1

OVERSEAS MARKET INTRODUCTION SERVICE

for

Sea Fish Industry Authority

Produced by

Yoonah Lee

Trade Officer

Food & Drink

Delivery Date of Report: 11 January 2013

The OMIS is provided by the Commercial Departments of Diplomatic Service Posts overseas as part of the joint trade development operation, UK Trade & Investment (“UKTI”), of the Foreign and Commonwealth Office (“the FCO”) and the Department for Business, Innovation & Skills (“BIS”). Whereas every effort has been made to ensure that information provided through OMIS is accurate, these Commercial Departments, UKTI, the FCO and BIS accept no liability for any errors, omissions or misleading statements in such information and accept no responsibility as to the standing of any firm, company or individual mentioned. Any party interested in the goods or services provided by any company referred to in OMIS material should undertake their own research and should not consider a reference in OMIS material to be an endorsement of any goods, services or companies mentioned.

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CONTENTS OF THE REPORT

1. SUMMARY OF THE ENQUIRY…………………………………………………….3

2. METHODOLOGY………………………………………………………………………3

3. MAIN RESEARCH…………………………………………………………………….4

Section 1 - Matching Profile 4 1.1 The Trade Environment

1.2 The Seafood Sector 1.3 Consumer Trends

1.4 UK Share and Export Opportunities Section 2 - Doing Business Profile 21

2.1 The Supply Structure 2.2 The Retail Channel 2.3 The Food Service Channel

2.4 Key Regulations and Tariffs 2.5 Tips and Useful Links

4. SOURCES……………………………………………………..….…………………….41

5. NEXT ACTIVITY & FOLLOW UP…………………………………………….……42

6. LIST OF PARTIES INVOLVED IN THIS REPORT………………………......43

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1. SUMMARY OF THE ENQUIRY

Seafish is the UK’s only pan-industry body supporting efficiency and sustainability of the industry’s stakeholders. To provide comprehensive

information on the South Korean market to their customers and levy payers, Seafish requested UKTI to conduct wide research on the market.

You commissioned this OMIS and we agreed the following Workplan:

Service Scope: developing a report on the South Korean seafood industry to be placed on your website for your levy payers. The report incorporates;

- The trade environment. - Facts about the seafood sector in South Korea.

- Consumer trends. - UK share and export opportunities. - Local supply structures and distribution systems.

- Retail channels. - Food service channels. - Key regulations and tariffs.

- Tips and other useful information.

2. METHODOLOGY

We reviewed information from several reputable sources including annual reports of government authorities, statistics announced by trade associations, trade publications and news articles. We also interviewed market experts to

obtain their views on the market. Particular information sources utilised are listed at the end of this report.

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3. MAIN RESEARCH Section 1 - Matching Profile

1.1 The Trade Environment

Table 1. Fast facts

Population (2011) 50,112,000

Land area 100,460km2

Inhabitants per sq km (2012) 515

Capital Seoul

Other main cities Busan, Daegu, Daejeon

Languages Korean

Political system Democratic Republic, Presidential

System

Religion Buddhism, Protestant, Catholic

Economy The 13th largest economy in the

world (by GDP), OECD member

Currency Korean WON(₩)

Exchange rate (as of 1 December 2012) 1￡=1732.57

1$ =1077.20

Total GDP (2011) US$ 1,116.4 billion

Real GDP growth rate (2012) 2.4%

GDP per capita (2012) US$ 22,778

Inflation growth rate (2012) 2.2%

Unemployment rate (2011) 3.4%

Value of exports (2011) US$ 555 billion

Value of imports (2011) US$ 524 billion

Total food and drink imports (2011) US$ 13,195 million

Total food and drink exports (2011) US$ 7,690 million

Top four countries South Korea imports from(for the food and drink sector)

USA, China, Japan, Australia

Source: www.investkorea.org, Euromonitor international, The Bank of Korea,

Korea Customs Service, The Ministry of Strategy and Finance

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Source: Google Maps

South Korea was the 13th largest economy in the world with GDP worth of

USD 1,116.4 billion in 2011. Thanks to its strong performance of its export industry, the South Korean economy maintained relatively stable growth in

2011 and 2012. The economy is expected to grow by around 3 percent in 2013.

The nation has a population of 50 million with over 80 percent living in

urban areas. The Seoul metropolitan area is the most populous area in

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South Korea with more than 22 million people. This is followed by Busan

with 3.7 million and Incheon with 2.6 million.

As South Korea is known as the fastest aging country amongst OECD member states, demand for healthy, quality foods is growing. Seafood and

organic foods are the main beneficiaries of this trend.

The food and drink market in South Korea was estimated to be worth ₤76 billion in 2011. The country currently depends on imports for around 60 to

70 percent of its food as local agriculture and food production fails to keep pace with increasing demands for greater variety and higher quality foods.

Major exporters to Korea include the U.S.A, Australia, China as well as the EU.

- Given several important socio-economic changes including the

retirement of the ‘baby boomers’, more women in the workforce, downsizing of the family (most only have one child), a well-travelled younger generation, high tech communications development, and

inflation pressures, products offering:

- Quality

- Value

- Health benefits

- And a new or exciting taste

are benefitting from substantial growth in this market.

The reasons for this are complex but rapid economic growth and increasing incomes have led to substantial changes to Korean eating

habits and have expanded the range of food available in the market. Consumption of the main staple food, rice, has declined, while

consumption of meat, fruit, vegetables and dairy products has increased. In addition, the younger generation’s exposure to western-style foods, brands and tastes (resulting particularly from overseas travel and study) is

increasing their familiarity and acceptance of western food products.

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1.2 The Seafood Sector Table 2. South Korean Seafood Production Trend (for the last 40 years)

(Unit: 1,000 M/T, ₩ 0.1 billion)

Source: Statistics Korea

In 2011, total seafood production in South Korea reached 3.26 million

tonnes, increasing by an average 3.1% annually from 1970 (when production was 0.93 million tonnes). By value, the average annual

increase rate is 12.5%.

By category, production of shallow sea cultures recorded 1.48 million tonnes (45.4%); adjacent water fishery 1.24 million tonnes (37.9%);

distant water fishery 0.51 million tonnes (15.7%), and inland water fishery 320 thousand tonnes (1.0%) in 2011.

