The notoriously workaholic South Koreans are starting to kick back and take life a bit easier—and it’s already fostering brisk growth across a wide swath of consumer-centric businesses. Investors, take note.
South Koreans are still the world champs of hard work. They took only seven of their allowed 15 days of vacation in 2014, well below the 24-nation average of 19.5 days, according to online travel agency Expedia’s most recent Vacation Deprivation study. All told, South Koreans worked nearly 25% longer than their developed-world counterparts that year. But those hours of toil have been declining steadily for the past several decades, and are now 25% below where they were in the mid-1980s (Display).
Time to Take It Easy
Expect them to continue trending lower. Both the government and large Korean companies have launched campaigns to encourage workers to take more time off, prompted by signs that this excessive industriousness was taking a heavy societal toll. Long hours have not translated into greater labor productivity: South Korean productivity is well below developed-world levels despite much faster GDP growth. Overwork has also been linked to the country’s high rates of suicide and industrial injury.
It is also important to note that fewer work hours haven’t meant smaller paychecks. According to government statistics, the average full-time Korean worker earned 3.4 million won (US$3,229) a month in 2014, up 36% from 2.8 million won in 2008, despite a 4% drop in hours worked. More cash to spend on fun.
The cultural impact has been striking. A recent study found that South Koreans are sleeping more (up 9% since 1999), taking longer to eat (up 25%) and devoting more time to personal care and healthy activities (up 35%). Spending on entertainment (such as moviegoing, hobbies, sporting events, books and travel) has risen at a 4.4% annual clip since 2004, outpacing the 3.8% annual increase in overall consumer spending.
We see plenty of ways that investors can capitalize on these trends. The most obvious beneficiaries are travel-related businesses. The number of South Koreans flying to international destinations has grown exponentially, from 6 million in 2001 to 16 million in 2014. Unlike travelers in other parts of the world, Koreans much prefer packaged tours to non-packaged alternatives, as they don’t like being caught making vacation plans too far in advance. Spending on these tours has been climbing 12% annually since 2004. Interestingly, studies found that less than 40% of adults have ever traveled abroad. But as more Koreans take advantage of their time off, we expect such trips to lure a broader cross-section of the population.
Arguably the best barometer of the country’s more laid-back lifestyle is the soaring attendance at Lotte World, a major recreation complex in Seoul that consists of the world’s largest indoor theme park, shopping malls and a luxury hotel. It received 7.6 million visitors in 2014, nearly double the levels only five years earlier.
Coffeeholics and Chicken Addicts
South Koreans are also spending more on eating out. Among the fastest-growing segments are coffee and beverage shops, where annual sales have been growing at twice the pace of restaurant sales overall (Display). A recent government survey reported that South Koreans consume coffee nearly as often as they do the traditional side, dish kimchi, and twice as frequently as they do white rice. South Korea now ranks fourth among countries with the largest numbers of Starbucks locations per person.
Tastes and eating habits are changing as well. Sales of fast-food pizza, hamburger and fried- chicken restaurants are also outpacing the total restaurant average. The surge in fried-chicken eatery sales has been fed by the hugely popular TV show, “My Love from the Star,” a romantic comedy in which the main character is crazy for chimaek—“chi” is short for chicken and “maek” is the Korean word for beer. Chimaek is now a well-entrenched part of the country’s pop culture and bar scene.
Rethinking Korean Investments
The country’s work ethic is deeply entrenched. But given the concerted institutional push and the obvious economic positives, we expect South Koreans’ enthusiasm for leisure to continue to grow. In turn, we see investment opportunities increasingly shifting from the better-known South Korean auto and technology conglomerates to the more domestically driven businesses across the retail, entertainment, travel and other consumer services industries. The trend toward more balanced lifestyles is likely to influence investment in the country for years to come.
This blog was originally published in InstitutionalInvestor.com.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.