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Assessing South Korea’s 2025 Food Consumption Contraction: Retail and Dining-Out Trends

General Report May 8, 2025
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TABLE OF CONTENTS

  1. Summary
  2. Macroeconomic Context Affecting Consumer Behavior
  3. Retail Food Consumption Decline
  4. Dining Out and Food Services Contraction
  5. Outlook and Emerging Trends in the Food Market
  6. Conclusion

1. Summary

  • As of May 8, 2025, South Korea's food consumption patterns are experiencing a significant contraction influenced by several macroeconomic factors. The Consumer Price Index (CPI) recorded a year-on-year increase of 2.1% as of March 2025, a reflection of modest yet persistent inflation impacting household disposable income, especially among middle-class consumers. This inflationary trend has been exacerbated by rising costs in essential categories such as food and non-alcoholic beverages, which saw a 2.4% increase. Consequently, household budgets are tightening, prompting consumers to make more cautious spending decisions in both retail and dining-out sectors. The decline in retail food purchases aligns with an overall decrease in consumer spending, where households are opting for essential expenditures over discretionary purchases, leading to profound impacts on the food service industry as well.

  • Amidst this contraction, there is a noteworthy dichotomy in the economic recovery across income classes. Low-income households, buoyed by government support, and high-income individuals benefiting from better asset growth have maintained a steadier consumption pattern relative to their middle-class counterparts. Data from the Korea Chamber of Commerce and Industry (KCCI) reveals that the marginal propensity to consume among middle-income groups has sharply decreased, illustrating a significant shift towards saving rather than spending disposable income. This trend complicates the consumer landscape, where reduced dining-out expenditures further indicate a pivot towards more cost-effective food consumption strategies, marked by an increasing preference for home-cooked meals as families grapple with economic pressures.

  • Looking ahead, the organic packaged food segment emerges as a potential area for growth, with projections indicating a robust compound annual growth rate (CAGR) of 12.0% from 2025 to 2032. This anticipated expansion is largely driven by evolving consumer preferences towards health-focused and environmentally sustainable food options. Retailers and policymakers are uniquely positioned to leverage this shift, fostering strategic initiatives that could enhance market resilience and stimulate long-term consumer spending despite the prevailing economic challenges.

2. Macroeconomic Context Affecting Consumer Behavior

  • 2-1. Consumer Price Index and Inflation Trends

  • As of March 2025, the Consumer Price Index (CPI) in South Korea exhibited a year-on-year increase of 2.1%, reflecting the overall inflationary pressures impacting consumer spending habits. Notably, major categories contributing to this inflation include food and non-alcoholic beverages, which saw an increase of 2.4%. This general uptick in prices across various categories indicates persistent inflationary challenges that consumers face, leading to adjustments in their purchasing behaviors. Households, particularly in the middle-income brackets, are tightening their budgets as disposable income deteriorates under modest but firm inflation.

  • Specific items within the food sector, alongside transport and housing costs, are pushing inflation higher, with restaurants and hotels experiencing a particularly steep rise of 3.0%. This inflationary environment is crucial to understanding the contraction in food consumption witnessed in both retail and dining-out sectors, as consumers are likely prioritizing essential purchases over discretionary spending.

  • 2-2. March 2025 CPI Data

  • The CPI data from March 2025 substantiates the broader inflation narrative, demonstrating that while certain essential goods are on the rise, there is also an underlying trend of varying inflation rates across different categories. For instance, the core CPI, which excludes volatile items such as food and energy, recorded a lower increase of 1.9%. This suggests that while food prices are indeed a significant concern, other segments like communication and health are experiencing less inflationary pressure, thus providing a nuanced view of the economy.

  • Furthermore, the CPI results indicate a dichotomy in consumer behavior where rising prices compel consumers to make trade-offs in their spending patterns. This shift has resulted in reduced overall food purchases as disposable income is squeezed. With restaurant and food-service expenditures remaining significantly below pre-pandemic levels, it becomes imperative for both retailers and policymakers to adapt to these macroeconomic conditions to foster stability in consumer spending.