During the recent years, production of distant water fishery has shown a

slight downturn due to the enforcement of Exclusive Economic Zone (EEZ)

Adjacent Waters

Shallow Sea Cultures

Distant Waters Inland Waters Total

Volume Value Volume Value Volume Value Volume Value Volume Value

1970 724 426 119 106 90 123 0 1 934 656

1980 1,370 4,737 541 1,083 458 2,190 39 396 2,408 8,408

1990 1,472 14,162 773 4,199 919 4,913 34 908 3,198 24,182

2000 1,189 23,295 653 6,839 651 9,297 21 1,234 2,514 40,664

2010 1,133 39,117 1,355 18,156 592 13,645 31 3,338 3,111 74,257

2011 1,235 44,441 1,478 17,842 511 14,670 32 3,775 3,256 80,729

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by Korea’s neighbouring countries. The number of fishing vessels has also

decreased reflecting the reduction in fishery resources.

To support the growth of inland water fishery, Ministry of Agriculture, Forestry & Fisheries of South Korea announced in 2012 that by 2016, the

government will invest KRW 110.7 billion to increase 50% the household incomes of those working in the industry. This plan includes industrialisation of high value inland aquaculture business, and strategic

management of inland fishery resources.

In the meantime, the Korean government is undertaking studies of

aquaculture and establishing how to secure higher fish catch quotas in foreign waters. They are s working hard to purchase fish quotas from other countries including Russia.

Table 3. Total South Korean Seafood Production, Volume and Value (for

the last 4 years)

(Unit: M/T)

2008 2009 2010 2011

Total Production 3,361,255 3,182,342 3,110,634 3,255,929

Adjacent Waters 1,284,890 1,226,966 1,132,536 1,235,489

Shallow Sea Cultures 1,381,003 1,313,355 1,355,000 1,477,546

Distant Waters 666,182 611,950 592,116 510,624

Inland Waters 29,180 30,071 30,982 32,270

Total turnover

Unit: ￡million 3,680 4,016 4,307 4,682

Unit: ₩ billion 6,345 6,924 7,426 8,073

Source: Ministry of Agriculture, Forestry & Fisheries of South Korea

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Table 4. Total Seafood Production in 2011

Source: Statistics Korea

Table 5. Total Seafood Production & Value Added

Source: Statistics Korea

According to Statistics Korea, the volume of seafood production in 2011 increased by 4.5% and the value by 9% compared to the year before.

This is mainly because of the rising water temperature around the Korean peninsula. The volume of warm water fishes such as corvine, mackerel, anchovy has increased while hairtail and Spanish mackerel has decreased.

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Aquaculture production of seaweed has contributed to overall increase

while pelagic fishery continued to downsize due to a la Niña phenomenon which lowered the water temperature and accordingly reduce the number of skipjack in distant waters.

As the volume of seafood production has increased since 2003, the value of production has increased accordingly. The value continued to increase even after 2008 when production volume went down due to the rise of

consumer prices of fishery products.

Aquaculture in recent years has become the largest source of fisheries

production, with output reaching 1,477,546 M/T in 2011, and it has risen almost each year after aquaculture output of 653,000M/T was recorded in 2000.

Inland fishery is the other sector of the fishing industry. However, production remains small in mountainous Korea, with production of just 32,270 M/T of inland freshwater fishery reported in 2011.

Value added in the fisheries industry is estimated to be ￡1.1 billion

annually. The proportion of value added overall has gone slightly down

from 0.37% in 2001 to 0.3% in 2011 as other industries in Korea grow relatively greater than fisheries.

According to Ministry of Food, Agriculture, Forestry and Fisheries, as GDP is steadily increasing, the consumption of seafood will increase and a considerable proportion of the additional demand will be satisfied by

imported seafood products.

Table 6. Production of Shallow Sea Cultures

(Unit: number of fish (1,000))

2008 2009 2010 2011

Grand Total 546,256 519,257 456,218 492,081

Sebastes schlegeli 280,217 253,667 231,901 290,546

Flatfish 97,792 105,532 84,925 79,318

Red sea-bream 46,089 34,893 30,348 40,990

Black porgy 44,906 37,055 25,711 11,465

Gray mullet 26,348 28,979 37,895 30,942

Sea bass 15,274 14,210 12,976 10,656

Other fish 35,630 44,921 32,462 28,164

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Source: Statistics Korea

Since 2006, shallow sea culture has obtained the largest share of the

overall yearly seafood production followed by adjacent waters. Average annual increase rate of shallow sea cultures is 6.3% during the time span of 1970 to 2011 while that of adjacent waters stayed only at 1.3%.

Production of shallow sea culture has abruptly increased by 125.3% from 656,000 tonnes in 2000 to 1,478,000 tonnes in 2011.

The increase in f aquaculture volumes in recent years reflects the followingchanges:

- Intensified variability due to climate change (number of cold water

fish has decreased / that of warm water fish has increased).

- Reduction of fishing vessel due to the reduction of fishery resouces.

- International restrictions have intensified against twalers.

- Global trends of increasing aquaculture and decreasing fishing vessels.

- Policies supporting aquaculture.

Sebastes schlegeli is the main fish being cultured and in 2011, 290 million Sebastes schlegelis were harvested through aquaculture – followed by Flat fish and Red sea-bream.

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Table 7. South Korean Production, Consumption and Self-Sufficiency of

Seafood

Source: Ministry of Agriculture, Forestry & Fisheries of South Korea

(Unit: kg/person)

Source: Statistics Korea

2002 2003 2004 2005 2006 2007 2008 2009 2010

Consumption

Seafood 44.7 45 48.9 49.5 56.5 56.5 54.9 49.8 51.3

Rice 87 83.2 82 80.7 78.8 76.9 75.8 74 72.8

Meat 33.5 33.4 31.3 32.1 33.6 35.8 35.6 36.8 38.8

Seafood Self-sufficiency (%) 71.2 69.2 64.2 69.2 69.2 79.1 80.8 83 77.9

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Table 8. Yearly Consumer Price Index (year-on-year changes)

(Unit :%)

Source: Statistics Korea

Table 9. CPI for Fresh Fish

(2010=100)

Source: Statistics Korea

Per capita consumption of seafood reached the peak at 56.5kg in 2006 and 2007, but has been slightly decreasing from then on. According to an

official at Korea Maritime Institute, the rising seafood price index could explain the decrease of consumption.

