Sector Trend Analysis – Beer, wine and spirits South Korea

Alcoholic beverage megatrends

South Korea has a strong and entrenched drinking culture, and it is seen as an important way to relieve stress in a country in which long working hours are common. Colleagues often go drinking with one another in a type of event known as Hoesik. As of 2014, a Euromonitor study found that South Koreans drank the most spirits of the 44 countries analyzed. However, the South Korean drinking culture has undergone significant changes due to the coronavirus pandemic. Hoesik events and social drinking have become less common, and consumers have pivoted to drinking at home. Many consumers have shifted away from hard liquors in favor of drinks with a lower alcohol content.

Drinking at home

Prior to the pandemic, social drinking had been the driving force in South Korea's drinking culture. However, the pandemic has changed this. Two thirds of South Koreans reported changes in where they drank during the pandemic, most of whom started drinking at home, where alcohol can be purchased more cheaply from off-trade locations. On-trade alcohol retailers have been hit hard by the pandemic, with on-trade sales in litres falling by 23.0% in 2020. On-trade sales fell by 354.7 million litres, while off trade sales rose by 336.2 million litres.

Rise of imported wine

Over the course of the pandemic, many South Korean consumers have embraced wine for at home drinking. Wine is viewed by many as indulgent, however is also more affordable than many of the spirts that are popular for business or work-related drinking. The South Korean wine market is increasingly permeated by cheap wines, and South Korean imports of wine have been growing rapidly. The South Korean wine market is still not mature and has potential for future growth. 2021 saw a massive spike in Canadian exports of wine to South Korea.

Decline of imported beer

South Korean imports of beer have fallen significantly over the last several years. This comes after an extended period in which imports of beer had been showing strong growth. Imports of beer from Japan, formerly South Korea's largest supplier, have collapsed due to a boycott of Japanese goods by Korean consumers. Domestic breweries have picked up the slack, seeing significant gains over the historic period. Meanwhile, South Korean imports of Canadian beer have also fallen dramatically.

South Korean beer market

As of 2020, the South Korean beer market was the eleventh largest in the world, with beer sales of US$10.7 billion. From 2016-2020, beer sales in South Korea contracted at a CAGR of −1.7%. From 2021-2025, beer sales in South Korea are expected to see robust growth at a CAGR of 5.4%, with sales expected to reach US$13.5 billion by 2025. This growth rate is expected to be somewhat below the global average of 8.1%. The South Korean beer market has also seen a significant shift away from on-trade locations in favor of the off-trade due to the pandemic. Concurrently, there is also a significant shift away from imported beers in favour of beer that is domestically produced.

In the years leading up to 2020, craft beer had been enjoying rapid growth, and growth is expected to continue following regulatory updates that give the industry more freedom. In 2020, craft beer jumped from 0.4% of the market by volume, to 1.2% of the market by volume. Craft beer is also now benefitting from being newly available at off-trade locations, as well as declining demand for imported lager. Smaller suppliers of craft beer continue to have difficulty satisfying the significantly increased levels of consumer demand.

The South Korean beer market was valued at US$10.7 billion in 2020. The South Korean beer market was dominated by lager, which saw sales of US$9.8 billion in 2020 (91.2% of the beer market). Mid priced lager was the largest subcategory, with US$ 7.4 billion in sales in 2020 (76.4% of the lager market, and 69.7% of the beer market). Economy lager saw the fastest growth of any category over the historic period, exploding from US$86.7 million in 2017 to US$258.6 million in 2019. However, growth was modest in 2020 and economy lager is expected to see subdued growth from 2021-2025, growing at a CAGR of 4.4%. Dark beer saw a rapid CAGR of 21.0% from 2016-2020, however growth from 2021-2025 is expected to slow to a CAGR of 5.5%.

Non-alcoholic beer is expected to see the fastest growth, growing at a CAGR of 11.9% from 2021-2025. In 2020, non-alcoholic beer saw a significant spike in popularity, with sales growing by 53.8%, and expected to grow at a CAGR of 11.9% from 2021-2025. The market for non-alcohol beer, however, remains a small portion of the beer market, valued at US$20.0 million in 2020. It is expected to reach US$36.4 million by 2025. Increased demand for non-alcoholic beer has been driven in part by increasing health concerns and additionally the increasing ability of non-alcohol beer to replicate the taste of its alcoholic counterparts. Moreover, South Korean regulations limit the ability of consumers to purchase alcohol online, making non-alcohol beer a potential solution for consumers who do not want to visit supermarkets.

