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KNCCO discloses the result of its analysis of bingsu (shaved ice with syrup)
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#701 Seoul YWCA 20, Myeong-dong 11-gil, Jung-gu, Seoul, Korea
TEL.: 82-2-774-4050/FAX: 82-2-774-4090
KNCCO discloses the result of its analysis of bingsu (shaved ice with syrup)
-The prices for bingsu served at coffee franchises are 1.5 times higher than what business employees pay for their lunch.
-Profit margin for bingsu: 40%
- Business strive to increase sales with large and expensive bowls of bingsu
In the summer, bingsu is very popular. Due to its popularity, it is even served at coffee shops and bakeries. Consumers have complained about the wide range of prices for bingsu. Some stores set the price way too high. We at the Price Monitoring Center of KNCCO (President: Lee Deok-seung) would like to use price analysis to point out the issue of the exorbitant prices of bingsu.
1. The prices of bingsu served at coffee shops are the highest, followed by dessert cafés, bakeries, and stores specializing in bingsu
In June 2014, we found that, generally, a bowl of bingsu served at stores that specialize in it is cheaper (7,750 won) than what is served at other types of stores (i.e., bakeries [7,846 won], dessert cafés [8,950 won], and coffee franchises [9,341 won].)
As for bakery franchises, the prices for a bowl of bingsu at Paris Baguette and TOUS les Jours (in Myeong-dong) were 6,000-7,000 won and 7,500-8,000 won, respectively. The prices at franchise stores specializing in bingsu were: 7,000-9,000 won at Seolbing (in Insa-dong) and 8,000-9,000 won at Ongnumong (in Jonggak). The prices offered at other stores are as follows: 8,900 won at Baskin Robbins and Dunkin Donuts (in Jongro); 8,500 won at Yoger Presso (in Gwanghwamun); 10,000-14,500 won at Mango Six; and 42,000 won at luxury hotels like The Shilla and W Seoul Walkerhill.
2. Coffee franchises strive to increase sales by selling large and expensive bowls of bingsu
- They sell a bowl of bingsu for 9,250-10,036 won (i.e., this is 1.5 times higher than what is paid by business employees for lunch)
All coffee franchises sell a bowl of bingsu for more than 8,500 won (Caffé Bene: 8,900-13,500 won; Angel in Us: 9,800-11,000 won; A Twosome Place: 9,000-10,500 won). A bowel of bingsu mixed with red beans or fruit was priced at 9,250 to 10,036 (i.e., this is 1.5 times more than what that the average business employee pays for lunch the [6,488 won].) One version of bingsu that was priced at more than 10,000 won is sold by Caffé Bene (New York Cheese Cake Bingsu: 13,500 won); at Angel in Us the Mango Bingsu/Dutch Coffee Bingsu were: 11,000 won; and at A Twosome Place the Tiramisu Bingsu was: 10,500 won).
We found that coffee franchises sell only large-sized bowls (for two persons), with the exception of some items sold at A Twosome Place, which shows a disregard for customers’ right to choose. It shows that these businesses strive to maximize their sales with high priced goods in the summer.
Table 1. Price for bingsu served at coffee franchises
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Bingsu mixed with red beans
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Bingsu mixed with green tea
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Notes: 1) If there’s two or more bowls of bingsu on the menu, the average price is given.
2) “Others” refer to bingsu mixed with milk tea, black sesame, cheese, etc.
3. The total cost of bingsu served at coffee franchises is about 60% of the price. The cost of raw materials is about 25% of the price.
- The cost of raw material for bingsu mixed with red beans or fruit is less than 2,500 won, which is unreasonably expensive.
As for a bowl of bingsu mixed with red beans (888g sold at 8,900 won), its cost comes to about 2,397 won (red beans 373 [200g], rice cake/bean flour 478 won [121g], condensed milk/milk 690 won [80g and 80g], almonds 550 won [40g], and ice 306 [367g]). For a bowl of bingsu mixed with berries (594g) served at coffee franchises at the price of 9,800, the cost comes to about 2,269 won (berries 1,371 won [190g], condensed milk/milk 394 won [80g], ice cream 309 won [90g], and ice 195 won [234g]). Both of these examples show that the cost of raw materials comes to about 25% of the sales price. Consumers have complained that bingsu prices are unreasonably high, in light of the ingredients used for making bingsu.
Even with the inclusion of the variable cost and monthly rent/depreciation cost, the total cost for a bowl of bingsu comes to 5,514-5,702 won, which means a net profit of 40%.
Table 2. Cost analysis of bingsu served at coffee franchises
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Bingsu mixed with red beans (Store A)
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Bingsu mixed with berries (Business B)
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Sales price - Raw material expenses
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Sales price – variable cost
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Notes: 1) Raw materials expense: We estimated this cost based on the weight of each raw material contained in the store’s recipe.
2) Variable cost/fixed cost: We estimated these cost based on the store’s financial statements.
Stores selling bingsu should widen customers’ choices by including small-sized options and set the prices reasonably.
Stores selling bingsu, including coffee franchises, induce customers’ overconsumption by setting prices that are unreasonably high compared to the actual cost of making it. They limit customers’ rights to choose by selling only large-sized options. Bingsu is a high-calorie food and large-sized bingsu is not a healthy dessert option. These problems are that are caused in the supplier’s market.
Bingsu vendors should supply goods at prices that customers can accept and let consumers choose between different sizes. They should also make efforts to help customers enjoy bingsu, which is a favorite dessert for many people in the summer, without feeling that they are paying unreasonably high price for bingsu. We will keep an eye for the bingsu market whether it is going to be consumers’ market in terms of price and size.
-----------------------------Partners of Korea National Council of Consumer Organizations------------------------------
National YMCA of Korea, Green Consumers Network in Korea, Korea Federation of Housewives Clubs, National Council of Homemakers Classes, Korea Consumer Education Center, National Council of YMCAs of Korea, Consumers Union of Korea, Consumer Affairs Institute, Citizens Alliance for Consumer Protection of Korea
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