Chicken Game (2)
I called Sung Yoon-ah.
“I’m having dinner with Dong-ho sunbae and Ah-reum. Can you make it?”
“Yes.”
Fortunately, Sung Yoon-ah had time as well, so the four of us had dinner together.
On the menu was chicken and beer.
It was one thing for the three of us, but Min Ah-reum, whose face was known to the public, was cautious about going anywhere crowded.
So we had the chicken delivered and decided to eat it together in the MFW lounge.
The table was covered with a spread of delivery chicken, one variety after another.
I handed a beer to Sung Yoon-ah, who had arrived a little late.
“Here.”
“What’s with the chicken?”
“I just suddenly wanted some.”
We sat facing each other, clinked our canned beers together, and started eating.
Sung Yoon-ah put a bite of chicken in her mouth and chewed thoughtfully.
“Mm, it does taste good after a long time.”
“Do you know chicken’s gone over twenty thousand won lately?”
Min Ah-reum asked, “Is that expensive?”
Sung Yoon-ah tilted her head too. “Wasn’t it around that price already?”
This was why chaebol families were impossible.
I shook my head.
“No. It’s gone up a lot recently.”
“But everything else has gone up too.”
“This has gone up even more, which is the problem.”
Even the numbers showed it: compared to other dining-out items like tteokbokki or jajangmyeon, chicken prices had climbed far more steeply.
People weren’t imagining it when they said chicken had gotten expensive.
“And it’s not like franchise owners are making a killing either.”
The franchise companies used the rising cost of ingredients, labor, and rent as their excuse, but whenever they raised prices, they also raised the cost of the ingredients they supplied to franchisees.
In the end, only headquarters made money, while the franchises’ profits barely changed.
If the price increase had actually gone to franchise owners in the first place, headquarters wouldn’t have been able to boast a thirty percent operating margin.
Dong-ho sunbae said firmly, “A single chicken costing twenty thousand won is absurd. That’s basically price gouging.”
That sounded exactly like a middle-class man’s complaint.
Even if you made ten billion or a hundred billion won, twenty-thousand-won chicken was still expensive.
Sung Yoon-ah nodded.
“Well, chicken is a food for ordinary people, after all.”
I shook my head.
“Strictly speaking, chicken isn’t just ordinary people’s food.”
“Then what is it?”
“It’s food for both ordinary people and the rich. Chairman Yoo Jae-ho ordered chicken first thing when he got home after being investigated by the prosecutors, didn’t he?”
Back then, the reporters camped outside Chairman Yoo Jae-ho’s house had even grabbed hold of the deliveryman and reported on the exact brand and menu he’d ordered, and before long, orders for that item had skyrocketed.
If a conglomerate chairman ate it, people naturally wanted to try it at least once out of curiosity.
“If they keep raising the price like that, shouldn’t sales go down?”
“That’s the strange part.”
The price of a product was determined by supply and demand.
Normally, when prices rise, demand falls. But chicken was different: despite repeated price hikes, demand hadn’t dropped.
That was why they could keep pushing prices higher.
“Anyway, if we just leave it alone, chicken prices will keep rising forever, and a lot of people may no longer be able to enjoy chicken and beer. We need a countermeasure before prices go any higher.”
Sung Yoon-ah looked puzzled. “Why are you paying so much attention to this problem?”
“Ah... actually, I think I bear some responsibility here.”
“Pardon?”
I sighed and explained the cause behind the price surge.
When I finished, both of them looked shocked.
“So, let me get this straight. Because the industry leader, Hansung Chicken, raised its prices, chicken went up to twenty thousand won? And that happened because Hansung Group was dismantled and chicken was sold to a private equity fund?”
“That’s right.”
The guilt of being the main culprit behind chicken’s price explosion was enough to keep me up at night.
As a former Hansung Chicken franchise owner, I couldn’t just stand by and watch this mess continue.
“So I’m planning to fix it.”
“How?”
I’d already been thinking about that.
“By creating competition.”
The current price of chicken hadn’t risen because raw material costs went up or demand surged; it had risen because of monopoly and collusion among the top companies.
So if someone sold cheap, good chicken and lit a fire under the market, prices would naturally be forced down.
Sung Yoon-ah said, “But isn’t price competition hard for a latecomer to use?”
“It is.”
A precise point.
Economies of scale applied to chicken too.
Which had a lower cost per unit: the place selling one hundred thousand chickens, or the one selling ten thousand?
And chicken wasn’t a manufactured good; it was food. The price of raw chickens, frying oil, and the like fluctuated constantly.
Large franchises, which had wide margins and relied on bulk purchasing and long-term contracts, could absorb raw material price increases however they wanted, but small and medium businesses with thinner margins had no choice but to buckle under them.
Even the smaller franchise brands that had initially pursued low-price strategies quietly raised their prices for exactly that reason.
So if we wanted real price competition, we needed a place that could secure raw materials stably, over the long term, in large volumes, and keep selling them consistently.
Where on earth could we find such a place?
Conveniently, there was one that fit perfectly.
I turned to Min Ah-reum.
“Could you introduce me to Executive Director Min Gijin?”
* * *
Executive Director Min Gijin came to Continue Capital at once.
My first impression was simple: he was a big man.
