MAJOR SOUTH Korean supermarkets such as Lotte Mart, Homeplus, and E-mart have started selling new Tong-Keun Chicken and Dam-Dang Chicken, brands that pack twice the amount of regular chicken at half the regular price. As chicken is the nation’s most loved snack—often noted as South Korean’s favorite comfort food—the introduction of these delicious and cost-effective chicken has gained much popularity and could usher in an age of drastically reduced chicken prices. However, the rigid structure of the franchise chicken industry indicates that the impact of these new brands on the overall chicken industry might be slight and short-lived.   

Responding to the “chicken-flation” phenomenon

   Contrary to expectations, it is not the first time chicken has been sold at a knockdown price. Back in 2012, chicken prices typically ranged from ₩10,000 to about ₩20,000[1] but Lotte Mart introduced and sold the chicken brand Tong-Keun Chicken for ₩5,000, making the chicken one-third the price of typical franchise chicken[1]. Franchise chicken companies were highly dubious of major supermarkets’ intentions behind selling fried chicken at a very low price and pressured Lotte Mart to retract its sale of chicken within seven days. Lotte Mart did so under the fear that continued disagreements with other brands and remarks questioning the supermarket’s intent could damage its reputation. With Lotte Mart’s reintroduction of Tong-Keun Chicken in 2022, concerns of the chicken being a doorbuster were raised accordingly and further disparagements were made regarding the quality of the chicken. In fact, franchise brands went as far as claiming that Lotte Mart was intending to jeopardize the chicken industry by selling cheap fried chicken and making no profits[2]. Homeplus, another major Korean supermarket selling the supposed “loss leading” fried chicken, created a YouTube video proving that it was indeed making profits to disprove the zero-margin accusation. Homeplus’s response and confrontation gained public approval. 

Implications of supermarket chicken in the chicken industry

   Due to cheap prices and popular store policies, some consumers seem to have accepted radically reduced chicken prices as the new market standard. However, it is still important to question the impact of this market change on industry prices and whether consumers will abandon franchise chicken brands altogether for cheap supermarket chicken. Franchise chicken prices will likely stay the same because structural circumstances and conditions make it improbable for the franchise chicken industry to drastically lower pre-established prices like supermarkets can. Franchise industries cannot quickly adjust the prices of their products to respond to trends as labor and resource costs are fixed. Moreover, since franchise chicken producers need to create a set amount of net profit to avoid creating complications for the fried chicken industry as a whole, it would be highly unlikely for them to alter the prices of their goods. Promotional, advertising, and raw material expenses are additional elements that franchise brands have to worry about. These costs are not a big concern for brands like Tong- Keun and Dam-Dang as they can use raw materials provided by their own markets, and the pre-existing customer base for the supermarkets make it so that the brands do not have to separately advertise their products. Furthermore, supermarket fried chicken brands use a less costlier bulk distribution system, giving their products an advantage in terms of price competition[3]. 

   Additionally, evidence suggests that consumers will keep buying from franchise brands, further highlighting the lack of supermarket brands’ impact on the industry. Recent studies show that factors such as the quality of service, brand image, store environment influence consumer choices and increase loyalty towards a product, showing why franchise brands will still thrive despite the “half-price war” following the introduction of cheap supermarket chickens[4]. Moreover, given that the supply of supermarket chicken is already failing to satisfy demand, people would continue to buy the obtainable—although higher priced—franchise products, especially as they offer a diversity of flavors and various side menus that supermarket chicken brands do not have. 

*                 *                 *

   While Tong-Keun Chicken and Dam-Dang Chicken’s popularity might be showing strong signals of shaking up the overall chicken market, the franchise chicken industry is too fixed to allow a substantial change. Furthermore, the trend of cheap chicken could be just an unsustainable flash in the pan. While customers would prefer cheap chicken, there is nothing stopping the supermarkets from gradually increasing their prices to generate more profit. All that said, the definite depth and reach of this trend within the chicken market remains to be seen. 

[1] The Chosun Ilbo 

[2] YTN News

[3] Herald Economics