  • 2-3. Monetary Policy Outlook

  • The monetary policy outlook as of May 2025 remains pivotal to understanding the economic backdrop shaping consumer behavior in South Korea. The National Bank has maintained a cautious monetary stance following previous tightening to combat inflationary pressures. This has included recent decisions to hold the Central Bank Rate steady after a cumulative reduction of 100 basis points in 2024. Such measures reflect confidence in the stabilization of inflation within target ranges, although they have not fully alleviated consumer spending anxieties.

  • Ongoing assessments of the global economic environment underscore the complexities facing South Korea's monetary policy, particularly in light of anticipated global inflation adjustments. Market expectations remain centered on a continued cautious approach to monetary easing, aimed at fostering consumer confidence while monitoring inflation movements closely. This strategic positioning will likely influence consumer behavior significantly over the coming months, particularly among middle-class households impacted most heavily by inflation and budget constraints.

3. Retail Food Consumption Decline

  • 3-1. Middle-Class Spending Trends

  • As of May 8, 2025, analysis indicates a sustained decline in retail food consumption among South Korea's middle class. Recent data highlights that consumer spending has not only lagged behind that of low- and high-income groups but has also exhibited a prolonged stagnation when contextualized against pre-pandemic benchmarks. According to the Korea Chamber of Commerce and Industry (KCCI), while low-income households have benefited from governmental support and high-income earners have rebounded due to asset growth, middle-class consumers have faced increasing financial pressures. This demographic's marginal propensity to consume has plummeted, with a significant drop in the second and third quintiles—from an average of 90.8 to 81.8 from 2019 to 2024—indicating a growing tendency to save rather than spend disposable income. Consequently, there has been a notable contraction in spending towards food, beverages, and household services since 2022, aligning this decline with broader economic factors such as rising household debt and persistent inflation.

  • The prevailing financial strain on middle-income households, reflected through increased debt and interest payments, has stifled their ability to engage in discretionary spending. The KCCI highlights that the middle class, which traditionally forms the backbone of consumer demand, is now a pivotal area of concern as its skimpiness in expenditure negatively impacts the domestic economy. Reports indicate that while overall spending trends saw improvements post-pandemic, the middle class continues to grapple with challenges, further exacerbating their consumption patterns and leading to a decline in retail food purchases.

  • 3-2. Drivers of Retail Food Contraction

  • Several interconnected factors are driving the contraction in retail food consumption in South Korea. Most prominently, modest yet persistent inflation, which has registered a year-on-year increase of 2.1% in the Consumer Price Index (CPI), is reducing households' disposable income. This inflationary pressure has disproportionately affected middle-income earners, who are increasingly prioritizing essential expenditures while scaling back on discretionary spending. As household budgets tighten, particularly in the wake of high-interest rates and the lingering effects of the COVID-19 pandemic, many families are opting for value-oriented retail food options, or cutting back entirely on non-essential food items.

  • Moreover, the evolving economic climate has seen a shift in consumer behavior, prompting a focus on savings rather than spending. The KCCI report elaborates that the overall decline in food purchases, alongside certain categories like clothing and personal items, signals an urgent need for targeted policies to encourage consumption within the middle class. Retailers are adapting by concentrating on cost-effective alternatives and bulk purchasing strategies to attract economically cautious consumers. In summation, the retail food consumption decline is symptomatic of broader economic challenges, underscoring the need for strategic interventions that could rejuvenate middle-class spending and stabilize the domestic consumption base moving forward.

4. Dining Out and Food Services Contraction

  • 4-1. Dining-Out Expenditure Trends

  • As of May 8, 2025, dining-out expenditures in South Korea are under notable strain, which is closely tied to the broader economic context affecting consumer behavior. Following a period of erratic recovery post-COVID-19, food service spending has not fully rebounded to pre-pandemic levels. Reports indicate that the recovery of the food service sector is lagging significantly, with data showing that dining-out expenditures have continued to decline. This has been particularly pronounced among middle-class households, whose spending on dining experiences has contracted as disposable incomes diminish under the weight of increasing inflation and higher living costs. Particularly, the March 2025 Consumer Price Index (CPI) data highlighted a year-on-year inflation rise of 2.1%, which, while moderate, has eroded real disposable income for many consumers. The middle-class households, which traditionally contribute substantially to dining-out expenditures, have been especially affected. As these families grapple with rising costs in other essential areas, their discretionary spending on dining out has been curtailed. Restaurant and food service industries, which saw temporary growth during the pandemic due to takeout and delivery options, are now facing renewed challenges as the public shifts back toward budget-conscious consumer behavior. The dynamic nature of this contraction is compounded by a behavioral shift; consumers are opting for home-cooked meals over dining at restaurants. Data from various surveys and reports reveal a marked preference for meal preparation at home, influenced in part by both rising food prices and changing social dynamics, leading to a significant impact on the overall food service economy.

