South Korea’s largest breweries Oriental Brewery, HiteJinro and Lotte Chilsung Beverage came under fire for increasing beer prices despite lower production costs. The Korea Times quoted a study by corporate analysis firm CEO Score, showing that the breweries raised beer prices by 5 to 7.5 percent even though their sales cost ratios, which is the relationship between cost of goods sold and sales fell 1.4 percentage points, 0.6 percentage points and 1 percentage point, respectively.
Other food firms acted accordingly. CEO Score showed that 8 out of 10 companies in the food sector including breweries increased prices during November 2016 and May 2017 despite a 1.1 percent lower sales ratio, which dropped to 55.4 percent on average.
According to the report, the companies are suspected of taking advantage of the turmoil in South Korea’s politics following the impeachment of former President Park Geun-hye with lesser attention on other issues.
"Companies should reform their management structures first, if their production costs rise. However, the food firms raised their prices altogether, taking advantage of the political vacuum last year, when the nation's watchdogs struggled to do their jobs," said CEO Score President Park Ju-gun.
The criticized companies responded that the research was misleading because it only investigated one year, while many companies had kept prices stable over many years. "We raised our product prices for the first time after four years, as the production cost has continued to rise during the period," an Oriental Brewery spokeswoman said. "But the research only surveyed a change in a year."