Korean Retailers Expand into Mongolia Following CEPA Agreement

Korea and Mongolia have reached a preliminary agreement on a Comprehensive Economic Partnership Agreement (CEPA), accelerating the entry of domestic retail and consumer goods companies into the Mongolian market. With the elimination of tariffs on key exports such as cosmetics, ramen, and seaweed, the price competitiveness of K-food and K-beauty products is expected to improve significantly, leveraging the existing convenience store and supermarket distribution networks in Mongolia.

According to the Ministry of Trade, Industry and Energy, the CEPA agreement will immediately abolish tariffs on Korean cosmetics upon its enactment. Tariffs on ramen and seaweed will be phased out within five years. As local demand for Korean consumer goods continues to grow rapidly, the reduction in tariff burdens is anticipated to boost exports further.

Korean retail companies have already established a dense sales network in Mongolia. CU currently operates 603 stores, while GS25 has around 300 locations. E-Mart opened its first store in Mongolia in 2016 and now operates six outlets. These convenience stores and supermarkets are not just sales channels but also serve as export platforms facilitating the entry of Korean products into the local market.

President Lee Jae-myung, speaking at the Korea-Mongolia Business Forum on July 9, noted, "In Ulaanbaatar, you can easily find Korean convenience stores and supermarkets, leading young Koreans to refer to Mongolia as 'Montan,' a blend of Dongtan, Korea, and Mongolia." He emphasized the need to expand such mutually beneficial models like 'Montan.'

 

During President Lee's state visit to Mongolia, he was accompanied by key industry leaders, including Heo Seo-hong, CEO of GS Retail, Han Chae-yang, CEO of E-Mart, and Hong Jeong-guk, Vice Chairman of BGF Retail. Industry experts believe that the scope of local cooperation will expand beyond store expansion to include product sourcing, logistics, and digital services.

There is significant potential for small and medium-sized food and consumer goods companies in Korea to broaden their export channels. On the same day, E-Mart opened its first No Brand store in Ulaanbaatar, with approximately 70% of No Brand products produced by small businesses. This means that as local stores increase, the entry of domestic small business products into Mongolia will also expand. Han Chae-yang stated, "We will continue to expand the K-retail platform that allows local customers and domestic companies to grow together."

The domestic retail industry views Mongolia as a 'land of opportunity' due to its demographic structure and familiarity with Korean culture. With a population of about 3.5 million, Mongolia's market size is not large, but its young consumer base and high familiarity with Korean culture are seen as strengths. As of last year, 32% of the population was under 14 years old.

Notably, Mongolia's imports of Korean cosmetics reached $44.93 million last year, marking a 21.6% increase from the previous year and setting a record high. The elimination of tariffs is expected to further accelerate the growth of K-beauty in the region.