  • 4-2. Economic Strain on Food Service Providers

  • The ongoing contraction in dining-out expenditures has placed considerable financial stress on food service providers across South Korea. Many establishments, particularly small businesses and family-owned restaurants, are struggling to navigate an environment characterized by rising costs, diminished customer patronage, and increased competition from home-cooked alternatives and grocery establishments. As of now, many providers are reporting substantial declines in revenue compared to pre-pandemic figures. According to a recent report from the Korea Chamber of Commerce and Industry (KCCI), the food service sector has not only failed to regain its former customer base but is also contending with increased operational costs, including higher prices for ingredients and services. These financial pressures are exacerbated by a persistent consumer trend favoring home dining experiences, a scenario that many operators had not anticipated as they emerged from pandemic restrictions. The financial feasibility of maintaining business operations in such a challenging economic landscape has led to a rise in closures and a shaky job market within the food service sector. The resultant landscape demonstrates the nuanced interplay between economic policy, consumer behavior, and business viability. Strategic governmental support measures and innovative adjustments from within the industry are now viewed as critical to fostering resilience and enabling recovery. These measures are expected to include debt relief for struggling businesses, as well as initiatives aimed at boosting consumer confidence and spending. Without timely intervention, the sector risks stagnation, understanding that the path to recovery will likely remain slow and fraught with uncertainty.

5. Outlook and Emerging Trends in the Food Market

  • 5-1. Organic Packaged Food Market Forecast (2025–2032)

  • The organic packaged food market in South Korea is anticipated to experience significant growth from 2025 to 2032, spurred by an increasing consumer shift towards health-conscious eating and the demand for premium organic products. The growth rate of organic food sales was projected to expand at a robust compound annual growth rate (CAGR) of approximately 12.0%. This growth trajectory is largely attributed to evolving consumer attitudes post-pandemic, where buyers are showing a heightened preference for products that provide better health benefits and are perceived as environmentally sustainable.

  • The recent report highlights that in 2022, retail sales of organic packaged food reached US$417.9 million, with projected substantial growth driven by categories such as organic rice, dairy alternatives, and organic sauces. The strong market performance indicates consumers’ increasing willingness to invest in quality food products, which could result from a combination of higher disposable incomes, greater health awareness, and a cultural shift towards valuing anti-processed food habits.

  • The Canada - South Korea Organic Equivalency Arrangement that came into force on November 1, 2023, will likely facilitate smoother trade and boost the availability of organic products in South Korea. This agreement recognizes the organic products of both countries as equivalent, thereby strengthening import channels for organic goods, which is expected to further enrich the market landscape.

  • 5-2. Implications for Retailers and Policy

  • As the organic market expands, retailers are encouraged to adjust their strategies towards emphasizing organic offerings particularly through enhanced product labeling and marketing that underscores the health and environmental benefits. Given the projected market growth, a focus on organic sectors could provide a strategic advantage in capturing the emerging consumer base that prioritizes sustainability and health in food choices.

  • Policymakers could play a pivotal role by promoting organic farming practices and providing incentives for local farmers to transition to organic production. This would not only meet rising consumer demand but could also enhance economic opportunities within the agricultural sector. Furthermore, targeted policies that improve consumer awareness of organic product benefits could drive further market penetration and acceptance.

  • Additionally, collaboration between retailers and governmental entities can facilitate educational campaigns emphasizing the health implications of organic foods compared to conventional choices. This could mitigate hesitations among consumers who may still be adapting to the pricing of organic goods, as organic products are generally positioned at a premium price point due to higher production costs.

