Local beer losing out to foreign rivals, jeopardizing production base
[THE INVESTOR] Local beer is steadily being sidelined by imports as distributors are focusing on importing foreign brands that can potentially threaten South Korea‘s production base, industry observers here said on May 13.
Market insiders said that South Korean distributors are currently competing with each other to secure rights to import foreign beer that have become popular with consumers in recent years and offer better profits for companies that can handle them.
Reflecting this trend, companies like Lotte Liquor have moved to import such products as Miller Lite, Miller Genuine Draft, Coors Light and Blue Moon.
Local whisky brand Golden Blue Co. recently said it signed an exclusive contract to bring in Carlsberg beer, with convenience store operator 7-Eleven introducing Burgemeester to local consumers at its many outlets.
In contrast to the inroads made by foreign beverages, local breweries have not released a new product in nearly a year, with the last two being Lotte’s Fitz and FiLite by Hite Jinro Co. that made appearances in June and April of 2017, respectively.
South Korean beer companies have relied on Cass, Hite and Kloud to stave off foreign competition. These products remain steady sellers but may not be able to attract people who frequently seek something new.
Related to the latest trends, some experts have claimed that changes in drinking patterns are contributing to the popularity of foreign beverages, although local breweries have argued they are facing so-called reverse discrimination in terms of the country‘s irrational tax base that allow distributors to make more money by selling imported beer that those made in the country.
South Korean authorities slap liquor tax equal to 72 percent of manufacturing costs on beer made in the country, which takes into account all manner of expenses for locally made beer. For foreign product, the same 72 percent is levied on import prices that do not include sales, and general and administration costs.
“Naturally the liquor tax on foreign brands is lower, which translates into better profit margins for importers,” said an industry expert, who declined to be identified.
He said that local importers can even opt to mark down import costs they report to authorities that would allow them to pay even less in taxes.
Others said that unless changes are made, distributors will move to import more overseas products that can undermine the status of local beer, which could cause production facilities to shut down and losses in jobs, hurting the local industry.
By Park Ga-young and newswires (email@example.com)