Korean fast food moves upmarket

February 22nd, 2008 - 9:20 am ICT by admin  

Seoul, Feb 22 (DPA) South Korea’s fast-food chains have finally found a way to brake their fall: making their products bigger, tastier and more expensive. After five years of declining fortunes from its peak sales of $1.3 billion in 2002, the fast-food sector’s revenues increased by eight percent to $924 million during 2007, according to the local newspaper MoneyToday.

Sales at the country’s largest fast food chain, Lotteria, rose by 20 percent in January compared with one year ago, according to Kim Sang-Hyung who heads company marketing.

Kim Joo Young, a spokesperson for McDonald’s, the country’s second-largest chain, said sales rose by double-digits in recent months.

The upturn was a long-awaited boost from the falling revenues that had plagued the fast-food business under the double burden of rising rentals and a trend toward healthier lifestyles that took customers away.

As a result, Lotteria has trimmed its outlets. There are 735 outlets as of January 2008, down from 903 in 2002, with its sales falling from a peak of 556 billion ($589 million) won to its lowest level of 350 billion won in 2006.

The declines led Lotteria and McDonald’s to introduce their own versions of well-being menus like low-calorie salads or a ‘meatless pumpkin burger’ made sweet pumpkin salad.

Contrary to expectations, however, consumers did not snap up the healthier choices. “So we’ve come to realise that if a person walks into a fast-food chain, it is not well-being food but a tasty big hamburger that he wants to grab,” Lotteria’s Kim said.

Both Lotteria and McDonald’s switched to the opposite strategy of moving upmarket. Lotteria introduced six types of premium burgers - starting at 3,500 won, or $3.70, and rising to 5,500 won - which now account for one-fourth of its total sales.

The battle for breakfast between McDonald’s and Starbucks has also heated up since McDonald’s introduced its breakfast menu and premium coffee at about half of its 250 outlets that are open 24 hours a day.

“I thought it might be good if we keep our outlets running around the clock for a lot of young people who are going around downtown Seoul without going to bed,” said Ray Frawley, president of Korea McDonald’s.

“Breakfast and premium coffee is giving us a boost in our sales,” he added.

A facelift at Lotteria is another step to court consumers away from nearby trendy coffee houses like Starbucks.

Lotteria recently opened cafe-style outlets with artistic interior frills, and located them near universities or venture companies where there are concentrations of young people.

It remains to be seen, however, how well these fast-food chains are going to cope with the competition. In addition to the well-being restaurants, traditional fast-food chains are facing competition from within. Alternative chains offering pizza or doughnuts have been increasing their share of the fast-food market.

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