai Manufacturer: Haitai Bakery and Cereals & Foods The Choco Home Run Ball cookies by Haitai are bite sized mini biscuits in the shape of a ball. These are available in single serve packaging size of 46g that can be enjoyed by consumers during a break at work, Trend alignment: Personal Space & Time Brand: Shany Manufacturer: Samlip-SPC Group Samlip recently launched Honey Butter bread which is made using fresh cream and premium quality honey. It is targeted at consumers who seek superior quality bakery products. Trend alignment: Quality Seeking 4/6/ /04/2015 4/6/