Consumer price index for overall fresh food has shown the largest increase every year at least from 2009. While general CPI showed 2.2% growth in 2012, CPI for fresh food increased by 5.8%. CPI for fresh fish has

increased by over 10% in 2012 compared to 2010.

In terms of seafood self-sufficiency, the table suggests constant growth but according to the official, this does not necessarily mean that imports

have decreased. The official explained that the growth in self-sufficiency is most likely to be induced by the increased production of cultured

seaweed rather than production of popular fishes consumed in Korea. Imports of mackerel, squid, pollack are increasing as shown in table 10.

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Table 10. Top 10 Species Imported by Volume

Source: Ministry of Agriculture, Forestry & Fisheries of South Korea

Imports of popular fishes including pollack, mackerel, shrimp and

cuttlefish ranked top of the list due to the decreased production of adjacent water fishery.

In particular, imports of cutttlefish almost doubled in the last 3 years from 29,580,238kg in 2009 to 54,089,874kg in 2011.

According to Statistics Korea, while prices for other species imported more

than doubled, the cuttlefish price has risen by only 70% over the last 10 years. Import volumes have risen almost 600% during the period.

High water temperature impinged on the production of sand eel around

the Korean peninsula which resulted in over 200% growth of sand eel imports.

According to Korea Customs Service, to stabilise the price of imported seafood, the industry is diversifying the supplying countries rather than depending on a single supplier.

According to Mifaff, as more countries are signing FTAs with South Korea, imports of seafood are expected to increase.

1.3 Consumer Trends

As the Korean peninsula is surrouned by water, seafood has long been consumed as a staple food for most Korean people. The major fish species that Koreans consumed are Alaska pollack, mackerel, squid, hairtail and

yellow corvina.

Sharing similar food culture with China and Japan, South Korean people eat it steamed, fried, boiled with spices, blanch and even without any

cooking.

Rank Species 2009 2010 2011

Change (%)

2010-2011

Volume (kg) Value ($) Volume (kg) Value ($) Volume (kg) Value ($) Kg $

1 Pollack 211,259,239 330,382,790 267,354,861 416,233,052 260,685,018 397,925,742 -2.49 -4.4

2 Other fish 136,227,564 221,508,860 141,722,678 264,729,666 140,257,016 287,878,300 -1.03 8.74

3 Mackerel 29,365,054 45,430,777 42,315,631 72,909,640 60,799,205 124,560,923 43.68 70.84

4 Shrimp 47,576,521 188,273,488 49,499,249 217,183,745 57,548,029 271,529,738 16.26 25.02

5 Cuttlefish 29,580,238 62,821,571 35,324,474 90,063,052 54,089,874 142,475,701 53.12 58.2

6 Other mollusks 31,599,809 74,561,696 36,604,905 104,179,638 52,280,656 179,664,258 42.82 72.46

7 Mackerel pike 59,904,966 46,198,136 43,436,379 46,178,540 51,529,523 62,678,089 18.63 35.73

8 Sand eel 22,489,117 8,664,220 13,609,646 6,777,580 46,478,625 20,003,647 241.51 195.14

9 Manila clam 14,595,881 13,235,307 24,447,124 20,975,096 42,296,632 36,656,165 73.01 74.76

10 Small octopus 40,093,971 118,480,140 44,853,489 154,129,173 42,236,980 194,527,145 -5.83 26.21

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Korean consumers prefer fresh or chilled fish to frozen fish as they think

fresh fish tastes better than frozen fish after cooking. Accordingly, fresh or chilled fish tends to cost more than frozen fish.

Thanks to improvements in standards of living and GDP, Korean

consumers place value on high quality, healthiness, convenience in the course of making food purchasing decision, as well as price. Another important issue is food safety. In terms of seafood, consumers have

become more sensitive about safety even after Fukushima nuclear plant collapse in Japan last year. Several Japanes fishes are banned in South

Korea at the present time.

In addition, as raw fish is consumed widely in South Korea, keeping the seafood products fresh during the delivery is another crucial thing to

consider.

As the number of double income families is increasing, the demand for pre-cooked, ready-made and preserved food is expected to increase.

Supermarket chains are leading this trend.

In the food services sector, South Korea is not a unique country in

consuming a lot of sushi or sashimi. There are literally thousands of sushi restaurant chains varying in their sizes and the number of restaurants keeps growing. In addition, supermarket and hyper market conglomerates

have participated in this sushi competition by selling individually packaged sushi in their stores.

Another growing area is seafood family restaurants. Todai, Seafood Ocean,

Muscus, Bono-Bono and many more have already started business in a form of franchise since a few years ago and most of them are owned or

operatedby large retails groups. Seafood buffet is especially popular amongst women and family customers. These restaurants are using mainly imported seafood such as cooked snow crab section, surf clam,

cooked whelk in shell as well as locally produced seafood products.

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Table 11. Most Important Factor when Making Seafood Purchasing Decisions

Source: Korea Maritime Institute

According to the survey conducted by Korea Maritime Institute in

November 2012, consumers consider ‘safety’ as the most important factor in the course of making seafood purchasing decisions. 61.5% picked ‘safety’, ‘origin’, and ‘taste’.

The concern for ‘safety’ has significantly increased since 2011 after the explosion of nuclear power plant in Japan, which accordingly explains the

second important factor ‘origin’.

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Table 12. Preference for Seafood Origin

Source: Korea Maritime Institute

It is clearly shown in the above table that most Korean consumers prefer

domestic seafood rather than imported. 92.2% in 2010, 89.3% in 2011, 89.8% in 2012 answered that they prefer buying domestic products.

This is, however, not only for seafood sector but also for most of foods

after the government’s campaign for protecting domestic industry has achieved enduring success. The government and the industry are constantly campaigning out the message ‘people should eat foods from

their own land’.

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Table 13. Place to Buy Seafood

Source: Korea Maritime Institute

According to the survey, most consumers usually purchase seafood at

traditional market places and discount stores. 41% picked traditional markets and 39.1% chose discount stores in 2012.

Traditional markets are mostly located near the production grounds or the places where transportation is convenient. The location of the markets is connected to freshness and price, which consumers consider most.

