The Paradox of Livelihood-Suitable Industry Regulations Hindering K-Food’s Global Rise

This report begins from the recognition that although K-food is growing rapidly in the global food market, domestic regulations designating certain businesses as livelihood-suitable sectors and SME-suitable sectors are constraining the business expansion and overseas entry of major food companies.

K-food is spreading rapidly in global consumer markets, centered on products such as ramyeon, kimchi, sauces and pastes, tteokbokki, frozen gimbap, dumplings, beverages, and ice cream, and is expanding beyond agricultural and food products into a K-Food+ industrial ecosystem linked with upstream and downstream industries such as smart farms, agricultural machinery and materials, pet food, and veterinary pharmaceuticals. However, as many key K-food items—including kimchi, sauces and pastes, tofu, tteokbokki rice cakes, noodles and naengmyeon—have become subject to livelihood-suitable sector or SME-suitable sector regulations, firms face a contradictory situation: they are required to compete freely in global markets while being restricted domestically in business acquisitions, new business launches and expansion, investment in production facilities, new product development, branding, and export expansion.

The analysis finds that the growth of K-food is better understood not as the result of government regulation or protection policies, but as a market outcome driven by the combination of private-sector product innovation, localization strategies, the securing of global distribution networks, and brand expansion linked to K-content. According to data from the Korea Chamber of Commerce and Industry (KCCI), K-food exports nearly doubled from $3.51 billion in 2015 to $7.02 billion in 2024, while Ministry of Agriculture, Food and Rural Affairs figures show that K-Food+ exports also reached record highs of $13.03 billion in 2024 and $13.62 billion in 2025.

Major food companies such as CJ CheilJedang, Samyang Foods, Nongshim, Lotte Wellfood, Orion, and Lotte Chilsung are leading the global spread of K-food through overseas production bases, local distribution networks, brand marketing, and SNS-based fandom strategies. Because these strategies require scale, capital investment, quality control, overseas certification, logistics networks, and local marketing capabilities, they conflict with regulations that uniformly restrict the participation of large corporations and mid-sized firms.

This report points out that even if the livelihood-suitable sector system has the policy objective of protecting small merchants, protection does not automatically translate into industrial competitiveness. Empirical studies on the food and beverage manufacturing industry also make it difficult to conclude that designation as an SME-suitable sector has generally improved sales, profitability, or R&D activity; in some product categories, sales actually declined and incentives for innovation weakened.

Kimchi in particular reveals the paradox of protective regulation: restricting the activities of large domestic companies does not automatically enable small merchants to grow, and foreign substitutes such as low-priced Chinese kimchi may instead encroach on the market. In addition, discussions of livelihood-suitable sectors tend to focus on the interests of large corporations and small merchants, but consumer welfare—including consumer choice, prices, quality, product diversity, and access to HMR and premium products—should also be included as a core evaluation criterion.

Accordingly, this report proposes four directions for regulatory reform to expand K-food’s global market presence: first, separating the domestic livelihood market from the global growth market; second, exempting production and investment for export purposes from regulation; third, shifting from a protection model based on banning large-firm entry to a coexistence-oriented division-of-labor model; and fourth, replacing the uniform five-year designation approach with a performance-based sunset system and introducing an impact assessment on consumer choice.

In conclusion, what K-food needs is not a protective fence but a runway to the global market. The government should not be a regulator that ties the hands of firms, but a coordinator that lowers transaction costs and creates a market-based coexistence structure so that large corporations, mid-sized firms, SMEs, and small merchants can all advance together into global markets.

I. Introduction: K-food is a growth industry, but regulation remains stuck in livelihood-oriented protection

II. Current Status and Cases of K-food’s Entry into Global Markets

1. Quantitative Growth in K-food Exports

2. Cases of Firms Entering the Global Food Market and Their Implications

III. Current Status and Problems of Livelihood-Suitable Sector Regulations Related to K-food

1. Current Status of Major Regulations

2. Problem 1: Protection May Entrench Small Scale

3. Problem 2: It Excludes Consumer Choice

4. Problem 3: It May Cede the Market to Foreign Products and Foreign Firms

5. Problem 4: It Conflicts with the High Value-Added Upgrading of K-food

IV. Regulatory Reform Strategies and Policy Measures for Expanding K-food’s Global Market

1. Separating Livelihood-Oriented Protection from the Global Growth Market

2. Full Exemption for Production and Investment for Export Purposes

3. Shifting from Large-Firm Entry Bans to a Coexistence-Oriented Division-of-Labor Model

4. Introducing a Performance-Based Sunset System and Consumer Choice Impact Assessment Instead of Uniform Five-Year Designations

V. Conclusion: The Essential Requirement for K-food’s Global Leap Is Not a Protective Fence but Regulatory Reform

References

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Original title: K-푸드 글로벌 도약을 가로막는 생계형 적합업종 규제의 역설

Author: Gwang yong Go

Date: 2026-04-30

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=28869