Mr. Lee’s Chicken Dilemma
For fifteen years, Mr. Lee’s little diner has kept the price of fowl delight steady. Nestled near downtown Seoul, the shop is a haven for anyone who wants a cheap bite of crunchy chicken without the flashy price tag of the big‑chain chimaek franchises.
But the salty sea of soy not only has ocean waves—Indonesia’s sudden ban on exporting cooking oil is instead hog‑lining the feed for those fluffy wings. Since the ban, the cost of palm oil that powers everything from pastry to perfume has spiked, and the price of Mr. Lee’s own eggs is climbing in tandem.
Crunchy Costs Rise
“I’m at my wit’s end,” Mr. Lee sighed. “I’ve held my prices steady for a decade and still. But Indonesia’s export crunch is the last straw. I might have to follow the big chains and raise prices, even if it means losing a few loyal customers.”
It isn’t just Mr. Lee who’s feeling the pinch. Across Asia’s fourth‑largest economy, policymakers have watched the trend of cost‑push inflation climb alarmingly high. The result? A surprise rate hike this month, with both inflation rates and expectations hitting a decade‑high.
What’s the Back‑story?
- Indonesia banned its oil exports, rattling the global supply chain.
- Excess palm oil from other sources like Malaysia has become the new (and more expensive) goose‑egg.
- Substitutes such as soy oil are pricier, feeding into every consumer product from croissants to cosmetics.
It’s a tough pill to swallow for a small diner, but also a prominent illustration of how global supply shocks can touch even the humble corner sandwich shop. Sharp layoffs, heart‑broken night‑savers, and the forecast of cost‑inflation may turn the next menu add‑on more like a lottery than a promised weekday offering.
Can Mr. Lee Stretch the Menu?
One thought: roll out a “premium” line that uses imported palm oil and let others bite the bulk. Another route: extend the menu selection to create more product value per sale, potentially covering the cost of higher raw materials.
In a world where one unexpected policy change can ripple across the entire engine of consumption, the story of Mr. Lee’s diner is a small‑firm version of a global epic: it’s all about adaptation, creativity, and a pinch of humor to weather the storm. The future of that little place—and perhaps of Seoul’s wider culinary scene—will depend on its ability to lean into the changes while keeping the chickens—both literal and figurative—running.
<img alt="" data-caption="An employee cooks fried chicken at a pub in Seoul, South Korea, on April 25, 2022.
PHOTO: Reuters” data-entity-type=”file” data-entity-uuid=”30b837e1-be3d-46e5-bab3-a6f862647594″ src=”/sites/default/files/inline-images/20220429_cook_reuters.jpg”/>”We are cautiously watching the situation as demand for Malay palm oil could increase and could lead to higher prices,” said a spokesperson at Ottogi, a major South Korean producer of frozen pizza and ramen noodles.
Indonesia, the source of more than half the world’s palm oil supply, widened its export suspension on Wednesday (April 27) to include crude and refined oil, throwing the market into chaos after the war in Ukraine had already squeezed supplies of sunflower oil.
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The benchmark price of palm oil futures traded in Malaysia surged their daily 10 per cent limit after Wednesday’s announcement and are up nearly 50 per cent since the start of the year, while soy oil prices on the Chicago Board of Trade hit a record high.
Even before the ban, a steady climb in global prices had roughly doubled the price of an 18-litre container of edible oil in South Korea from a year earlier.
“Everything’s gone up, this box of oil has doubled, flour coating is up, so is chicken,” said Mr Lee, the chimaek diner owner, who declined to give his full name for fear of attracting attention to price increases at his shop. His shop displays a customer service award from a local government office for his long record of steady prices.<img alt="" data-caption="Cho Tae-won, 36, makes a toast as he and his colleagues eat fried chicken at a pub in Seoul, South Korea, on April 25, 2022.
PHOTO: Reuters” data-entity-type=”file” data-entity-uuid=”c4d20d3f-7c2f-416f-b319-36482961a41d” src=”/sites/default/files/inline-images/20220425_eat_reuters_0.jpg”/>”We haven’t been raising prices, but it’s really hard now and we need to raise prices a bit.” Genesis BBQ, one of the country’s biggest fried chicken chains, last week said it would raise prices for most items on its menu for the first time in four years by 10 per cent, after similar moves by rivals Kyochon F&B and BHC.
This set the stage for similar hikes at local shops like Mr Lee’s, which charges 8,000 won (S$8.70) for a whole chicken. The bigger chains will be charging up to 20,000 won for their chickens.
And the price impact of the palm oil squeeze won’t be limited to chicken.
South Korea imported US$2.2 billion (S$3.05 billion) worth of animal and vegetable fats and oils in 2021, of which about 30 per cent were palm oil, according to customs agency data. Most of that, or 56 per cent, came from Indonesia, and the rest from Malaysia.<img alt="" data-caption="Women eat fried chicken at a Han river park in Seoul, South Korea, on April 26, 2022.
PHOTO: Reuters” data-entity-type=”file” data-entity-uuid=”d8234246-0995-40e8-a747-e5800822208b” src=”/sites/default/files/inline-images/20220426_hanriver_reuters.jpg”/>”I heard palm oil gets used in so many cosmetics,” said Ms Joo Hyeon-jung, who was picnicking with friends along Seoul’s Hangang River.
“Cosmetics are like necessities for us women and price increases there will really hit me, because its like a fixed expenditure.”
South Koreafried chickenpalm oilInflation/Price LevelINDONESIAmalaysiaRussia-Ukraine conflictoil and gasEconomyasia