Discount chains are popular in urban areas and have many more stores than wholesale markets or department stores.

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Table 14. Most Important Information to Consider

Source: Korea Maritime Institute

It is found that for Korean consumers ‘fishing ground’ or the sea where the

fish has been caught is the most important information when buying seafood.

‘Production date’ which indicates the freshness and ‘certification’ connected to credibility and safety followed after ‘fishing ground’.

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1.4 UK Share and Export Opportunities Table 15. Seafood Imports to South Korea by Country, Volume and Value

(Unit: M/T, $1,000)

Country 2009 2010 2011 2012

Volume Value Volume Value Volume Value Volume Value

Total imports 356,030 238,086 324,967 289,568 402,490 353,615 476,955 309,460

1 PR.CHNA 87,836 72,922 96,383 105,736 147,081 127,460 74,590 94,231

2 RUSSIA 15,887 28,890 22,418 39,254 21,903 39,856 23,706 42,736

3 VIETNAM 7,292 20,931 11,519 32,967 10,657 38,208 11,283 38,665

4 AUSTRAL 149,506 6,732 51,855 4,105 82,476 6,834 255,644 14,305

5 TAIWAN 7,363 7,607 5,567 9,432 9,907 14,415 7,930 14,178

6 JAPAN 5,527 15,773 12,713 24,224 9,349 30,315 4,862 10,091

7 THAILND 1,898 8,120 2,159 8,229 2,264 9,557 2,213 9,615

8 U.S.A 1,893 6,406 2,584 7,332 2,271 6,786 3,171 9,575

9 CHILE 3,142 7,673 2,386 6,287 3,421 7,850 3,823 8,345

10 NORWAY 1,774 7,540 1,446 7,216 3,233 14,696 1,369 6,958

36 U.K 253 1,277 136 816 201 1,159 97 621

Source: Fisheries Information Service

Seafood is imported from over 100 different countries into South Korea.

Major suppliers include China, Russia, Vietnam, Australia, Mexico and

India. In 2011, the top 10 supplying countries accounted for about 83% of total seafood imports on a value basis. China continued to be the largest supplier, followed by Russia and Vietnam.

Seafood from UK has declined, to be ranked 36th as the Korean industry diversified its supplying countries for species.

According to Statistics Korea, since the late 1990s consumption of

imported fish and fishery products has grown dramatically in South Korea and imports are forecasted to continue to be growing especially with Korea

China FTA which is now under discussion.

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Table 16. Imports of Top 10 UK Species to South Korea

(Unit: Kg, $1)

2009 2010 2011

Volume Value Volume Value Volume Value

Grand Total 3,683,226 18,227,446 2,931,520 18,936,846 3,496,851 23,309,111

1 Whelk 2,454,431 16,922,989 2,520,401 17,850,103 2,371,028 18,755,367

2 Mackerel 72,600 169,560 88,560 222,277 916,863 2,524,095

3 Toothfish 116,095 612,999 81,308 553,419 103,689 1,095,742

4 Fish eggs 46,275 143,709 0 0 39,670 527,548

5 Salmon 4 240 10 461 34,546 257,709

6 Sea salt 988,097 320,811 168,376 52,289 24,106 13,726

7 Tuna 1 5 5,791 5,620 3,385 44,033

8 Other fish 0 0 10,896 20,574 1,510 21,517

9 Other crustacean 0 0 0 0 1,015 11,165

10 Fish oil 0 13 377 12,876 764 43,194

Source: Fisheries Information Service

With Diversity of Origin recently enacted by the Korean government and

industry, the import portfolio of the UK has changed. While whelk meat is staying in the first place, imports of mackerel has grown more than 10 times from 88,560 kg in 2010 to 916,863 kg in 2011.

Imports of sea salt have substantially declined for the last few years, but imports of crustaceans have started and imports of fish eggs also resumed in 2011.

According to Korea Customs Service, as the demand for seafood in the market has risen substantially, imports have almost doubled. Seafood

imports from the UK are expected to grow as there are high demands for what the country can provide including crab and whelk meat, as well as mackerel.

According to the official of Korea Maritime Institute, if seafood from the UK could highlight its freshness and stability in supplying, the demand for the British seafood will increase accordingly.

Section 2 - Doing Business Profile

2.1 The Supply Structure

History of South Korean seafood industry started with the establishment of

National Federation of Fisheries Cooperatives in 1962. The government

founded the federation to modernise and industrialise the domestic fisheries which then were not managed under the centralised system.

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National Federation of Fisheries Cooperatives contributed to and supported

both suppliers and consumers by conducting various in-depth research projects, developing centralised management systems and support programmes and most significantly by operating auction halls nationwide.

Seafood transactions take place either at auction halls or directly between suppliers and buyers. Sales generated through auction halls are calculated as ‘system sales’ while others are called ‘non-system sales’.

Table 17. Gross Output

(Unit: M/T)

Year Total Adjacent Waters Shallow Sea

Culture Inland Waters Distant Waters

2009 3,182,342 1,226,966 1,313,355 30,071 611,950

2010 3,110,634 1,132,536 1,355,000 30,982 592,116

2011 3,255,929 1,235,489 1,477,546 32,270 510,624

Source: Ministry of Agriculture, Forestry & Fisheries of South Korea

Table 18. Volume of System Sales

(Unit: M/T)

Year Total Adjacent Waters Shallow Sea

Cultures Inland Waters Distant Waters

2009 1,324,673 1,005,376 319,297 0 0

2010 1,287,045 919,537 367,508 0 0

2011 1,488,833 1,035,933 452,900 0 0

Source: National Federation of Fisheries Cooperatives

Overall, less than 50% of all seafood harvested or produced in Korea is

being sold or bought through the auction halls located in the production districts.

About 84% of fish caught by adjacent water fishery are being traded at

the auction halls while fish caught inside the land or distant waters is not being traded through the system.

