South Korea is ranked fifth among 190 global economies in terms of ease of doing business, according to the World Bank.[1] This makes it an attractive proposition for foreign businesses looking to expand into the Asia-Pacific region. European companies, for example, can benefit from preferential tariffs, as well as enjoy a familiar regulatory regime.
“South Korea has, to date, signed Free Trade Agreements with 28 European countries,” explains Lorraine Li, Senior Korea Regulatory Analyst & Editor for ChemLinked. “This means that enterprises from these countries can apply for preferential tariff rates. Moreover, Korean authorities refer to many EU food standards to legislate domestic food laws. This means that in most situations, EU food can easily meet Korean food requirements.”
Ensuring regulatory compliance
There are of course challenges to be overcome. Li notes that South Korea has very strict controls on food safety. Businesses need to fully complete food factory registration, for example, and establish an importer as the responsible entity in South Korea. Fully understanding the country’s regulatory environment is the first step to successful market entry.
In South Korea, the Ministry of Food and Drug Safety (MFDS) is the competent authority for the food industry. The regulation system is similar to that of the EU’s in that there are general laws on sanitation, imports and functional foods, etc. MFDS also promotes supporting legislation such as the Food Code, the Food Additive Code and Food Labeling Standards, etc.
“Before importing food into South Korea, enterprises need to register overseas factories as ‘foreign food facilities’ with the MFDS,” says Li. “Imported food products will then undergo detailed inspections. If products do not comply with Korean requirements, customs will designate these products as a risk and conduct even more rigorous tests. Compliance is therefore absolutely critical.”
Li’s job is to help businesses fully understand this environment. Together with her ChemLinked colleagues, she is experienced in compliance issues across a range of categories, including dietary supplements, animal products and home meal replacement (HMR) products.
“Our compliance team is based in Seoul,” she explains. “This consists of many experts with different experiences. We also have close collaborative relationships with local e-commerce platforms. This enables us to provide a one-stop service to clients.”
Understanding consumer culture
The second step for companies looking to enter the South Korean market is to understand the consumer. There are certain specificities that Li suggests should be taken on board.
“Korean consumers love free samples!” she says. “This may be related to the cultural background. South Korea is not a big country, and Korean people have very close connections with their families, friends, and co-workers. Sometimes, word of mouth works even better than advertising.”
Li says that the more ‘gifts’ a seller gives, the happier the consumer will be. The consumer will then share their satisfying shopping experience with their friends, building a beneficial cycle. “To win Korean hearts, selling products bundled with gifts is the right way,” she says. Local social media can also be used to promote products in a way that builds brand awareness. Selling products via e-commerce channels is another effective way to reach Koreans.
The COVID-19 pandemic has also influenced consumer patterns. More people have become aware of the importance of maintaining health, and the functional food and dietary supplements sectors have seen increased sales.
“Vitamins and probiotics are the most widely taken supplements, followed by Omega-3, red ginseng, and lutein,” says Li. “SMEs should think about starting with supplements containing these functional ingredients.”
The MFDS permitted ‘general foods with a function claim’ last year. This means that if general food products contain functional ingredients, they can be labeled and advertised as beneficial to the human body without the complicated supplement registration.
“I think this is an excellent opportunity for exporters,” says Li.
Another food category that sells well in South Korea at the moment is HMR (home meal replacement). HMR is a prepared meal kit with semi-manufactured food materials and seasonings, helping consumers to easily and quickly cook indoors. One reason for the popularity of HMRs is that more and more Koreans are living on their own, and of course, working remotely because of the pandemic.
[1] https://tradingeconomics.com/south-korea/ease-of-doing-business