Mid-priced lager is expected to grow at a CAGR of 6.5%. In 2025, mid priced lager is expected to make up 73.8% of the South Korean beer market in 2025. Imported premium lager is expected to see particularly slow growth of 0.4% compounded annually, while domestic premium lager is expected to grow at a CAGR of 5.3%, as the South Korean alcohol market shifts in favor of domestic suppliers.

Off-trade and on-trade review^{Footnote 1}

In 2020, the off-trade beer market accounted for US$5.6 billion in sales (52.2% of the beer market), while the on-trade market accounted for just US$5.1 billion (47.8% of the beer market). This is a dramatic shift from 2016, when on-trade beer sales accounted for 71.8% of the beer market. From 2016-2019, on-trade sales dropped by a CAGR of −4.4%, while off-trade sales grew by a CAGR of 10.1%, driven by a rising trend in South Korea of drinking at home, rather than social drinking. The impact of the coronavirus pandemic was to greatly accelerate this trend, with on-trade sales falling by 25.5%, and off trade sales spiking by 18.2%, as South Koreans began avoiding social drinking.

From 2021-2025, on-trade sales of beer are expected to grow at a CAGR of 7.0%, while off-trade sales grow at a CAGR of 4.0%. In 2025, on-trade sales are expected to partially recover to US$6.6 billion, slightly below their 2019 levels of US$6.9 billion and significantly below their 2016 levels of US$8.2 billion.

From 2016 to 2020, the South Korean off-trade beer market has shifted dramatically in favor of convenience stores. Convenience stores have risen from selling 26.9% of beer by volume in 2016 to 44.3% in 2020, adding 17.4%. Meanwhile, hypermarkets have seen their market share fall by 15.2%, falling from 34.3% in 2016 to 19.1% in 2020. Supermarkets, independent small grocers, and department stores all saw their market shares decline, while warehouse clubs emerged on the scene.

Additionally, e-commerce has now started to make small inroads into the South Korean off-trade beer market. Until the beginning of the pandemic, South Korean law prohibited the online sale of alcohol, meaning that e-commerce could only take place with online sales of non-alcohol beer. However, laws were updated due to the pandemic, and alcohol can be sold online as part of meal delivery, provided alcoholic items make up less than half the price of the meal. Nevertheless, the South Korean beer e-commerce market remains an extremely small portion of overall sales.

Foreign beer in South Korea

In the years leading up to 2018, South Korean imports of beer had been enjoying swift growth, rising by a CAGR of 29.0% from 2014 to 2018. However, in 2018, imports of beer peaked, and in the years since then have been declining. From 2018-2021, South Korean imports of beer contracted at a CAGR of −10.4%. The retail value of beer imports fell from US$309.7 million in 2018 to US$223.1 million in 2021. The fall in beer imports has coincided with a shift in the South Korean market in favor of domestic beers, which have seen fast growth during these years.

Canada was not a major player in the South Korean beer market, with just US$458,543 in exports in 2017. Even so, Canada has seen its beer exports to South Korea fall by 85.4% from 2017 to 2021, totalling just US$66,681 in 2021. In 2021 The market was led by the Netherlands, with US$43.4 million in sales, followed by China with US$36.7 million in sales, and Belgium with US$27.6 million in sales. European beers continue to be popular among South Korean consumers, who generally perceive European beer positively. Japan had been the leading exporter of beer to South Korea as recently as 2018, however as of 2021 they were ninth largest exporter, amid a boycott of Japanese goods.

Product launch analysis for beer

Over the last few years, new packaging of beer in South Korea has become relatively more common. Many South Korean players in the market have made an effort to offer smaller package sizes in an attempt to win over younger consumers, while the launch of low or non-alcohol beer products is becoming more common.