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Table 19. Top 10 Cooperatives (Auction Halls) by Vale and Volume

(Unit: ￡million, M/T)

Name of

cooperative District Value Volume

1 Busan Busan 142 77,709

2 Jeju Fish Jeju Island 109 16,723

3 Yeosu Jeollanam-do 98 41,363

4 Samcheonpo Gyeongsangnam-do 85 46,182

5 Mokpo Jeollanam-do 84 31,370

6 Guryongpo Gyeongsangbuk-do 82 38,083

7 Powered Anchovy Drag Net Fisheries

Gyeongsangnam-do 79 19,690

8 Halim Jeju Island 78 18,332

9 Shinan Jeollanam-do 63 28,607

10 Seogwipo Jeju Island 59 7,622

Source: National Federation of Fisheries Cooperatives

Table 20. Supply Structure (Adjacent Waters, Shallow Sea Cultures)

Source: National Federation of Fisheries Cooperatives

Table 21. System Sales Rate (2011)

(Unit: 1,000 M/T, KRW 0.1 billion, %)

Production (A) System Sales (B) System Sales Rate

(B/A)

Volume Value Volume Value Volume Value

Adjacent Waters

1,236 44,449 1,036 35,455 83.8 79.8

Shallow Sea Cultures

1,309 17,499 453 5,886 34.6 33.6

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Source: National Federation of Fisheries Cooperatives

About 84% of fish caught in adjacent waters is being traded at the auction

halls in the production district where its initial price is established. It then

is distributed to wholesale markets in the consumption districts, large discount stores, and traditional market places.

The auction hall in the production district functions as a control tower for

landing, establishing price and transaction, price settlement, and so on. For instance, when production exceeds the demand, the cooperative

purchases the surplus to stabilise the price and then sell it when the production is short and the price goes up.

About 35% of fish harvested from shallow sea culture is being traded at

the auction hall in the production district while the rest is being dealt directly between sellers and buyers.

In terms of cultured seafood, seaweed, oyster, tangles are the major

products being traded at the auction halls. Live fish is delivered directly to sushi restaurants by distributors.

Table 22. Supply Structure (Distant Waters)

Source: National Federation of Fisheries Cooperatives

Most seafood from distant waters is distributed frozen to consumption districts by general distributors. Declaration and inspection are conducted to land at the port and then the stock is distributed by the first wholesaler

to other wholesale markets in the consumption districts.

The first trade is made between the fishing vessel and the wholesaler

before landing at the port. The first wholesaler sells the fish to the second wholesaler without a competitive bidding and then the second wholesaler distributes the fish to commission merchants.

National Federation of fisheries cooperatives monitors and controls the trade and price settlement, consignment sales. The federation also takes part in the bid competing with other first wholesalers before the vessel

arrives at the port in order to control the market price. In 2010, the federation dealt 11,164 M/T and 12,016 M/T in 2011.

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Table 23. Supply Structure (Imported Seafood)

Source: National Federation of Fisheries Cooperatives

Imports of seafood/fish are relatively straight-forward compared to other food and agricultural products. Importers bring in fishery products and sell to hotels and food service industry directly and to distributors who sell to

traditional markets and restaurants. Usually no auction is involved in terms of imported seafood.

When the import volume is large, importers generally sell to retailers such as supermarkets, discount stores, department super stores directly. When the import volume is small, importers sell to distributors who sell to

retailers.

Table 24. Market Share of Imported Seafood at Wholesale Markets

(Unit: M/T, KRW million, %)

2010 2011

Volume Value Volume Value

Total Volume 287,059 1,007,473 320,488 1,080,410

Imported 145,543 466,563 171,905 479,473

Market Share 50.7 46.3 53.6 44.4

Source: Agricultural & Marine Products Market Year Book 2011

National Federation of Fisheries Cooperatives also functions in the

imported seafood market to monitor price and trade settlement and the trust sales.

The federation, however, does not get involved directly in imports and

distribution as the federation is representing the domestic fisheries. Instead, another sales body is expected to take part in the direct imports

to influence on the market price for imported seafood.

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Table 25. Supply Structure of Imported Live Fish

Source: Fisheries Price Research Report by Ministry of Agriculture, Forestry &

Fisheries of South Korea (2008)

Table 26. Supply Structure of Imported Frozen Seafood

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Source: Fisheries Price Research Report by Ministry of Agriculture, Forestry & Fisheries of South Korea (2008)

Table 27. Supply Structure of Imported Dried Seafood

Source: Fisheries Price Research Report by Ministry of Agriculture, Forestry &

Fisheries of South Korea (2008)

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2.2 The Retail Channel

Table 28. Top 5 Retailers

(Unit: ￡million)

Lotte Shopping

Co., Ltd. E-Mart Co., Ltd.

Homeplus Co., Ltd.

GS Retail Co., Ltd.

BGF Retail

Gross Assets

(as of 2011) 13,374 6,218 3,531 1,528 482

Total Sales (2011)

8,889 4,216 3,747 2,333 1,524

Store type

Department stores, Hypermarkets, Supermarkets,

Discount stores, Convenience

stores, Online stores

Hypermarkets, Discount stores,

Online stores

Hypermarkets, Supermarkets,

Discount stores, Online stores

Supermarkets, Discount stores,

Convenience stores,

Online stores

Convenience stores

Ownership Group (family, stock

exchange and private enterprises)

Group (family, stock exchange

and private enterprises)

Group (stock exchange and

private enterprises)

Group (family, stock exchange

and private enterprises)

Group (family, stock exchange

and private enterprises)

Website www.lotteshopping.

com http://store.emar

t.com/ http://corporate.ho

meplus.co.kr/ http://www.gsretail

.com/ http://www.bgfcu.c

om/

Source: Food Industry Statistics System

Large conglomerates lead the South Korean food and drink market along with specialised importers and distributors. The largest retailer in Korea is

Lotte Shopping comprised of Lotte Department Store, Lotte Mart, and so on. E-Mart, part of Shinsegae Group, and Homeplus, part of Tesco, GS Retail and BGF Retail are also major players.

Lotte Shopping Co., Ltd. - Address:Lotte Shopping Centre Bldg., 1, Sogong-dong, Jung-gu,

Seoul - Phone:+82 2 771 2500

- Lotte Shopping is part of the Lotte Group, the retail conglomerate

present throughout the Far East region. Like other retailers, including E-Mart and Homeplus (Tesco), they provide online shopping services

which continue to gain popularity in Korea. As a general retailer, they source both imported and domestic seafood and also do their private labelling.

