S. Korean winemakers struggle for their piece of the alcohol market

Posted on : 2015-03-08 07:47 KST Modified on : 2019-10-19 20:29 KST
The domestic market is dominated by soju and beer, and most wines are imported, due to high production costs in Korea

South Korean winemakers have a long, hard path to carve, not least because the domestic wine market itself is so small.

In 2013, the entire alcohol market in South Korea was worth 8.81 trillion won (US$8.02 billion), but fermented fruit beverages - a category that includes wine - only accounted for a paltry 125.5 billion won (US$114.17 million), or 1.4% of the total.

Even worse, wine that is made in South Korea is only estimated to pull in 15 billion won (US$13.65 million) in revenue, which represents just 0.17% of the total alcohol market in the country.

“Beer and soju account for an 84% share of the total alcohol industry. There’s hardly any room left for wine,” said Moon Tae-seop, an official working in the food industry promotion department at the Ministry of Agriculture, Food and Rural Affairs (MAFRA).

A bigger problem is that production of domestic wine is declining, while imports of foreign wine are on the rise. The amount of grapes used to make wine plunged from 1,776 tons in 2005 to 625 tons in 2009, before making a modest rebound to 864 tons in 2013.

Consumption of Korean wild grapes, known locally as meoru, is down as well, reaching a peak of 1,133 tons in 2008 and subsequently dropping to 405 tons in 2013.

Since appropriately 70% of grapes are used to produce wine, it is estimated that around 900 tons of grape and meoru went into domestic wine production in 2013.

At the same time, imports of foreign wine have shot up from 18,984 tons in 2005 to 32,557 tons in 2013. Consequently, the amount of wine produced in South Korea in 2013 is thought to be only 1/36 of the amount of wine imported from abroad.

South Korean wine also performs poorly in price competitiveness. The production cost of a bottle of domestic wine ranges from 5,000 won to 10,000 won (US$4.60-US$9.10), while the production cost of wine imported from Chile or the US can be as low as 1,000 won or 2,000 won a bottle.

“Land and labor both cost a lot in Korea, which makes wine about 10 times more expensive to produce in Korea than in Chile. We have to acknowledge that Korean wines just can’t compete when it comes to price,” said Lee Jong-gi, director of the Association of Korean Wine Producers.

Consequently, one frequently expressed view is that domestic winemakers should seek a niche market.

“Europeans have been making wine for more than 2,000 years. There’s no way to develop the domestic wine industry all at once. We should start by linking it to tourism or cuisine,” said Kim Jun-cheol, president of the Korea Wine Association.

Some options are more events that highlight domestic wine - such as railroad travel packages, field trips to wine cellars, vineyard visits, and festivals - and various regions should pair local wines with tourist destinations and foods that they are promoting.

Another need is to address problems with wine distribution and retailing, which is currently dominated by beer, soju, and imported wines.

“Supermarkets and department stores say they’ll sell domestic wines, but then they smack us with prices that are lower than the production cost. We can’t supply wines like that. Recently, the Ministry of Agriculture, Food and Rural Affairs opened a traditional wine gallery in Insadong, Seoul. It would be great if bigger cities would create galleries that could double as retailers,” said Ryu Kyung-gyu, the wine industry representative for the city of Yeongcheon.

There are also numerous calls for the government to lower the excise tax of 15% that is currently imposed on all fermented fruit beverages, including wine, regardless of the size of the producer.

“We have been asking for the government to cut the excise tax by half or more for vintners who make less than 100 kiloliters of wine or exempt them from the tax altogether. So far, though, the government hasn’t played ball,” said Cho Dong-hui, owner of Chateau Muju.

 

By Kim Kyu-won, staff reporter

 

Please direct questions or comments to [english@hani.co.kr]

 

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