South Korea's Chocolate And Cocoa Confectionery Industry And Competitive Landscape 2023
Updated: December 29, 2023Industry Landscape
Demand Conditions
In 2022, South Korea's imports of chocolate and confectionery containing cocoa (HS code 1806) amounted to USD 363 million by value (up 1.8% YoY), over five times higher than the country's chocolate confectionery exports which amounted to USD 66.7 million (up 7% YoY). By volume, South Korea's chocolate and cocoa confectionery imports amounted to 51.8 million kilograms (up 1% YoY) less than double that of exports which amounted to 35 million kilograms (up 6.8% YoY).
At just 700 grams per capita, South Korea's per capita chocolate consumption is moderately low compared to the world average of 900 grams per capita. Additionally, despite comparable per capita incomes (South Korea's per capita income of USD 50,330 in 2022 is just slightly lower than the United Kingdom's USD 54,929 the same year), South Korea's per capita chocolate consumption is considerably lower than countries like the United Kingdom (over 8 kilograms) suggesting room for growth.
Supply Factors
South Korea imports virtually all raw materials related to chocolate production with the country's imports of cocoa powder (HS code 1805), cocoa butter (HS code 1804), cocoa paste (HS code 1803), and cocoa beans (HS code 1801) far exceeding exports.
South Korean's chocolate purchases have largely been driven by self consumption, however chocolate is increasingly gaining popularity as gifts according to industry participants, for occasions like the College Scholastic Ability Test (CSAT), and Christmas. The trend is driving demand for boxed chocolates and is a boon for foreign brands in particular (such as Ferrero Rocher), whose branding, product quality, and packaging aesthetics are perceived to be higher than local brands.
Challenges
South Korea's chocolate gifting customs bear similar characteristics to Japan, which differ materially compared to the West. For instance, much like in Japan, Valentine's Day in South Korea sees chocolate being gifted by women to men (in contrast to the West where men typically gift chocolates to women), while White Day is the occasion for women to receive chocolate gifts by men. Localization is key to suceed in South Korea's chocolate confectionery market.
Competitive Landscape
Lotte Wellfood
Homegrown confectionery giant Lotte Wellfood (formerly known as Lotte Confectionery) is the market leader in South Korea's chocolate market with an estimated market share of 46%. The company's brand portfolio includes Belgian premium chcolate brand Guylian (which sells boxed chocolates), as well as mass market brands like Lotte Ghana (chocolate bars), and Crunky (countlines).
Recent developments:
Lotte Wellfood launched a sugar-free 'Zero Mild Chocolate', a mildy-sweetened chocolate developed in response to consumer demand.
Guylian converted to using 100% fair trade cocoa in all of its chocolate products last year, sales of which began this year.
Future plans:
Lotte's Guylian chocolate brand is undergoing transformation as part of the company's effort to improve the brand's profitability. Efforts include a rationalization of their store footprint (Guylian cafe was closed this year and the company intends on refocusing attention on the travel retail channels), and the brand is looking at reducing their packaging carbon footprint.
Godiva
Belgian luxury chocolate player Godiva sells boxed chocolates, chocoate bars, chocolate squares, as well as chocolate-based desserts and baked goods like biscuits, cakes, ice cream, and beverages. Channels include their direct-to-consumer online store on their website, as well as offline channels including Godiva stores across South Korea.
Recent developments:
At least 10 new products (non-seasonal) were launched during the year, all of them boxed chocolate assortments. Among them was the Truffes Légendaire Collection, Golden Collection in collaboration with Jungkook (vocalist of South Korean boyband BTS), Essence of Nuts praline collection in collaboration with local artist Gaku, White Collection, Heart of Gold Collection, as well as collections for Spring (which included three separate collections namely Flapping Spring, Forest Blessing, and Blooming) and Summer, among others. Seasonal launches during the year included collections for White Day, Valentine's Day, Christmas, and themed packaging to usher in 2023.
Over 10 chocolate desserts were launched during the year which included at least four new ice creams (Tanzania Dark Banana ice cream, matcha soft ice cream, matcha and chocolate soft ice cream, a double chocolate soft ice cream as part of Godiva's ice desserts for summer), at least four chocolate beverages or "chocolixirs" (which included limited edition launches for winter featuring popular winter fruit hallabong, autumn launches, and summer launches featuring truffles, and chocolate drink with crunchy toppings as part of Godiva's ice desserts for summer), and cookies among others.
As part of channel expansion eforts, at least six new locations were opened across South Korea during the year which included five department store locations (Lotte Incheon, Lotte Gwangbok, Lotte Gimpo, Lotte Ulsan, and Shinsegae Time Square) and one stand-alone store. Their flagship store was also refurbished.
Marketing efforts included both online (social media) and offline marketing. Online marketing included social media promotion (In 2023 Godiva Korea made over 300 Instagram posts or nearly a post a day, and around 30 Youtube videos or over two videos per month) with posts covering a mix of brand endorsements (at least a third of Godiva Korea's Instagram posts and all Youtube videos made in 2023 featured one of Godiva's brand ambassadors) and product promotion. Offline efforts included roping in South Korean singer and actor Minho as their new brand ambassador, pop-ups, and giveaways.