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Source: Lotte Shopping Website

E-Mart Co., Ltd. - Address: 333-16, Seoungsu-dong 2-ga, Seongdong-gu, Seoul

- Phone: +82 380 5678 - E-mart is the biggest hypermarket franchise in South Korea with 129

stores nationwide. It is operated by Shinsegae which is itself a major retailer in Korea. E-Mart is also the first Korean retailer to advance

into China with the aim of becoming one of the world’s leading retailers. As of January 2011, there are 27 stores in China.

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Source: E-mart Website

Homeplus Co., Ltd. - Address: 17th fl., Samjeong Development Bldg., 701-2, Yeoksam 1-

dong, Gangnam-gu, Seoul

- Phone: +82 3459 8000 - Founed in 1999, Homeplus is one of Korea’s major discount retail

chains. This is a 100% Tesco-owned entity, operating almost 400 stores nationwide. The chain operates hypermarkets, convenience

stores as well as an online home delivery shopping service.

GS Retail Co., Ltd.

- Address: GS Gangseou Tower, 10, Mullae-dong 6-ga, Yeongdeungpo-gu, Seoul

- Phone: +82 2005 1114 - Established in 1971, GS Retail Co Ltd operates a chain of convenience

stores (GS25), supermarkets (GS Supermarket), malls (GS Square) and discount stores (GS Mart), etc. Amongst these affiliates, GS

Supermarket is the only channel to distribute seafood products.

BGF Retail - Address: 11th fl., Bokwang Bldg., 141-32, Samseong 2-dong,

Gangnam-gu, Seoul - Phone: +82 1577 3663

- Founded in 1994, the largest convenience store chain in Korea, BGF Retail changed its name from Bokwang Family Mart in June 2012.

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2.3 The Food Service Channel

Table 29. Top 5 Food Service Companies

(Unit: ￡million)

Our Home Ltd. CJ Foodville

Corp. Lotteria Co., Ltd.

Shinsegae Food Co., Ltd.

Dongwon Home Food Co., Ltd.

Gross Assets

(as of 2011) 317 179 455 146 66

Total Sales (2011)

724 463 426 409 218

Service type Mass feeding

service, ready-meal product

Restaurant franchises

Fast food franchise,

Convenience Stores

Mass feeding service, restaurant

franchises

Mass feeding service, food processing

Ownership

Group (family, stock exchange

and private enterprises)

Group (family, stock exchange

and private enterprises)

Group (family, stock exchange

and private enterprises)

Group (family, stock exchange

and private enterprises)

Group (family, stock exchange

and private enterprises)

Website www.ourhome.co.

kr www.cjfoodville.co

.kr www.lotteria.com

http://www.gsretail.com/

www.dwhf.co.kr

Source: Food Industry Statistics System

Our Home Ltd. - Address: 4th fl., Meritz Bldg., 825-2, Yeoksam 1-dong, Gangnam-gu,

Seoul - Phone: +82 2175 4114

- Since 1984, OUR HOME has been providing meal services to

institutional customers. Their businesses categorised into 4 parts; concession & hospitality, contract food catering service, food manufacturing, and food material distribution.

Source: Our Home Company Brochure

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CJ Foodville Corp.

- Address: 7th fl., 292 SSangnimdong, Jung-gu 825-2, Seoul - Phone: +82 1577 0700

- CJ Foodville Corporation started by opening a family restaurant

business in 1994 and successfully launched a homegrown, Western-style family restaurant VIPS in 1997 to lay the foundation as a specialized food service company. CJ Foodville Corp. has grown as a

firm, integrated food service company, splitting from CJ Corp. in 2000 and merging group’s franchise business division in October 2006.

- CJ Foodville currently runs 14 restaurant & franchise brands and

multi-restaurant culture spaces, ‘CJ FoodWorld’, and there are over 120 stores nationwide being operated under direct control.

Lotteria Co., Ltd.

- Address: 98-6, Garlwol-dong, Youngsan-gu 825-2, Seoul - Phone: +82 709 1114

- Lotteria hoisted its sales as the nations first franchise fastfood

company in 1979. Now its chains are over 950 in Korea, having about 45% of market share in fast food. Lotteria has another famous dining chain – Krispy & Kreme Donut, TGI Fridays, Angel in us coffee.

Shinsegae Food Co., Ltd. - Address: 6th FL., Mesa BLDG., 204, Hoehyun-dong 1Ga, Jung-gu,

Seoul - Phone: +82 3397 6000

- Shinsegae Food involves in purchasing domestic and foreign food

products, processing agricultural, fisheries and meat products, manufacturing processed foods, building a nationwide logistics network, and expanding the distribution and sales channels for food

products. It is focused on four core businesses; food distribution, food processing and manufacturing, institutional catering, and dining

services.

Dongwon Home Food Co., Ltd.

- Address: Mabangro 68, Yangjae-dong, Seocho-gu, Seoul - Phone: +82 589 6200

- Dongwon Home Food is a catering specializing company around 200

business locations including public offices, companies, schools and hospitals. Dongwon Home Food is also operating a take-out franchise, Sand Presso, an organic food specialized store, E-Farm.

2.4 Key Regulations and Tariffs

The major ministries and agencies involved with the South Korean food

system are the Ministry of Health and Welfare (MHW), the Korean Food and Drug Administration (KFDA), the Ministry of Agriculture, Food, Forestry and Fisheries (MIFAFF), the Ministry of Knowledge and Economy

(MKE), and the Prime Minister’s Office (PMO). The ministries share their roles and responsibilities based on the fixed hierarchy.

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Amongst the authorities, KFDA and MIFAFF are the 2 organisations directly

related to trade practices by setting and implementing regulations pertaining to food products.

Table 30. Inspection Procedure for Imported Foods

Source: Korea Food and Drink Administration

The Animal, Plant and Fisheries Products Quarantine and Inspection

Agency (QIA) was created by merging the National Veterinary Research and Quarantine Service, the National Plant Quarantine Service, and the

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National Fisheries Products into one single agency in 2011. Under the

control of QIA, fisheries products are subject to inspection and quarantine when clearing the customs at ports.

Table 31. Export and Import Quarantine Procedure for Fisheries

Source: Animal, Plant and Fisheries Quarantine and Inspection Agency

Subject of quarantine or inspection.

- Live aquatic animals for aquaculture (including sperms and roes).

- Live fish, shellfish, and crustacean for human consumptions,

aquariums, and research and laboratory works.

