BBQ forced to retract price hike

Yoon Hong-geun,
BBQ Genesis chairman

By Lee Hyo-sik

BBQ Genesis has been forced to retract its decision to hike its fried chicken prices by 10 percent, under mounting pressure from the government and consumer groups.

Since Korea’s largest fried chicken franchise announced a plan last week to raise prices of its fried chicken menus by up to 10 percent beginning March 20, it has been facing growing pressure from the Ministry of Agriculture, Food and Rural Affairs not to do so.

The agriculture ministry, which has been struggling to contain the soaring prices of chicken, eggs and other fresh produce in recent months, has threatened to ask the National Tax Service and the Fair Trade Commission to conduct an investigation into BBQ if the company goes ahead with the plan.

The ministry argued that buying chickens account for only 10 percent of the chicken franchises’ production costs, adding it doesn’t make sense to charge more for fried chicken because of rising chicken prices.

BBQ, headed by Chairman Yoon Hong-geun, has been claiming that it had no choice but to charge more for its items, citing higher chicken prices and surging rents among other things.

However, the fried chicken chain submitted to rising pressure from the government Wednesday amid unfavorable public sentiment, withdrawing its price hike plan.

“We decided to cooperate with the government in its efforts to curb a rise in consumer prices amid the ongoing chicken supply shortage,” BBQ said in a statement, indicating that it would not hike its fried chicken prices as planned.

The announcement came after company executives held a meeting with ministry officials earlier in the day.

“We have and will continue to consider raising prices at the request from owners of our franchised stores,” the company said. “The stores have done the best over the past few years not to charge more by reducing costs. Besides rising prices of chicken and other food ingredients, they have to pay more to hire delivery personnel and to rent space. But their cost-cutting efforts have reached a breaking point.”

BBQ and other fried chicken chains will eventually hike their prices, according to industry analysts, saying that the agriculture ministry should not have interfered in the market.

“Government intervention distorts the market, which is bad for both producers and consumers,” said an executive at one of Korea’s business associations, who declined to be named.

“If chicken franchises are forced not to reflect rising costs, the quality of food and service they offer to consumers would inevitably deteriorate. The value of goods and services should be determined by supply and demand.”

Consumers will decide whether to pay more for fried chicken or not, he said, stressing that in any case, the government should not tell market players what to do.

“What the government should do is to maintain market order and make rules fair for everyone. It should let the invisible hand of the market control everything else,” he said.

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