As per request: digestible brand bites
If Seoul could jump, it probably would have suppressed a strong urge to do so when it saw the number 3.5 last Wednesday.
What does this number mean? If you’re keeping up with the times you’ll know it’s not referring to anything particularly palatable. The US consumer price index for March is up by 3.5% YoY. In fact, there’s been a steady upwards trend in CPI since January (3.1% YoY). What this hails for Seoul is not too hard to guess. Seoul just saw the dollar hit the 1,400 KRW mark. What’s unsettling about this figure is that there’s a high chance that it’ll continue to remain at this end as long as the Fed persists in lowering the US’ inflation rate to 2.0%. In other words, Seoulites’ buying power—be it a quick trip to the grocer’s or an indulging dinner at Wolfgang’s—is being depleted.
Let me be clear. I’m not here to recap an article by the Financial Times. All the figures mentioned above translate into a shift in behaviors by brands. As such, today’s post is going to be a sweet bite into a spicy topic: how Seoul’s brands tango with inflation.
The scramble to elevate
Burger King shocked Seoulites last week with news that the Whopper is being discontinued. People bemoaned how Burger King wouldn’t be the same without the whopper. Then came news of a “New Whopper” yesterday.
People weren’t too amused.
Priced at 7,100 KRW—or 1,000 won more than the whopper price back in 2022—the New Whopper sparked speculation that Burger King was trying to mask a price increase behind a supposedly “new” product. Albeit, to be fair, the New Whopper has a thicker patty that’s showered with even more salt and pepper to bring out the umaminess of the meat. The name change isn’t just a facelift.
What Burger King pulled off here is a tactic that quite a few brands are falling back on: premiumization. With living costs ever rising, brands are walking a tight rope as they’re pressed to retain customers while keeping operations costs manageable. Customers aren’t going to be happy if brands raise prices or surreptitiously engage in skimpflation. Likewise, shareholders aren’t going to be happy if the bottom line starts to collapse. Thus, the neat “legitimate” way to overcome this hurdle is to charge customers more for premium product offerings.
Burger King is joined by McDonalds down this lane.
McDonalds Korea dropped a Choonsik edition of their sweet potato fries pack last Thursday (the 11th). Designed and released in collaboration with Kakao Talk, the nation’s number one social messenger app, the Choonsik collector pack retails for 38,000 KRW or about $30. The price is NOT cheap considering that the edible portion of the meal consists of simply a pack of sweet potato fries and a modestly sized glass of Coke. There isn’t a wagyu patty burger dressed in truffle oil included in the package. Bear in mind that the Gordon Ramsey burgers here in Seoul set you back by about 35,000 KRW. Yet, Seoulites lined up in front of McDonalds at 7 AM. Within three hours, nearly all of the McDonalds in Seoul had sold out of the Choonsik collector pack.
Choonsik is the real deal.
In essence, Choonsik is McDonald’s way of justifying an exorbitantly high price for a pretty skimpy meal. The name of the meal itself “Choonsik collector pack” implies a level of scarcity that people instinctively register as exclusivity. When you combine rarity with cuteness, a trait that Seoulites just cannot resist at the moment—this is a story for another day—you evoke desire. People covet what others can’t have. And when that something manifests in the form of a pudgy cat hatted with a McDonald’s cap, people rush to open their wallets. However, I would like to clarify that the collector pack was most likely designed with the resell market in mind; Gen Zs in Seoul are quite serious when it comes to the lucrative resale of collectible goods on secondhand platforms i.e. Dangeun Market, Bungae Jangteu, etc. Most of the people who lined up in front of McDonald’s in the wee hours of the morning were most likely young resellers. Notwithstanding, this resale culture further lends credence to the argument that there is demand for rare items. Scarcity dictates premiumness.
A similar narrative of premiumness is being unfolded within a much more quotidian setting: the grocery store. Seoul recently saw the price of apples spike to 4,000 KRW a piece. Do the math and you have to shell out 20,000 KRW ($15) for a set of five apples. To counter the apprehension (and disbelief) surrounding this fruity debacle, groceries are rebranding apples under names like “diamond apple” or “consciously picked and pre-cleaned apple”. While the latter is more of a description than a brand, it nonetheless demonstrates how grocery stores are attempting to rationalize questionable price tags. This predilection reaches a peak at “diamond apple”, a moniker that is essentially a spin-off of the Korean phrase “golden apple”. For those who aren’t familiar, there’s a Korean saying that compares morning apples to gold (금사과), figuratively of course. This idiom gives off the same vibes as the adage “an apple a day keeps the doctor away”. Regardless of how deliciously nutritious an apple might be, the term “diamond apple” signals to customers that they are staring at a premium product that deserves to be priced the way that it is. The extent to which this title is well earned or misleading can only be determined through a purchase.
The onslaught of inflation is prompting many brands to execute an ad hoc premiumization tactic. I refrain from using the term “strategy” as this term denotes a competitive advantage that extends into the future. While first movers will most certainly be able to capitalize on premiumization, the tactic’s efficacy will diminish noticeably over time as more and more brands release products that are skewed towards the premium segment of a market. Eventually, at one point, a gap will form at the lower end and only a brand with sufficient cash flow will be able to swoop in and meet the demands of a neglected consumer base. Until then, it will be interesting to see how brands maneuver their way through a frigid economy where people coalesce into fandoms more than ever before.