- Articles contained the pathogens of aquatic animal diseases or the

diagnosis reagents included the disease pathogens.

Quarantine implementation location.

- Definition: Places those aquatic animals are being stored and held

during quarantine and the president of the QIA is approving in accordance with the Quarantine Implementation Places Regulation.

- Aquarium facilities, farming aquarium facilities, aquariums on land, or

cold storage facilities.

Quarantine type.

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- Document Quarantine is to evaluate the submitted documents

whether to meet the requirements of the quarantine regulations.

- Clinical Quarantine is to evaluate the live aquatic animal’s clinical

symptoms by visually examining (including dissection).

- Precise Quarantine is to evaluate the live animals by pathological,

molecular biological, serological, or biochemical methods.

Table 32. Import Inspection (Declaration) Procedure for Fisheries

Source: Animal, Plant and Fisheries Quarantine and Inspection Agency

Subject of Inspection.

- Aquatic animals and plants: Live fish or shellfish, crustaceans, and other forms of aquatic animals, fresh and frozen products, or

seaweeds.

- Simply processed products: aquatic animals and plants processed in a

manner such as cutting, heating, boiling, drying, salting, and brining with only salt.

Products excepted for declaration.

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- Imported by foreign embassies, legations, consulates, or other

corresponding institutions in Korea or imported by the public officials (or their families) belonging to the aforementioned institutions for the

purpose of their own consumption.

- Carried by travellers; may be acceptable for their own consumption

- Imported as specimens and promotions free of charge and indicated their use on the labels.

- Frozen or processed at a Korean vessel after catching or gathering the aquatic animals in cooperation with foreign one in the economic

sea zone of the state of the foreign ship.

- Used by a central government or a local government.

- Permitted the use on a vessel or an airplane by the head of Korean Customs under Article 239 of the Korean Customs Law.

- Recognized by the head of the Korean Food and Drug Administration as a non-hygienic risk product.

Inspection type.

- Document Inspection: Document inspection is to evaluate the

submitted documents whether to meet the import regulations and is covered the followings;

1) Imported in order to re-export, manufacture, and study, used by central or local governments, expos, exhibitions, or returned exported products regardless of the hygienic risks.

2) Recognized products by the head of the Korea Food and Drug Administration as a security assured product.

- Organoleptic inspection: Sensory Inspection is to evaluate qualities,

labels, net weights, and etc. of the fish and fishery products by visually examining, smelling or touching the lot of the imported

products and is covered the followings;

1) Imported: the relevant product has passed the precision inspection.

2) Recognized to need a sensory inspection by the chief of a branch as sensory inspections. Verification of fish species such as yellow croaker, yellow corvenia, and etc. or processed types, freshness or

net weights, confirmation on containing foreign substances or food additives.

- Precise Inspection: Inspection is to evaluate the products by physical,

chemical or microbiological methods in a laboratory and is covered the followings;

1) Imported for the first time or has a “rejected” history.

2) Reported as the product contained hazards in Korea and other

countries.

3) Unconfirmed reason(s) for returning an exported product.

Qualification of declarers.

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- To import products for the purpose of selling: Persons who have

completed the Business Registration for Foods, etc., Import, and Selling Business and other related standards.

- To use imported items for business (food manufacturers or processors, food additives producers, or food containers or package producers):

Persons who can prove that they use the imported items specified in the import declaration.

Table 33. Import Tariff on EU Seafood (valid until 30/06/2013)

HS Code Product description EU

03 CHAPTER 3 FISH AND CRUSTACEANS, MOLLUSCS AND OTHER AQUATIC INVERTEBRATES

0301 Live fish:

- Ornamental fish:

0301.11 - - Freshwater fish:

0301.11.10 - - - Fancy carp

0301.11.90 - - - Other

0301.19 - - Other

- Other live fish:

0301.91 - - Trout (Salmo trutta, Oncorhynchus mykiss, Oncorhynchus clarki, Oncorhynchus aguabonita, Oncorhynchus gilae, Oncorhynchus apache and Oncorhynchus chrysogaster):

0301.91.10

- - - Salmo trutta, Oncorhynchus mykiss, Oncorhynchus clarki, Oncorhynchus aguabonita, Oncorhynchus gilae

0301.91.20 - - - Oncorhynchus apache and Oncorhynchus chrysogaster

0301.92 - - Eels (Anguilla spp.):

0301.92.10 - - - Glass eel (for aquaculture)

0301.92.90 - - - Other

0301.93

- - Carp (Cyprinus carpio, Carassius carassius, Ctenopharyngodon idellus, Hypophthalmichthys spp., Cirrhinus spp., Mylopharyngodon piceus)

0301.94 - - Atlantic and Pacific bluefin tuna (Thunnus thynnus, Thunnus orientalis):

0301.94.10 - - - Atlantic bluefin tunas (Thunnus thynnus)

0301.94.20 - - - Pacific bluefin tunas (Thunnus orientalis)

0301.95 - - Southern bluefin tuna (Thunnus maccoyii)

0301.99 - - Other:

0301.99.20 - - - Yellow tail

0301.99.40 - - - Sea-bream:

0301.99.40.10 - - - - Fry (for aquaculture)

0301.99.40.90 - - - - Other

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0301.99.50 - - - Conger eel

0301.99.60 - - - Sharp toothed eel

0301.99.70 - - - Hagfish

0301.99.80 - - - Flat fish

0301.99.90 - - - Other:

0301.99.90.10 - - - - True bass

0301.99.90.20 - - - - Puffers

0301.99.90.30 - - - - Tilapia

0301.99.90.40 - - - - Rock fish (including pacific ocean perch)

0301.99.90.50 - - - - Sea bass:

0301.99.90.51 - - - - - Fry (for aquaculture)

0301.99.90.59 - - - - - Other

0301.99.90.60 - - - - Mullets

0301.99.90.70 - - - - Loaches

0301.99.90.80 - - - - Cat fishes

0301.99.90.90 - - - - Other:

0301.99.90.91 - - - - - Rock Trout (Hexagrammos spp., Agrammus spp.)