Description of above image

Launch type	2017	2018	2019	2020	2021	Total
New product	42	34	10	9	20	115
New packaging	17	21	24	6	12	80
New variety / range extension	10	16	6	15	14	61
Relaunch	0	2	0	1	0	3
New formulation	0	0	0	0	0	0
Total	69	73	40	31	46	259

Source: Mintel, 2022

Description of above image

Unit pack size (millilitres)	Bottle	Can
500	135	4
355	39	10
330	7	29
473	9	2
360	0	4
440	3	0
350	3	0
Other	1	3
Total	203	56

Source: Mintel, 2022

Description of above image

Price in US$ (group)	Bottle	Can
[0.10 - 2.09]	48	23
[2.10 - 4.09]	123	44
[4.10 - 6.09]	26	64
[6.10 - 8.09]	21	22
[8.10 - 10.09]	6	20
[10.10+]	7	14
Total	231	187

Source: Mintel, 2022

Description of above image

Price in US$ (Group)	500 millilitres	355 millilitres	330 millilitres	473 millilitres	360 millilitres	Other format
[0.10 - 2.09]	15	4	5	0	0	1
[2.10 - 4.09]	99	8	12	7	0	4
[4.10 - 6.09]	9	15	13	0	4	0
[6.10 - 8.09]	4	15	1	0	0	2
[8.10-17.00]	3	4	1	1	0	1

Source: Mintel, 2022

Description of above image

• Premium: 50
• Seasonal: 24
• Social Media: 20
• Limited Edition: 20
• Ethical - Environmentally Friendly Package: 17
• Ethical - Recycling: 17
• Cobranded: 10
• No Additives / Preservatives: 5
• Diet / Light: 4
• Event Merchandising: 3

Source: Mintel 2022

Examples of beer launches

South Korean spirits market

South Korea was the world's ninth largest spirits market in 2020, with US$10.0 billion in sales. The South Korean market contracted at a CAGR of −1.9% from 2016-2020, however is expected to grow at a CAGR of 3.2% from 2021-2025. South Korean sales of spirits are expected to reach US$11.5 billion by 2025.

The South Korean spirit market is dominated by Shochu/soju, which saw US$7.7 billion in sales in 2020, accounting for 76.2% of all sales in 2020 of any products in the spirit category. This category is expected to see slower growth than the market and is expected to account for 74.4% of the market in 2025, with US8.6 billion in sales.

Blended scotch was the largest category of foreign whiskey, with US$610.1 million in sales in 2020, down significantly from its 2016 value of US$1.9 billion. Blended scotch whiskey is expected to partially recover from 2020-2025, growing at a CAGR of 10.8% over the period and reaching US$998.8 million in sales in 2025. Single malt scotch whiskey and bourbon both saw modest increases from 2016-2020, while other whiskey saw a decline.

The South Korean spirit market is shifting in favor of products with a lower alcohol content, as health concerns become increasingly prevalent. A new trend is the mixing of tonic or soda water with shochu/soju, reducing both shochu's alcohol content and its bitterness. Meanwhile, locally produced spirits are trending towards lower alcohol contents, as producers try to appeal to female consumers.^{Footnote 2}

Off-trade and on-trade review

In 2020, the South Korean spirit market was largely dominated by the on-trade. Total on-trade sales were US$ 7.6 billion (76.2% of the spirit market), while off-trade sales were US$2.4 billion (23.8%). The South Korean alcohol market saw a significant shift from the on-trade to the off-trade during the pandemic, however the benefits to the spirit off-trade have been relatively limited. In 2020, on-trade sales of spirits fell by US$2.8 billion, while off-trade sales grew by a relatively modest US$0.2 billion. Social drinking continues to be key to South Koreans' taste for harder drinks. Nevertheless, demand for spirits from the off-trade has increased. From 2021-2025, the on-trade is expected to see faster sales growth as it partially recovers from the pandemic. On-trade sales of spirits in 2025 are expected to be US$9.1 billion, below their 2019 levels of US$10.4 billion. Off-trade sales are expected to reach US$2.5 billion by 2025.

Whiskey has been hit particularly hard by the pandemic, with on-trade sales declining by 43.4% in 2020, while off-trade sales also fell. The largest losses were suffered by Scotch. Prior to 2020, whiskey had been largely consumed in nightclubs or luxury settings and was of limited appeal to those drinking at home. Whiskey sellers have been attempting to adjust to the new reality, offering smaller drink sizes to appeal to at-home drinkers, offering whiskey mixed with a non-alcoholic base, and offering their products at convenience stores. Overall, both the on-trade and off-trade of whiskey are expected to see relatively fast growth from 2021-2025, with on-trade sales of whiskey growing at a CAGR of 7.2%, and the off-trade growing at 3.0%. On trade sales of whiskey are still, however, expected to remain well below 2019 levels.

