Inflation brings South Korea grocery wars to boil

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A Kentucky Fried Chicken (KFC) bucket of fried chicken is seen in this picture illustration taken April 6, 2017. REUTERS/Carlo Allegri - RC1DB6CFAB00

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HONG KONG, Aug 23 (Reuters Breakingviews) - Soaring food prices may send South Korea's hyper-competitive retailers past boiling point. Instead of passing on higher costs to shoppers, discount chain Homeplus has sparked a price war in fried chicken, according to media reports. It's a shrewd way to win over bargain-hunters but risks pecking away at the sector's thin margins.

Overall consumer inflation hit a near 24-year high in July; of that, prices of food and non-alcoholic beverages jumped 8% year-on-year. Diners are flocking to cheaper options: Instant-meal sales grew 30% at convenience store operator GS25 year-on-year in the January to May period, for example, while peers have experienced similar increases, according to Reuters.

Retail giants are responding. E-Mart (139480.KS), one of the country's largest supermarket chains, last month launched an aggressive sales campaign that boasts the lowest prices for some three dozen essential items like eggs and kimchi. That will keep pressure on loss-making online rivals Kurly, which is gearing up to go public, and the $32 billion Coupang , whose New York stock has nearly halved over the past 12 months. Simmering price wars risk giving investors indigestion. (By Robyn Mak)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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Editing by Antony Currie and Katrina Hamlin

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