He wasn’t especially tall, but his shoulders were broad and his neck was thick. His eyebrows were heavy, and his eyes were sharp. He and Yoo Jae-ho were the same age and cousins, so I could even see a faint resemblance between them at a glance.
He greeted me with a bright expression.
“Pleased to meet you, CEO Han Miru. I’ve heard a lot about you.”
“Good to meet you too, Executive Director Min.”
After exchanging greetings, we sat down.
“I asked to meet you because I had something I wanted to discuss.”
“What is it?”
“I heard you’re very interested in the food service business.”
In fact, the Shinsegi Group was a powerhouse not only in distribution but also in food service.
In Korea, the number-one franchise by sales was Starbucks. Not just cafés, but among all franchises combined, it still boasted overwhelming revenue.
And the company that brought Starbucks into Korea and operated it was none other than Shinsegi Group.
Under Min Gijin’s leadership, Shinsegi Group was expanding its investments in franchises even further. That was why they had also tried to secure the Korean rights for O'Connor Burger.
“That’s right. There’s a strong synergy with distribution, which is one of the group’s core businesses.”
“Are you interested in chicken, by any chance?”
“...Pardon?”
I spoke to him about current chicken prices.
“I was wondering what you’d think about Shinsegi launching half-price chicken.”
“Half-price chicken?”
“Yes. If supermarkets and shopping malls started selling chicken for under ten thousand won, I think it would get a huge response.”
Chairman Hong In-gyun of BQQ had complained that chicken had such a high ingredient cost that even selling it for twenty thousand won left them with nothing, but in reality chicken was relatively cheap to produce compared to other foods.
The biggest share of chicken’s cost was the raw bird itself, and that had stayed around 2,500 won for ten years without moving much at all.
So even if it were sold for under ten thousand won, there was still plenty of room for a margin.
Executive Director Min Gijin looked troubled.
“Half-price chicken isn’t impossible. But unlike coffee or hamburgers, chicken tends to provoke an unusually strong backlash. You may not know this, but about ten years ago, Retail Mart launched something called Great Emperor Chicken.”
“Yes. I remember.”
It was chicken served in a literal large-capacity container, just like the name implied.
The price was five thousand won.
Even by the standards of the time, that was an outrageous bargain.
Of course it became wildly popular, and people lined up before the store even opened.
But that popularity didn’t last long.
Because the chicken franchise companies fought back hard.
“This is a conglomerate trampling small neighborhood businesses,” “This destroys the survival rights of small merchants,” “Protect the livelihood of ordinary shop owners,” “It’ll kill all the little businesses,” and so on.
Chairman Hong In-gyun of BQQ personally took to the streets with franchise owners to stage protests, and also filed a complaint with the Fair Trade Commission, claiming Retail Mart was selling below cost to eliminate a competitor.
At the time, public opinion was strongly against conglomerates encroaching on small neighborhood businesses.
As the controversy grew, the political world eventually stepped in, and even the senior presidential secretary for political affairs raised the issue.
Feeling the pressure, Retail Mart abandoned Great Emperor Chicken just one week after launch, and donated all fifty thousand remaining chickens.
“The situation is a little different now. Everyone feels a heavy burden from chicken prices.”
Back then, chicken hadn’t been cheap, exactly, but it also didn’t feel absurdly expensive. At the very least, delivery used to be free.
Now, however, the market had been completely reorganized around franchises, and prices were climbing without end.
Public sentiment was on the verge of exploding.
No, it had already exploded.
After hearing my explanation, Executive Director Min Gijin nodded.
“So you’re saying that if we release half-price chicken in this climate, it could become hugely popular.”
“Exactly.”
In fact, even in my first life, once chicken prices climbed past twenty thousand won, the big supermarket chains released half-price chicken and hit the jackpot.
He seemed to do a quick calculation in his head.
A moment later, Min Gijin said, “I can see it would create a significant promotional effect. But even if supermarkets sell as much as they can, the daily volume will probably only be around twenty thousand units. It’d still be hard to affect the overall chicken market.”
I nodded.
“That’s a fair point.”
Cheap chicken shops did exist if you looked for them.
And yet people kept ordering Hansung Chicken, BQQ Chicken, and Ruru Chicken because they were clearly tastier than the alternatives.
If we only fought a price war, the small players would be the only ones to die, and the big three chicken franchises would barely be affected. The effect on prices would be limited too.
“It has to be half the price, of course, but it also has to be better than Hansung Chicken, BQQ Chicken, and Ruru Chicken.”
In other words, it had to beat the big three chicken franchises in price, taste, and quality all at once.
Min Gijin looked a little flustered.
Chicken was one of the most fiercely competitive items in the entire food industry.
You couldn’t survive in that battle with an ordinary level of taste.
That was why the leaders poured enormous sums into R&D.
“Hansung Chicken and BQQ Chicken have both set up Chicken Lab and a chicken academy to improve taste and develop new menu items. Even as a conglomerate, it isn’t easy to catch up to them.”
Those investments were what had allowed them to pull ahead and take first and second place.
So how could we possibly create a menu that would outdo them?
I said confidently, “You don’t need to worry about that part at all.”
Right now I was co-CEO of Continue Capital. But once, I had been co-representative of a Hansung Chicken franchise. If anything, I had spent longer working as a chicken franchise owner than I had working in securities.
The future history of Hansung Chicken was already in my head.