The sale of white spirits through the on-trade is expected to grow at a CAGR of 8.3% from 2021-2025, while off trade sales of tequila are expected to grow at a CAGR of 17.8%. However, the off-trade market for tequila is small, and this represents only a growth from US$1.3 million to US$2.5 million.

Companies

In 2020, Hite Jinro saw the market share of its brand Chamisul expand from 31.2% to 39.8%, while its brand Jinro doubled its market share to 4.0%. The Shochu market is becoming more consolidated, as smaller players lose sales due to covid-19.

Foreign spirits in South Korea

South Korean imports of foreign spirits totalled US$238.8 million in 2021, and grew at a CAGR of 3.8% from 2017-2021, despite a significant drop in imports in 2020. Whiskies dominated the category, with US$175.4 million in imports in 2021 (73.4% of spirit imports).

From 2017-2021, Canadian spirit exports have declined, however they have also become increasingly diversified. Until recently, Canadian exports of spirits to South Korea had been almost exclusively whiskey. The value of Canadian whiskey exports to South Korea spiked from US$0.4 million in 2015 to US$1.8 million in 2016. However, after peaking in 2018 Canadian whiskey exports have returned US$0.4 million.

However, Canada has seen growth in other categories of spirits. As recently as 2013, Canadian exports of any spirits other than whiskey to South Korea were negligible. Canadian exports of spirits other than whiskey totalled US$7.0 thousand in 2013 and reached US$434.5 thousand in 2021.

South Korean wine market

In 2020, the South Korean wine market was valued at US$2.7 billion, down slightly from US$2.8 billion in 2019. Despite a temporary downturn in 2020, wine has seen strong growth from 2016 to 2020, growing at a CAGR of 4.8%, at a time when global wine consumption was declining. Moreover, the market is expected to grow at a very strong CAGR of 8.1% from 2021-2025, outpacing any of the world's top wine markets. South Korean wine consumption is expected to reach US$4.0 billion by 2025.

Many South Korean consumers who have taken up drinking at home have turned to wine, viewing it as indulgent and affordable. At a time when the South Korean alcohol market is shifting in favour of domestic producers, wine has been a bright spot for exporters to South Korea.

In 2020, the still red wine was the largest wine category in South Korea, with US$1.2 billion in sales (45.1% of the market). Red wine is popular due to perceived health benefits^{Footnote 3}, and is expected to see strong growth from 2021-2025, growing at a CAGR of 9.5%. Still rosé wine and sparkling wines other than champagne are expected to see fast growth as well. Growth in wine's popularity is being bolstered by increasing access to cheaper wines through the off-trade. Wine's popularity among female consumers is said by Euromonitor to be growing particularly fast, driven by the appeal of affordable wine. Overall, the outlook for the South Korean wine market is promising, with strong growth expected across a broad range of categories.

A notable exception to this trend is the category of sake. Sake has seen its popularity drop sharply, as South Korean consumers continue to boycott Japanese goods. Sake lost over half its retail value from 2019-2020 and is not projected by Euromonitor to recover by 2025.

Off-trade and on-trade review

The South Korean wine market saw a dramatic shift in favour of the off-trade in 2020, with on-trade sales falling by US$0.4 billion, while off-trade sales rose by US$0.3 billion. The off-trade made up 57.4% of South Korean wine sales in 2020, compared with 44.8% in 2019 and 46.7% in 2016. The on-trade is expected to see slightly faster growth from 2021 to 2025, as the sector recovers from the pandemic, however the off-trade is also expected to see very strong growth. The South Korean off-trade has seen a significant shift in favour of cheaper wines from 2016 to 2020, with the share of wines costing under $15.42 increasing across all categories.

The South Korean wine off-trade is dominated by hypermarkets, which enjoyed 62.6% of sales by volume in 2020, while convenience stores have been gaining prominence. Both categories of outlets have been seeking to appeal to consumers by offering new private label wines for more affordable prices. Hypermarket Lotte Mart, for example, launched its own private label that sells for KRW3,900 (US$4.11).

