[Exclusive] Nonghyup Brand More Expensive Than Emart Despite 'Made in China'... Here's Why [World of Rebates]③

Nonghyup Distribution's PB 'Bada Sanghoe' Dried Pollack
Price Cuts Still Leave It 6.7% Higher Than Emart
Many Products Use Ingredients from China and Vietnam
"Double Back Margin Structure...A Channel for Slush Funds"

Dried seafood products from Nonghyup's private brand "Badasanghoe" on discount sale at the seafood corner of Nonghyup Hanaro Mart Changdong Branch in Dobong-gu, Seoul, on the morning of the 29th. Photo by Han Yeju

On the 29th, at the seafood and dried seafood corner of Hanaro Mart Changdong Branch in Dobong-gu, Seoul, dried seafood products with the blue packaging “Bada Sanghoe” label had double price tags. The Dried Pollack Strips (400g) were priced at 28,800 won (7,200 won per 100g). This is a more than 30% discount from the original price of 43,600 won (10,900 won per 100g). On the same day, Russian dried pollack strips (400g) sold at Emart were 26,980 won, or 6,745 won per 100g. The Bada Sanghoe product was 1,820 won or 6.7% more expensive per 100g. Both products used Russian pollack as the raw ingredient and were the same weight.

It has been found that many of the dried seafood products under Nonghyup Distribution’s private brand (PB) Bada Sanghoe use imported seafood as their main ingredients, resulting in higher prices than competitors. Some Bada Sanghoe items were not just made from foreign raw materials but also manufactured in China.

Bada Sanghoe is a private brand introduced by Nonghyup Distribution, which operates Hanaro Mart. A PB is a product that distributors such as hypermarkets plan directly and commission manufacturers to produce, then sell under their own brand. These products are popular for their good value for money and strong ability to attract customers.

The Paradox of Bada Sanghoe Prices... The “Nonghyup” Name, but China and Vietnam as Main Sources of Ingredients

However, at the location visited that day, the Bada Sanghoe products were often more expensive. For example, at Emart, a 500g pack of domestic Tongyeong anchovies for soup base was priced at 13,980 won, or 2,796 won per 100g. The Bada Sanghoe 300g pack for soup base was 9,000 won, or 3,000 won per 100g. Comparing by weight, the Emart product is 204 won less per 100g, or around 6.8% cheaper. If converted to a 500g basis, the Bada Sanghoe product would cost 15,000 won, which is 1,020 won more than the Emart product.

Additionally, the large Bada Sanghoe dried pollack strips (500g) sold on Coupang were 27,980 won (5,600 won per 100g), whereas another Coupang listed brand’s dried pollack strips (500g) were 24,150 won (4,830 won per 100g). Both products have China as their country of origin, but the Bada Sanghoe dried pollack strips are made from Russian pollack processed by the Chinese food company Qingdao Yliu Foods., Ltd.

Appearance of grilled dried filefish Shark. Photo by Hanyeju.

Also, the 200g pack of grilled monkfish fillet sold at Hanaro Mart Changdong Branch that day included monkfish from China accounting for 84.5% of all ingredients. Refined salt was also from China. The 200g pack of grilled small filefish fillet contained 99.6% Vietnamese filefish. The 200g grilled filefish fillet also used 86.27% Chinese filefish. Both original and wasabi-flavored fried shredded cuttlefish listed the origin of the cuttlefish as “imported (Peru, Chile, China, etc.).” Some products also used American wheat and Canadian canola oil.

Imported seafood products are currently sold by most domestic distributors. Bada Sanghoe also lists the country of origin on the packaging. However, some point out that while Nonghyup Distribution sells imported processed seafood under its PB, using the Nonghyup brand name at the forefront is inconsistent with the business purposes of Nonghyup. Bada Sanghoe's packaging introduces it as a “specialist brand of dried seafood, backed by Nonghyup Distribution’s long expertise.”

An industry expert commented, “Since Nonghyup-related distribution organizations differ in character from general retail companies, their PB products should transparently disclose metrics such as producer prices, retail prices, the percentage of domestic ingredients used, and criteria for selecting suppliers.” He argued, “Without such standards, it becomes unclear whether PB products are part of Nonghyup’s public-good distribution business or ordinary private brand business like any other retailer.”

The Stronghold of Kickbacks, Bada Sanghoe

Thus, Bada Sanghoe, which utilizes inexpensive imported raw materials, is regarded as the “final boss” in suspicions surrounding kickbacks in Nonghyup Distribution’s procurement practices. The private brand merchandise planner (MD) purchases the raw materials and passes them to an OEM manufacturer. In this process, it is alleged that the MD receives double kickbacks. First, delivery prices are inflated in the purchasing process, and then the MD is paid the difference in cash by the supplier over the actual purchase price.

There are also allegations that the MD receives further kickbacks by subcontracting further processing like packaging to another company and collecting a share of the difference again. A current Nonghyup Distribution employee stated, “With kickbacks going both ways, the actual price of goods delivered to stores becomes higher.”

However, the kickback structure of Bada Sanghoe cannot be confirmed through official accounting records. The employee explained, “Since Bada Sanghoe operates as OEM, there are technically no issues in form. Raw materials are purchased cheaply and sent out for processing. Then, after attaching a margin to the packaging in the processing stage, the products are repurchased and distributed to stores. If raw materials are purchased for 10,000 won, whether they were originally worth 8,000 won or 5,000 won, it would be impossible to determine after the fact.”

It has also been confirmed that the supply of dried seafood is highly concentrated among certain companies. According to data submitted by the office of Democratic Party lawmaker Lee Jaegwan to the National Agricultural Cooperative Federation, K Trading supplied 14 out of 29 Bada Sanghoe products last year, accounting for 48.3%. This year, it was 13 out of 36. In total, K Trading handled 27 out of 65 procurement items across the two years, or 41.5%. Grilled monkfish fillet and grilled filefish fillet, both of which saw price increases and sales declines, were also supplied by K Trading.

Other key dried seafood items, including grilled pollack, grilled dried pollack strips, grilled monkfish strips, and grilled filefish strips, were also supplied by the same company. K Trading sells grilled filefish fillet on the NH Mall (NH Singsing Mall) as well. An industry official said, “In the OEM-based PB system, retailers directly plan products, select manufacturers and suppliers, and negotiate purchase prices. If a particular supplier is continuously responsible for a significant number of SKUs, it is necessary to examine how the vendors were selected and whether there was real competition on price.”

There are also suspicions that such kickbacks are being pooled as slush funds and passed up to higher management. A key witness in the ongoing prosecution investigation into Nonghyup Distribution purchasing corruption commented, “Inside staff are all aware that Bada Sanghoe was created to generate slush funds, but they just keep quiet. I heard that to avoid suspicion from large transactions with a single company, they expand the range of products and suppliers, and collect kickbacks multiple ways.”

On the 29th, at the 'Bada Sanghoe' corner of Hanaro Mart Changdong Branch in Dobong-gu, Seoul. Photo by Yeju Han

A Nonghyup Distribution representative stated, “No objective evidence has been found to support claims that the purchasing staff colluded with suppliers to inflate procurement prices and secretly received the difference in cash to create organized slush funds. There are discrepancies between such statements and the transaction structure and records we have verified.”

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