The Korea National Council of Consumer Organizations reports the analysis results of a price increase in ice cream products and beverages.

Regarding an increase in the consumer recommended price of ice cream products and beverages in the first half of 2010, the Korea National Council of Consumer Organizations (Chairperson Kim Jae-ok) reported the results of a cost analysis conducted between January and June of 2010.

Compared to the factors of the price increase, an increase in consumer recommended prices turned out to be excessive.

In the case of ice cream products, manufacturers increased consumer recommended prices by a maximum of 43% compared to the later half of 2009 by presenting reasons of ① the price increase in raw materials, ② the use of higher quality raw materials, and ③ increase in the size of products. However, the price increase of ice cream products was excessive compared to the load of the above-mentioned factors on the production cost of ice cream products.

① The price of the raw materials of ice cream such as dairy produce, Sweet type whey powder, cocoa preparation, and milk fat did not show an apparent increase since 2009 until the early half of 2010, but rather showed a decrease.

② The price difference between high quality grade milk and lower quality grade milk with the improved quality of raw materials was merely 2%.

③ An increase rate of the product volume was merely 7-13% of the previous volume.

In the case of beverages, as manufacturers increased consumer recommended prices by 5-10% compared to the latter half of 2009, they mentioned that the price increase of the raw materials and subsidiary materials were the factors of price increase, but in actuality, the price of major raw materials for beverages such as undiluted orange juice and sugar materials has been decline since 2009, and the price of sub-materials such as Gongqwan was stabilized.

Manufacturers did not present convincing data regarding the price increase.

The Korea National Council of Consumer Organizations held a meeting on July 13, 2010 in order to listen to manufacturers' position about a price increase, but most manufacturers simply indicated the problems of the distribution system and the necessity of a price increase. They failed to present convincing data regarding the price increase.

Organizations decided to take strong measures against manufacturers with continuous monitoring.

The Korea National Council of Consumer Organizations raised doubts over whether manufacturers and distributors increased prices prior to the introduction of an open price system, which would be implemented from July 1, 2010, and requested manufacturers and distributors to lower this unjustified price increase after investigating price increases of ice cream products and beverages from customers' perspective. In addition, the Price Analysis Team from the Korea National Council of Consumer Organizations plans to strongly request manufacturers and distributors to lower prices when the additional factors of lowering prices and obvious issues occur as continuously monitoring the trend of raw material prices and consumer prices

※ Appendix: Results of the cost analysis of ice cream products and beverages

[Analysis results of the cost of ice cream]

○ During March - April 2010, the consumer recommended price of ice cream increased by a maximum of 43% compared to the latter half of 2009.

○ As factors of increasing ice cream prices, manufacturers presented the reasons of ① the price increase of raw materials, ② the use of higher quality raw materials, and ③ an increase in the size of products, but the price increase of ice cream products was excessive compared to the load of the above-mentioned factors on the production cost of ice cream products.

- The raw materials of ice cream such as dairy produce, Sweet type whey powder, cocoa preparation, and milk fat, except for sugar and milk, showed a price decrease since 2009, or did not show an apparent price increase in 2010, but rather some raw materials showed a price decrease.

- The price difference between high quality grade milk and lower quality milk with the improved quality of raw materials was also greatly lower than the rate of price increases

Source: 유대조견표 of Korea Dairy Committee

When there was a price increase in 2010, in the case of products with increased volume, the rate of a price increase was higher than the rate of volume increase.

○ The Korea National Council of Consumer Organizations held a meeting in order to listen to manufacturers' position about the price increase of ice cream. At the meeting, most manufacturers indicated the problems of the distribution system, but did not present convincing data regarding the price increase.

[Analysis results of beverages]

○ In the early half of 2010, when manufacturers increased prices by 5-10% compared to the latter half of 2009, they mentioned that the price increase of raw materials and sub-materials was the cause of a price increase. However, in actuality, the price of the main raw materials of beverages such as undiluted orange juice and sugar materials was in decline and had stabilized since the first half of 2009, and the price of subsidiary materials such as Gongqwan was stabilized. It seems that manufacturers increased prices regardless of the costs of raw materials and subsidiary materials.

- The price of undiluted orange juice is influenced with a lag of 6 months. Since the first half of 2009, the price of undiluted orange juice has been stabilized, but the price of orange juice was never lowered. It implies that, when the price of international raw materials increases, businesses tend to reflect the increase on price, but when the price of international raw materials decreases, they tend to not reflect the decrease in price.

- In the case of soft drinks such as Coca Cola and Cider, even when the prices of main ingredients such as sugar were stabilized, manufacturers increased prices. Consumers cannot understand why the prices went up.

(Unit: won / kg)

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Source: The Korean Traders Association's Import Statistics and manufacturers' business reports

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Green Consumers Network, Korea Federation of Housewives Clubs, Citizens Alliance for Consumer Protection of Korea, National Council of Housewives Classes, Korea Women's Association, Korea Consumer Affairs Institute, Korea Consumer Education Center, Consumers Union of Korea, National Council of YMCAs of Korea, YWCA of Korea