Prolonged Middle East War Triggers Emergency Measures in Food Industry... Request for Expanded Government Support

Rising Exchange Rates and Logistics Costs Increase Production Burden
Profitability Worsens Amid Sluggish Domestic Demand
Industry Calls for Expanded Export Support and Tax Benefits

The food industry has requested that the government expand export support and strengthen tax benefits. Industry representatives cited the prolonged Middle East war as the reason, stating that the resulting rise in costs for raw materials, packaging materials, energy, and logistics, coupled with a sluggish domestic market, has worsened overall business conditions.

The Korea Food Industry Association announced on June 12 that it held the "Food Industry Meeting to Respond to the Prolonged Middle East War" at its conference room in Seocho-gu, Seoul, with officials from the Ministry of Agriculture, Food and Rural Affairs and key food companies in attendance. More than 20 representatives from major food companies, including CJ CheilJedang, Nongshim, Daesang, Lotte Chilsung Beverage, and Pulmuone Foods, participated in the meeting.

Officials from the Ministry of Agriculture, Food and Rural Affairs and key food companies are holding the "Food Industry Meeting to Respond to the Prolonged Middle East War" in the conference room of the Korea Food Industry Association in Seocho-gu, Seoul. Courtesy of the Korea Food Industry Association.

The industry called for policy support to enhance export competitiveness, including support for responding to certifications and regulations by country, establishing a K-Food certification system, expanding export vouchers, supporting participation in overseas exhibitions, and increasing support for logistics costs. In addition, to ease the burden on companies from rising costs of raw materials, packaging materials, energy, and logistics, industry representatives requested a temporary increase in the deduction rate and limit for input VAT credits for the food manufacturing and processing sector.

Industry representatives voiced concerns that the prolonged Middle East war has led to higher oil prices, a stronger US dollar, and increased logistics costs, all of which have significantly increased business burdens. They specifically explained that the simultaneous rise in prices of packaging materials, energy, logistics, and raw materials is intensifying pressure on profitability.

According to the association, the supply of naphtha—a key raw material for packaging—dropped to about 70% of normal levels in March and April, immediately after the outbreak of the Middle East war. Although supply has now recovered to around 85–90% of normal, packaging material prices remain high. Rising sea freight rates and increased currency volatility were also cited as factors adding to the industry's burden.

By sector, the beverage industry highlighted increased cost pressures due to rising prices of key packaging materials such as aluminum cans and PET bottles, as well as a stronger US dollar. Since packaging materials account for a large portion of the manufacturing costs of beverage products, these cost increases are directly impacting profitability. The instant noodle industry reported that the prices of oils such as palm oil and soybean oil, along with packaging costs, continue to rise. Despite the accumulation of cost increases, companies face difficulties in adjusting product prices due to concerns about consumer price burdens, further intensifying management challenges.

Across the entire food industry, rising costs of packaging materials, energy, logistics, and raw materials are increasing cost pressures, while weak domestic demand and worsening export conditions are forcing many companies to operate under emergency management systems.

The Ministry of Agriculture, Food and Rural Affairs stated that, based on the issues raised at this meeting, it will continue to monitor the supply and demand situation for raw materials and packaging materials, and strengthen policy support to boost exports and enhance industry competitiveness. The ministry also added that it will continue to communicate with the industry, gather feedback from the field, and work with relevant ministries to devise necessary support measures.

This content was produced with the assistance of AI translation services.