Imports

In 2021, South Korean wine imports surged to US$559.8 million, having grown at a CAGR of 27.8% from 2017-2021. Even as sales of wine in South Korea contracted slightly amidst the pandemic, the growth of wine imports accelerated. Domestic production of wine is limited by scarce farmland and a climate that is not suited to grape cultivation.^{Footnote 3}

Canada is a relatively minor player in the South Korean wine import market, with US$1.2 million in wine exports to South Korea in 2021 (0.2% market share). However, Canadian wine saw strong growth in 2021, jumping 61.4%. Overall, from 2017-2021 Canadian exports of wine to South Korea grew at a CAGR of 17.9%, somewhat below the growth rate of South Korean imports of wine from all countries. Non-sparkling wine in containers of size 2 litres or smaller made up 98.8% of Canadian wine exports to South Korea in 2021.

Of note, American wine has become increasingly present in the South Korean market, growing at a CAGR of 38.3% from 2017-2021. As of 2021, The United States is now South Korea's second largest supplier of wine, behind France.

South Korea overview

South Korea is the tenth largest economy in the world and fourth largest in Asia, with a GDP of US$1.8 trillion and a population of 51.8 million. South Korea's population is highly educated and productive, while the country enjoys low unemployment and solid economic growth. South Korea also has the lowest fertility rate in the world and a rapidly aging population. Single person households are becoming increasingly common throughout the country and are an increasing part of South Korean consumer demand.

Doing business in South Korea

When contact with a South Korean importer is established, it is advisable to visit the importer in person. There is no substitute for face-to-face meetings because Korean traders highly value face-to-face contacts when developing business relationships with new foreign suppliers. Cold calls usually don't work with South Korean businesspeople. One of the best ways for new-to-market Canadian suppliers to develop contacts with a large number of Korean buyers/importers is through participation at a trade show. Seoul Food & Hotel (www.seoulfoodnhotel.co.kr) is the leading food trade show held annually in South Korea. Participating in these shows enhances initial contacts with importers, agents, wholesalers, distributors, retailers and others in the food and beverage industry.

Taxes

On January 1, 2020, South Korea abolished its previous 72 percent tax on beer. In its stead, Korea has a implemented a volume based KRW830.3 (US$0.72) per-litre tax.^{Footnote 4} This new tax is to the benefit of more expensive beers, with any beer priced over US$1.00 a litre (before tax) seeing its taxes decline.

Tariffs

Since January 1, 2019, most of Canada's exports have benefited from duty-free access into South Korea under the Canada-Korea Free Trade Agreement (CKFTA). South Korea will eliminate all tariffs on alcoholic beverages by 2024. Consult the Canada Tariff Finder to explore tariff information for the South Korean market under the CKFTA, and other foreign markets with which Canada has a free trade agreement. 

Tariff preferences for key Canadian alcoholic beverage exports to South Korea:

• Beer - tariff of 30% was eliminated in 2021;
• Rye whisky - tariff was eliminated in 2015;
• Canadian wine - tariff was eliminated in 2017;
• Canadian vodka - tariff of 20% will be eliminated by 2024 (tariff is reduced to 10% for 2019).

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

• Find a Trade Commissioner

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For additional information on Seoul Food and Hotel (SFH) 2019, please contact:

Ben Berry, Deputy Director
Trade Show Strategy and Delivery
Agriculture and agri-food Canada
ben.berry@agr.gc.ca

Resources

• Euromonitor International. Alcoholic Drinks in South Korea, May 2021
• Euromonitor International. Beer in South Korea, May 2021
• Euromonitor International. Dark Beer in South Korea, May 2021
• Euromonitor International. Non/Low Alcohol Beer in South Korea, May 2021
• Euromonitor International. Spirits in South Korea, May 2021
• Euromonitor International. Wine in South Korea, May 2021
• Global Trade Tracker, 2022.
• Mintel Global New Products Database, 2022.
• United States Department of Agriculture, South Korea: Distilled Spirits Market Report, May 2020
• United States Department of Agriculture, South Korea: Wine Market Report, March 2021
• United States Department of Agriculture, South Korea Adopts Volume-based Liquor Tax for Beer, January 2020

Sector Trend Analysis – Beer, wine and spirits South Korea
Global Analysis Report

Prepared by: Brendan Dwyer, Student

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