"Sales Flat, Cost Burden 'Soars'"... Restaurant Industry Index Falls for First Time in Three Quarters

Third-Quarter Restaurant Business Survey Index: 77.49
Down 1.33 Points from Previous Quarter as Food Ingredient Costs Rise
"Businesses Must Justify Prices Rather Than Simply Raising Them"

The restaurant industry business index fell for the first time in three quarters, as the heatwave in the third quarter of this year (July-September) raised food ingredient costs for restaurants and dampened dining-out demand.

The current index of the Restaurant Business Survey Index for the third quarter of this year, released on October 15 by the Ministry of Agriculture, Food and Rural Affairs and the Korea Agro-Fisheries & Food Trade Corporation (aT), stood at 77.49, down 1.33 points from the previous quarter. The index fell for the first time in three quarters after rising from 75.09 in the fourth quarter of last year to 78.82 in the second quarter of this year.

Yonhap News Agency

The Restaurant Business Survey Index is calculated from a survey of 3,000 restaurants nationwide. With 100 as the benchmark, a reading below 100 means that more businesses saw their sales decline year over year than saw them increase.

The reversal is seen as reflecting a slight contraction in dining-out demand. Record heat in July and August raised agricultural product prices and food costs for restaurants, while consumer sentiment fell in August for the first time in four months. The food ingredient cost index stood at 139.66 in the third quarter, up 1.31 points from the previous quarter.

By business type, Japanese restaurants recorded the steepest decline, with their index falling 6.69 points from 83.79 in the second quarter to 77.10 in the third. Over the same period, Korean seafood restaurants and Western-style restaurants also saw their indices fall by 4.63 points and 4.57 points, respectively, declines that were relatively large compared with other business types. Higher food ingredient costs appear to have contributed to the drops.

The indices for Korean restaurants and gimbap and other casual food outlets also fell as rising prices for key ingredients increased cost pressures. In the third quarter of this year, the index stood at 73.02 for Korean restaurants and 77.47 for gimbap and other casual food outlets.

The Ministry of Agriculture, Food and Rural Affairs and the Korea Agro-Fisheries & Food Trade Corporation (aT) said on the 15th that the current Restaurant Business Survey Index stood at 77.49 in the third quarter of this year, down 1.33 points from the previous quarter. Screenshot of the "Restaurant Business Survey Index for the Third Quarter of This Year" report.

The third-quarter index for nonalcoholic beverage outlets, including coffee shops, where demand surged amid an early heatwave, fell 3.21 points from the previous quarter to 86.42. The weaker conditions for cafe and beverage consumption are seen as reflecting continued price increases by coffee chains amid rising bean and other input costs, as well as a slowdown in consumer sentiment due to accumulated inflationary pressures.

By contrast, institutional cafeterias rebounded sharply as demand increased amid rising prices for dining out. Their index rose 2.82 points from the previous quarter to 94.77 in the third quarter of this year. The index had been on a sustained decline since the third quarter of last year, when it stood at 96.30.

The Restaurant Business Outlook Index for the fourth quarter stood at 84.68, up 0.60 points from the previous quarter. The increase appears to reflect growing expectations that tourism and dining-out demand will rise as local fall festivals expand in October and November, amid improvements in the Consumer Sentiment Index and consumer spending outlook. The outlook index has fluctuated throughout this year.

Academic experts said the index suggests that, with restaurant sales slowing and food ingredient costs rising, price increases alone are unlikely to restore the industry.

In the report, Professor Jin Hyunjung of the Department of Economics at Chung-Ang University said, "Sales are slowing while costs are rising, leaving the restaurant industry caught in a pricing dilemma. The industry needs responses on both fronts: stimulating consumption and managing costs. To support a recovery, businesses must make efforts to bring customers back while creating conditions that allow them to serve good food at costs they can afford."

Professor Eo Yunseon of Sejong Cyber University said, "The rebound in the first half continued, but the pace of recovery slowed. The improvement in the fourth-quarter outlook should be interpreted not as a full-fledged return to optimism, but as a cautious rebound driven by hopes for a year-end boost amid weak current conditions." Eo added, "The solution lies not in simply raising prices, but in designing value that justifies them. The ability to give customers a reason to choose a business, rather than simply focusing on sales volume, and a menu structure that can withstand cost fluctuations will determine the success or failure of the restaurant industry in the fourth quarter."

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