0301.99.90.92 - - - - - Crusian carp

0301.99.90.93 - - - - - Salmon

0301.99.90.94 - - - - - Grass carp

0301.99.90.95 - - - - - Croakers

0301.99.90.96

- - - - - Carp (other than Cyprinus carpio, Carassius carassius, Ctenopharyngodon idellus, Hypophthalmichthys spp., Cirrhinus spp., Mylopharyngodon piceus)

0301.99.90.99 - - - - - Other

Source: European Commission Market Access Database

Korea EU FTA came into effect in July 2011. The FTA will eliminate tariffs on 97% of EU goods with three years. Accordingly, tariffs on seafood are also decreasing every year. Current tariffs on respective items could be

confirmed at European Commission Market Access Database (http://madb.europa.eu).

Based on the agreement, UK companies are asked to obtain ‘Approved Exporter Status’ from HMRC to get the preferential tariff when exporting to Korea. Find more details at http://www.hmrc.gov.uk/.

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<Labelling Regulation>

All domestic and imported foods distributed in the market should be

labelled in Korean upon arrival. After the custom clearance and declaration,

provincial authorities will randomly verify labelling of domestic and imported goods in the marketplace.

Korean language labels must be attached to all imported food products

clearing the customs, except unpackaged agricultural/fisheries products. The Korean label should be attached on the package not covering the

original label. Given blow are the items contained in the label:

- Product name.

- Product type.

- Importer’s name, address, phone number, and the address where products may be returned or exchange in case of defects.

- Manufacture date (date, month, and year).

- Shelf life or best before date. Fresh fish not packages are not required to be indicated with the date, however, should be dealt carefully.

- Contents (Calories)

- Ingredient names and content.

- Composite Ingredients.

- Additives.

- Allergens.

- Etc.

<Organic Certification>

In the case of seafood and seafood products, no organic certification is required or expected in South Korea. This also includes seafood products already certified in other countries and it cannot be labelled as ‘organic’ in

South Korea.

<Tax on Food>

The VAT rate in South Korea is 10%.

2.5 Tips and Useful Links

Seafood trade shows

- Seoul Seafood Show (3S) 2013 (http://www.seoulseafood.com/eng/index.asp)

: The show is designed to be an international trade show open to domestic and imported fisheries. Sponsored by the MIFAFF, this show

covers seafood, fishery, nursery, aquaculture, processing machinery and equipment. Expected visitors to this show are sellers, buyers,

40

users, retailers, wholesalers, and traders. The show will be held in

Seoul from 18 to 20 April 2013.

- Busan International Seafood & Fisheries Expo (BISFE) 2013 (http://www.bisfe.com/)

: Although the date of the expo has not been fixed, this largest annual fisheries show will be held in November 2013. Featuring 300 exhibitors from 25 countries, BISFE 2012 is Korea's leading seafood

and fisheries trade fair based on its global competitiveness. The show covers wide range of areas including seafood, seafood processing

machinery, packing equipment, marine biotechnology, overseas trade, and so on.

Export formalities and regulation updates

- European Commission Market Access Database (http://madb.europa.eu) publicly open to British exporters contains

the most updated, legitimate information on global trade. As Korean authorities do not usually provide English version of the regulations,

this database website could be useful for English speaking traders. It provides updated tariffs, regulation, export formalities and specimen of forms, etc.

41

4. SOURCES

Invest Korea (www.investkorea.org)

Korea Customs Service (http://english.customs.go.kr/kcshome/site/index.do?layoutSiteId=english

)

The Ministry of Strategy and Finance

(http://www.mosf.go.kr/main/main.jsp)

The Ministry for Food, Agriculture, Forestry and Fisheries (http://english.mifaff.go.kr/)

Korea Food and Drug Administration (http://www.kfda.go.kr/eng)

Animal, Plant and Fisheries Quarantine and Inspection Agency (http://www.qia.go.kr/english/html/indexqiaEngNoticeWebAction.do?clear

=1)

Fisheries Information Service (http://www.fips.go.kr/)

Statistics Korea (http://kostat.go.kr/portal/english/index.action)

Korea maritime institute (http://www.kmi.re.kr/kmi/en/)

Euromonitor international (http://www.euromonitor.com/)

Worldfishing & Aquaculture (http://www.worldfishing.net/news101/analysis-and-interviews/new-horizons/south-korea)

US Agricultural Trade Office (http://www.atoseoul.com/)

European Commission Market Access Database (http://madb.europa.eu)

The Korean Society of Fisheries Business Administration (http://www.fima.or.kr/)

Food Industry Statistics System (http://fis.foodinkorea.co.kr/)

Korea Rural Economic Institute (http://www.krei.re.kr/kor/main.php)

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5. NEXT ACTIVITY & FOLLOW UP

Ms Yoonah Lee, author of this OMIS report in the UKTI team at the British Embassy in Seoul, will be happy to answer any questions.

It might also be of interest to know that the British Embassy Seoul has a seminar/reception venue for up to 100 people (Aston Hall) with audio-visual

equipment available for the use by British companies at competitive rates. For smaller, special events, consideration can also be given to the use of the Ambassador’s Residence.

General country and market information is also available on the UK Trade & Investment portal (www.uktradeinvest.gov.uk) and from the Korea team in UK

Trade & Investment headquarters in London:

Contact: Kevin Ringham, Senior Country Manager for South Korea Tel: 020 7215 8623 Email: kevin.ringham@ukti.gsi.gov.uk

UK Trade & Investment has published a report identifying the 100 Best Business Opportunities for UK Companies arising from the EU-Korea Free Trade

Agreement. To obtain a free copy, please click here.

43

6. LIST OF PARTIES INVOLVED IN THIS REPORT

Produced for:

Seafish Industry Authority Contact: Malcolm Large

E-mail: M_Large@Seafish.co.uk

Commissioned by:

UKTI North West Address: North West International Trade Centre, Warren Bruce Court, Warren Bruce Road, Trafford Park, Manchester, M17 1LB

Tel: 0161 875 2337 Fax: 0161 875 2234

Contact: Jonathan Shaw E-mail: jonathan.shaw@uktinorthwest.co.uk

Produced by:

British Embassy Seoul Address: Sejong-daero 19-gil 24, Jung-gu, Seoul, South Korea

Tel: +82 (0)2 3210 5625 Fax: +82 (0)2 736 6241 Contact: Yoonah Lee

E-mail: yoonah.lee@fco.gov.uk