With a burgeoning young middle class, Korea looks set to become a hotbed for alcohol consumption in Asia Pacific. While soju may dominate the market, producers from other drinks are keen to make their presence felt.
*This feature was originally published in the May 2023 issue of spirits business magazine.
K-Pop – popular Korean music – has become the international face of Korea. Groups like BTS and Blackpink have become global icons – and as a result, interest in Korea has been rekindled like never before in the past few years. K-Pop may not have caused a surge in interest in spirits in Korea, but in the same period, international alcoholic beverage brands have shown growing interest in the Asian market. ASIAN.
Korean soju brand Jinro remains the world’s best-selling spirits brand – and has seen sales surge in 2022. Its 9-liter barrel sales have grown from 94.5 million cases in 2021 to 100.9 million barrels in 2022, marking a 6.8% increase from the giant starting point.
Kim Kang-wook, director of global strategy group overseas business, at Hite-Jinro, parent said, “As the Korean Wave spread around the world, Korean food culture also followed. have a great impact on foreign consumers. company of the Jinro soju brand. “Korean soju is also affecting foreign consumers, so the Korean market is a very important starting point for our company, as the competitive advantage in the Korean market leads to the foreign market. outside.”
According to data from IWSR’s Beverage Market Analysis, national spirits account for more than 95% of spirits consumption in South Korea in 2021 and 80% by value. Beer is the main shareholder of the Korean market, followed by spirits, then wine. In terms of market share by quantity of spirits in South Korea alone (excluding national spirits), whiskey is the dominant category, accounting for 72 percent by 2021, according to IWSR Beverage Market Analysis. During the Covid-19 crisis, South Korea has coped relatively well in 2020, when the number of infections remained in the hundreds. But 2021 is when the pandemic is clearly felt. The appearance of a new variant of Covid-19 caused the Korean government to extend the ‘administrative order’ for the first 10 months of the year.
The country’s ‘traditional commerce’, such as karaoke or hostess bars, was hit hard, while ‘modern commerce’ faced limited capacity constraints and closing times. early door. Drinking alcohol at home means increasing sales at a discount – but alcohol still benefits the most from the occasion change.
The spirits categories ‘heavily dependent’ on the modern trade channel – gin, rum, tequila, vodka and US whiskey – have grown in 2021 thanks to more home-drinking, Analysis IWSR’s beverage market noted. In contrast, soju sees a “modest decline” in 2021, mainly due to Covid-19 restrictions. Jonathan Ho Chen Chong, marketing analyst at IWSR, noted: “A large drop is expected during this period. “However, soju is a staple Korean drink and it can be easily purchased through other channels.
Convenience stores and supermarkets have not yet closed completely and consumers can still buy soju from nearby stores.” It shows the powerful soju commands in its home market.
“Given the substantial market share of local soju, any change to other spirits seems relatively insignificant,” continued Ho Chen Chong. Leave soju out of the equation, and no “major changes” are expected in South Korea’s consumption of spirits. “Vodka is expected to continue its downtrend, while whiskey is expected to remain the dominant category, with Scotch whiskey predicted to gain more market share from other whiskeys, particularly are those with lower alcohol content based on Scotch,” adds Ho Chen Mr. Chong. “In the Scotch whiskey category, single malt Scotch is expected to continue to expand and increase market share. We anticipate increasing consumption of Irish whiskey.”
Figures from the Scotch Whiskey Association (SWA) back up Ho Chen Chong’s insights. In 2021, South Korea is worth £63.8 million, or 8.4 million bottles of direct export, SWA noted. By 2022, this has grown to £124.5 million, or 14.1 million bottles, making South Korea the 17th most valuable market for Scotch exports globally – and the second largest. seven in Asia Pacific by value. However, the figures describe a year of post-Covid-19 recovery, the SWA pointed out, and these figures are still significantly below their 2009 peak, according to the trade body.
Emily Roads, head of commerce (Asia Pacific) at SWA, notes: “Korea is an increasingly upscale market. “Although bottled blended Scotch whiskey accounts for the majority of exports (about 65%), demand for single malts has grown strongly, accounting for about a third of exports by 2022, up from 3% market share in 2012, and 13% market share in 2019. This premiumization has helped maintain Korea as an important export market for Scotch whiskey, despite a significant decline in exports over the decade. past century.”
