Breaking: Food Chaebols Getting the Restraint Collar
I had heard that this was in the works. It was announced at a press conference last night. I should note that the foreign press was not invited, so it has appeared in the Korean dailies before the WSJ and other international outlets.
Basically, the news is that the big food conglomerates are being put on a leash and tied to a tree. These conglomerates include Lotte Group (Krispy Kreme, Lotteria), CJ Foodville (VIPS, Cold Stone, Tous Les Jours), E-Land Group (Ashley), and SPC (Paris Baguette), along with some smaller groups like Nolboo, Won Halmeoni, Bon Juk, and Sae Maul Sikdang. Funnily enough, Outback Steakhouse is also included in this. Surprised I didn’t see Starbucks and Caffe Bene in there–especially when you’re talking about protecting mom-and-pop SMEs.
The biggest hit are the bakeries, specifically Paris Baguette and Tous Les Jours. They can’t open new stores within 500 meters of existing mom-and-pop bakeries. And they are only allowed to grow two percent a year. It’s also asking non-food conglomerates to not enter the food industry. I think that was specifically aimed at Samsung family members getting into the coffee and bakery business, which was broken up last year.
Some funny stuff I read in those articles.
“We have already sustained losses due to the regulations by the Fair Trade Commission, which forbids bakery franchises from opening new shops within a 500-meter radius of an existing bakery under the same brand,” an official from CJ Foodville said. (source)
Yes, they’re actually complaining that they already can’t open a Tous Les Jours within 500 meters of another Tous Les Jours. It was that aggressive market penetration that sparked this in the first place. CJ also said that the restrictions limit consumer choices, ignoring the fact that having Paris Baguettes and Tous Les Jours on every single block in Korea has already limited consumer choices. One thing I’ll say for SPC, at least they tried to improve Paris Baguette. Tous Les Jours is still crappy children’s food.
The commission designated 14 service industries, including bakeries and restaurants, and two manufacturing businesses – plastic bags and buckwheat flour – as areas reserved for small enterprises.
Other services closed to conglomerates include: servicing vending machines, delivering gas for households, selling bicycles, books, used cars and flowering plants. (source)
This is all coming about because, with the conglomerates entering so many diverse industries in Korea, that those industries are the only places left for entrepreneurs. The conglomerates use their big pockets to buy up prime locations and sell their wares at a loss, driving out any mom-and-pop competition. You know, the Wal-Mart model. Which also makes this complaint sound funny.
CJ said the government’s attitude conflicts with its sincere efforts to globalize Korean cuisine by expanding its business overseas. (source)
Globalizing Korean cuisine with bakeries? Oh yeah, they also run Bibigo. How does limiting domestic expansion reduce expansion overseas–unless you’re planning to have the domestic market pay higher prices to subsidize the foreign market? The Hyundai business model. And the Korean washing machine business model.
This is a curious development, and I wonder how this will work out. The rule about closing large supermarkets on certain Sundays that went into effect last year is rather stupid. It reeks of the usual slapdash regulations Korean Immigration throws together to appease the public. But this recent rule, which goes into effect next month, is quite aggressive.