Conclusion

  • In conclusion, South Korea’s food consumption landscape in 2025 highlights the significant impact of moderate inflation and a cautious monetary policy. As these factors disproportionately affect middle-income households, the resulting decline in both retail food purchases and dining-out expenditures calls for an urgent reevaluation of strategies by both retailers and policymakers. Proactive measures are necessary to restore consumer confidence within these demographics while supporting vulnerable segments of the food service industry, which continues to struggle to regain pre-pandemic patronage.

  • The projected growth in the organic packaged food sector, with a CAGR of 12.0% through 2032, presents a viable pathway for retailers to redirect efforts towards value-added offerings that resonate with health-conscious consumers. Retailers who embrace this trend by enhancing product availability and promoting the benefits of organic foods can capitalize on an evolving market landscape. Moreover, policymakers must consider targeted interventions that foster organic farming practices, incentivizing local production to meet increasing consumer demand and fortify agricultural economic opportunities.

  • Ultimately, achieving a collaborative alignment between industry and government stakeholders is essential not only to counteract immediate spending constraints but also to cultivate resilience within the food market. As such, the focus should remain on tactics that collectively drive awareness, accessibility, and acceptance of diverse food options in South Korea, enabling a more sustainable consumption model in the long run.

Glossary

  • Consumer Price Index (CPI): As of May 8, 2025, the Consumer Price Index (CPI) is a key economic indicator that measures the average change over time in the prices paid by consumers for goods and services. In March 2025, South Korea's CPI rose by 2.1% year-on-year, indicating moderate inflation affecting disposable income and consumer behavior. Understanding CPI is crucial for analyzing economic conditions, especially concerning spending patterns in food consumption.
  • Inflation: Inflation refers to the rate at which the general level of prices for goods and services rises, eroding purchasing power. As of May 2025, South Korea is experiencing modest yet persistent inflation, with significant impacts on consumer spending, particularly among the middle class. Inflation influences household budgets, forcing consumers to prioritize essential over discretionary expenditures, especially in food-related categories.
  • Monetary Policy: The monetary policy outlook as of May 2025 indicates a cautious approach by the National Bank to stabilize inflation and consumer spending. Following a 100 basis point reduction in the central bank rate in 2024, the bank has opted to hold rates steady, aiming to ease consumer anxiety amid ongoing inflation. Monetary policy is essential for economic management, influencing interest rates, investment, and overall economic health.
  • Middle Class: In the context of South Korea's economy as of May 2025, the middle class is experiencing significant financial pressures due to persistent inflation and stagnant consumer spending. Reports indicate that this demographic's marginal propensity to consume has sharply decreased, impacting overall economic demand. Understanding the challenges faced by the middle class is critical for policymakers and businesses aiming to navigate the current economic landscape.
  • Organic Packaged Food: The organic packaged food market in South Korea is forecasted to grow robustly from 2025 to 2032, with a projected compound annual growth rate (CAGR) of 12.0%. This growth is driven by increased consumer preference for health-conscious and sustainable food options. As of May 2025, this sector represents a significant area for retailers to explore amidst overall food consumption contraction, offering a pathway to rebalance consumer spending towards premium products.
  • Dining Out: Dining out refers to the expenditures and experiences associated with eating at restaurants and food service outlets. As of May 8, 2025, dining-out expenditures in South Korea are declining, particularly among middle-class households affected by rising costs and lowered disposable incomes. Understanding trends in dining out is crucial for grasping shifts in consumer behavior and the financial health of the food service industry.
  • Retail Sales: Retail sales encompass the sale of goods to consumers through various channels, including brick-and-mortar stores and online platforms. The report notes a decline in retail food purchases in South Korea as of May 2025, particularly among middle-class consumers, reflecting tightening household budgets and shifting spending priorities amid economic pressures.
  • Consumer Spending: Consumer spending, or consumption expenditure, represents the total amount of money spent by households on goods and services. As of May 2025, South Korea is witnessing a decrease in overall consumer spending, notably in food-related categories due to inflation and reduced disposable incomes, impacting various economic sectors, including retail and dining.
  • Korea Chamber of Commerce and Industry (KCCI): The Korea Chamber of Commerce and Industry (KCCI) is a prominent organization in South Korea that represents the interests of businesses and analyzes economic conditions. As of May 2025, the KCCI has highlighted critical trends regarding consumer behavior and spending, particularly in middle-income groups, providing valuable insights for policymakers and industry stakeholders.

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