The trends Roads sees in Korea mirror those in the broader Asia Pacific region. Last year, the region became Scotch’s highest value export market – surpassing the EU for the first time. “In 2022, the site is worth £1.818m [US$2,271.8m] (29% of global exports), and the second largest by volume, with a total volume equivalent to 479 million bottles (29% of global exports),” adds Roads.
“There are significant opportunities for further growth in the region, with markets such as Vietnam, Malaysia, Thailand and the Philippines all showing strong signs of growth and with a growing young middle class, we We can see a growing interest in high quality, premium products like Scotch whiskey.”
Let’s go back to Ho Chen Chong’s note predicting “increasing consumption of Irish whiskey”. Given Scotch’s entry into Korea, it would make sense for the category’s Irish partner to follow suit – with a whiskey-familiar audience waiting. Belfast Distillery Co has its eye on the market. McConnell’s Irish whiskey owner has signed a distribution deal with Goldenblue in Korea this year, including a shipment of nearly 10,000 bottles to Korea. The partnership is supported by the new group of government agency Investment Northern Ireland in the South Korean capital, Seoul.
Free trade between the UK and South Korea is under discussion as the UK government conducts an eight-week consultation in December 2022 regarding the crafting of an enhanced free trade agreement. high between the two countries. The aim is to create a ‘more modern and fit for purpose deal’ that builds on the existing £14.3bn deal. What potential impact could this have on the soul context? “This is of particular concern to the Scotch whiskey industry, as we seek to address a number of trade barriers and market access issues that could increase our exports to this market. ,” advises SWA’s Roads.
“Examples of change we would like to see include duty-free access to products coming to market through distribution centers like Singapore: a lasting concern for the whiskey industry Scotch.”
E-commerce is another area with potential – but the rules in South Korea are strict. Currently, the law only allows clicking and receiving alcohol orders online, not door-to-door delivery. The exception to this rule is the traditional alcohol order, like soju. Understandably, this is something SWA wants to change. Roads said, “Fixing this in line with international best practices will help ensure the e-commerce market in Korea is a safe and responsible sales channel.
“With consistent support from the governments of both sides in the UK-Korea FTA negotiations, the Scotch whiskey industry can continue to boost exports to a market that still plays a role. important role in the Asia Pacific region, while ensuring that consumers have choice and access to a wide range of Scotch whiskey products.”
Bryan Do, founder of Korean distillery Three Societies, said the introduction of click and collect through the Smart Order policy in 2020 has “made it easier for consumers to access alcohol.” high-class power”. In early 2023, the three Associations released Korea’s first single malt whiskey, called Ki One (40% ABV). The producer also introduces Cask Strength whiskey (57.7% ABV). A single malt gin, Jung One, is also in production. Do note two main trends affecting the drinking habits of consumers in Korea: premiumization and lower ABV spirits.
“Many people are looking for enjoyment and ‘flexibility’ through social media when it comes to drinking, so premium bottles are being sought out even more,” Do added, adding that consumers are in their 20s and older. 30 are increasingly looking for something new, whether it’s local. or imported brands. “With an increasing focus on health, more people are tending to drink better quality products in less quantity.” He noted that the soju market in Korea is “very competitive,” but less so for Western spirits. “Less is known to the local market for these spirits, such as gin, brandy or Cognac. However, because whiskey is so popular, imported single malt whiskey is very competitive.”
Taiwanese whiskey brand Kavalan has also enjoyed recent success in South Korea, but from a different channel than Scotch and Ireland. In 2022, its sales more than doubled with 169% growth, led by a 115% increase in travel retail. Korean movie brand credit Decision ARRIVE Leave for its success. Created by Korean director Park Chan-wook, the film features a brief appearance by soloist Kavalan Oloroso Sherry.
“The introduction of Kavalan as a whiskey is endorsed by celebrities as a premium brand,” said Britney Chen, Kavalan’s regional brand ambassador and global public relations officer. It also helps “minimize price increases and create positive viral content,” adds Chen. “Consumers know Kavalan as a competitive brand with great taste and competitive pricing among major brands.”
Chen said South Korea has become one of Kavalan’s biggest export markets thanks to “the continued development of Korean culture globally.” “As such, it is likely to remain an important market, not only in Northeast Asia but globally. We remain modestly and cautiously optimistic about its potential for further growth in the Korean market, especially with the Sherry Cask line.”
Could Korea be the next spirits market in Asia? It is looking increasingly capable.