Haitai-Calbee to build snack factory in South Korea to meet soaring demand

Japanese snack maker Calbee will build a factory in South Korea to meet the soaring consumer appetite for its potato chips in that country.

The facility is to begin operation in spring 2016, doubling the company's local capacity to churn out products worth 10 billion yen ($82.9 million) in annual sales.

Haitai-Calbee, a joint venture with Haitai Confectionery & Foods, will set up the factory in an industrial park about two hours east of Seoul. The 4 billion yen investment will be shared equally by the partners, with the land leased from the government for 50 years.

Haitai-Calbee's Honey Butter Chips, released last summer, have been flying off the shelves as consumers rave about the snack on their social networking pages. The company has been producing the chips at full capacity.

Cheaper potato prices also encouraged Calbee to increase production. Potato imports face a roughly 30% tariff in South Korea. But under South Korea's free trade agreement with the U.S. that took effect in 2012, potatoes from that country are duty-free from December to April every year.

Shrimp-flavored rice crackers highlight South Korea's snack market of roughly 100 billion yen a year, and the potato chip segment comes to just 10 billion yen. Calbee sees the segment growing to 25 billion yen. Japan's potato chip market stands at 230 billion yen.

Calbee's sales in South Korea apparently rose 60% to nearly 4 billion yen for the year ended March 31. The company aims to reach 10 billion yen by 2020.