France, US, Chile wage wine war in Korea

The Korean love affair with wines has fluctuated wildly between highs and lows in recent years. Distributors now hope that the effects of relaxed retail regulations and free trade pacts with wine-making nations will put the relationship on firmer ground by making them more affordable.

Wine consumption appeared to be hitting new peaks when Lehman Brothers collapsed, triggering a full-blown economic crisis, which forced wine lovers here to reign in their budgets.

But there is a renewed sense of vibrancy in the wine market as Korea’s free trade agreement (FTA) with the United States is poised to take hold.

FTAs with other major wine-making regions such as the European Union and Chile didn’t have a dramatic impact on consumer prices, with the complex web of importers and retailers negating lowered tariffs.

However, recent changes in Korea’s beverage tax law, which enables importers to sell their bottles directly to consumers instead of going through wholesalers and retailers, suggest that falling prices are about to become more visible.

And if the controversial plans by the Fair Trade Commission (FTC) to allow wine to be sold and distributed online ever go through, it’s safe to assume that more drinkers will be converted back to the grape from the hop.

Major wine importers Keumyang International, Lotte Liquor and Nara Cellar are now engaged in a heated price competition as they lower costs of the wines they supply to discount chains and department stores. Retailers such as Shinsegae, which runs its eponymous department stores and E-Mart, the country’s largest discount mall, are also expanding the amount they import directly as they look to lure wine lovers with lower prices.

One of Keumyang’s popular items is the 1865 San Pedro single vineyard cabernet sauvignon, which is popular among Korean golf enthusiasts who construe the number as a hopeful “18 holes, 65 shots.” The wine is now sold at just above 50,000 won in shops, instead of its going price of 60,000 won just weeks ago.

Lotte has cut the supply prices of Chilean brands Carmen and San Pedro by around 10 percent recently, while Nara is providing Montes Alpha wines 10 percent cheaper to retailers than before the start of the month. The importers are also lowering the prices of their American wines, which will be losing their 15 percent tariff on March 15 when the Korean-U.S. FTA kicks in.

“While the laws on beverage taxes have been revamped, it will take more time for us and other importers to secure and prepare spaces where we can sell our wines to consumers directly,” said a Keumyang official.

“But there is excitement among consumers due to anticipation that prices are about to go down, and this requires us to start a marketing war early for brand recognition and loyalty.”

Korea’s wine boom peaked in 2008 when $166.5 million worth was imported. However, since the economic downturn, the country’s imports fell by 32.5 percent the following year to $112.45 million. Imports improved moderately last year to $132 million.

Industry people here believe that the wine market is ripe for a rebound. The Italians, however, could prove to be the casualties of the renewed wine wars. Korea’s wine market has been dominated by products from France, Chile and Italy, but the United States could threaten to overtake Italy for third place in the sales hierarchy, market sources say.

“The strength of Italian wines has been based on sweet wines like Moscatos, but the popularity of Italian table wines in the 20,000-60,000 won price range has been poor. This lack of diversity is beginning to hurt Italian wines here,” said an official from one of the importers.

“The so-called new world wines from countries such as the United States, Chile and Australia continue to challenge old world wines made in Europe. France’s top spot continues to be undisputed and Chilean wines have been building a reputation for providing high quality at moderate prices, but it remains to be seen how American wines attack this status quo.” <Korea Times/Kim Tong-hyung>

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