Korean Beer Market Overview
Korea’s beer industry was worth 3.1bn GBP in 2016, with a total consumption of 2,350 thousand kilo-litres, making Korea the 14th largest consumer of beer globally. In terms of consumption of beer by country in Asia, Korea was ranked first with consumption of 46.7 litres annually. Three local mass manufacturers dominate the market; however, their market share is decreasing. The largest player, OB Beer, is the Korean subsidiary of the global beer manufacturer; AB Inbev – which not only produces the best-selling Korean beer brand Cass Beer with a market share of over 60%, but also imports and distributes major AB Inbev brands such as Hoegarden, Stella, and Corona. It is also leading the craft beer market through opening Goose Island Brewing Pub in central Seoul.
The Current Status of Imported Beer
In 2016, 136m GBP worth of beer were imported from overseas. More and more foreign brands are entering the market, with their market share in the beer category in convenient stores surpassing local beer for the first time in 2016. Imported beer is benefiting significantly from a loophole in the taxation scheme of beer products, which can sometimes allow imported beer to be more cheaply priced than local brands. Hence, in convenience stores and hypermarkets, imported beers can be sold as low as 5 GBP for 4 cans. Imported beers have shown particularly strong sales in retail channels such as convenient stores or hypermarkets as a result of these proactive marketing and promotional schemes.
Korean Craft Beer Market: A New Growth Driver
Korea’s craft beer market is valued at 13.6m GBP (2016). In terms of market share, although it only accounts for 0.5% of the beer market, it is growing quickly – five-fold in just a year in 2016 and doubling its size for three consecutive years up to 2015 – is expected to reach a market share of 10% in 10 years. The government created measures to relax regulations on craft beer; which now allow the distribution of craft beer products in hypermarkets and convenient stores, as well as broadening the range of ingredients that can be added to craft beers. These measures have significantly contributed to the growth of craft beer industry. This also led to the establishment of over 70 small-sized breweries to provide craft beer products to consumers, which is a dramatic increase from only 2 small-sized breweries just 5 years ago.
Latest Trends That Are Changing the Contours of Beer Market in Korea
Anti-Graft Law: The Anti-Graft Law was put into effect in 2016, and in turn, doing business through heavy drinking at karaoke bars was quickly replaced by a light drinking culture of having a pint of beer after work. Public servants, whose heavy drinking culture after work involved soju, a Korean traditional liquor, and hard liquor, were heavily affected by this new regulation, and underwent a dramatic lifestyle change to drinking a pint of beer alone at home to avoid breaking this newly established law.
Hon-Sul/Home-Sul: Those in their 20s and 30s are increasingly enjoying drinking alone (Hon-Sul), or buying canned/bottled beers from convenient stores nearby to consume at home alone (Home-Sul). Imported beers have shown a particularly strong growth in these retail channels, as people are now able to easily access imported beer sold at discounted prices.
Beer Delivery: Food delivery service is an important aspect of F&B business in Korea. In line with this culture, Veluga launched a home delivery service for imported/craft beers. It delivers different craft beer products twice a month, and this has been particularly popular amongst the ‘Hon-Sul’ population.
Preference for Low ABV Alcohol: Beer in Korea used to be a mixer product to be consumed together with soju. This meant that the flavour of beer was not important. However, growing drinking population of younger generation and women increased the demand for more flavourful alcohol with diverse flavours such as fruit-flavoured soju, which became popular amongst women and the younger generation. Beer companies are working to apply this trend to their products.
Food Pairing: Food pairing with different alcoholic products is a crucial element in the Korean beer market, as people enjoy a specific beer brand that goes well with a specific food. To exemplify this, currently the best-selling imported beer in Korea is Tsingtao Beer from China. It achieved its success despite Chinese beer not being popularly recognised globally as the best quality beer manufacturer. This is largely due to active marketing through food pairing with lamb stick barbeque which has traditionally been a popular street food in China and has also become quite prevalent in Korea. People often associate eating lamb sticks with Tsingtao Beer in Korea and, subsequently, huge consumption of Tsingtao Beer was achieved through this. The most recent trend is to have different craft beer products with authentic western pizza, and various craft beer brands have been able to grow through actively pursuing this opportunity.
Opportunities for UK Companies in the Beer Category
Korea’s beer industry is an attractive market for many foreign breweries. With the relaxation of regulations and the consumers’ growing demand for different flavoured beer, the beer industry has, as a whole, grown consistently. To tap into this opportunity, an increasing number of foreign companies and individuals have identified this market potential for craft beer, and have entered the Korean market through different means. An exemplary case is Brooklyn Brewery, which entered the Korean market in 2016 by setting up Jeju Brewing Company. It received funding from venture capital firms such as SBI Investment, an investment arm of SBI Holdings Inc, a Japanese firm. It is currently constructing its own brewery in Jeju, Korea, which can produce 25 million litres of craft beers annually. It plans to localise most of the production, distribution, marketing and development of new brands.
In general, Korea is considered a test market for many brands before entering other Asian markets, as China and Southeast Asian countries tend to follow trends that develop in Korea. The significant number of Chinese tourists that visit Korea each year also are given the chance to experience drinking UK beer brands in Korea – which now have a further opportunity to heighten their name recognition across Asia. With this in mind, UK brewers contemplating their Asia strategy should seriously consider this market.
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