Saturday, 1 December 2007

Cheese 'Crisis' Curdles Profits for Korea's Pizza Makers

Korean pizza restaurants are in the midst of a "cheese crisis", as soaring demand for dairy products in China has the price of cheese sky-rocketing. Unable to bear the increasing costs, a great number of small pizzerias have gone out of business. Many survivors have bkorea pizzaeen forced to hike prices even though they know that will cost them customers.
Cheese distributor Aser Food said that the supplying price of cheese has shot up some 40 percent from W5,500 (US$1=W922) per kg in April to W8,000 in October.

An employee of Seoul Milk, the country¡¯s largest dairy products company, said that China has imported some 50 percent more cheese and milk this year than last year, which has caused a shortage of cheese in the market.

"In addition, a drought in Australia caused a slump in the production of cheese, which has worsened the situation for Korean companies," he added.

Medium-size pizza chains like Papa John's and Pizza Etang have had little choice but to raise their prices by W1,000-2,000 since September. Large chains such as Pizza Hut, Mr. Pizza and Domino's with relatively higher prices have adopted a wait-and-see attitude, although the rising costs have slashed their profits by 20-30 percent.

A Pizza Hut employee said, "In a recent meeting to deal with the problem, we decided to first try to reduce advertising costs and improve management efficiency because a price rise would directly affect sales."

The cheese shortage has also triggered other problems, such as greater circulation of cheese products nearing their expiration dates and more low-quality cheeses made from high percentages of imitation cheese.

An Asel Food employee said that the situation facing the pizza industry is more serious than was the financial crisis of 1997.

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