Insights into South Korea's wine market

South Korea is one of Southeast Asia’s most attractive markets for wine exporters, given an affluent population who are increasingly interested in wine. According to a USDA Foreign Agricultural Service report, France was the leading supplier of wine to Korea in 2014, followed by Chile, and then Italy. James Lawrence asked experienced market watchers for their thoughts.

Carlos Bonet, Keti Mazzi, Charles Sichel, Sunjoo Choi
Carlos Bonet, Keti Mazzi, Charles Sichel, Sunjoo Choi

Carlos Bonet  

regional sales manager, Codorníu Asia. Codorníu is one of the world’s biggest producers of sparkling wine, founded in Catalonia, Spain in 1551.  

With all the excitement concerning China, the Korean market for imported wine is sometimes unwisely overlooked. Indeed, South Korea currently boasts the highest level of alcohol consumption per capita in the world and is one of the top 10 global economies open for business.

Codorníu opened the first Spanish regional sales office in Seoul in 2014, although we started exporting to Korea back in 2010. Since 2010, growth has been steady and in 2013 the value of Codorníu sales in Korea grew by almost 40%. Consumption of imported wine is being driven by the Millennial generation of urban, middle-class professionals, who are travelling with greater frequency and being exposed to Western culture. That said, the market for imported wine is almost totally dominated by Seoul and, unlike China, Korea has no really important tier 2 and 3 cities. The nation’s capital, however, has seen a recent boom in the number of nightclub openings and the on-trade is where we are increasingly focusing our attention. Weddings are another growing avenue for Codorníu as more and more young professionals shun spirits and beer at weddings in favour of Western traditions.

However, over the past 12 months our sales have flatlined in the retail sector to a degree and the country is still recovering from the financial crash in 2008. In addition, government domestic tax on alcohol is around 70% –  for the moment, the consumption of imported wine stands at approximately three litres per head. A large majority of the populace, certainly the older generation, consume vast amounts of Soju, a distilled beverage that retails for just $2.00 per bottle. 

So my advice to any brand contemplating jumping headfirst into Korea is be very judicious in your choice of importer. There are over 400 importers working in Korea, but every year over a third go into administration. I feel that more are going to go out of business in 2016, as the industry continues to see more consolidation. Many will take your money and then run, so do your research above all else. And be aware that the market for imported alcohol is becoming rapidly saturated, so ensure you have something genuinely different to offer.

Overall, though, I feel that South Korea is worth the considerable time and investment required to build a brand in any emerging market. The per capita spend among the middle classes is far higher than in the Philippines or Thailand, for example, and a wine journalism culture is also starting to develop; Seoul has a major wine magazine, Wine Review, and the growth in students applying for WSET courses has been phenomenal over the past five years.

Moreover, the nation is blessed with a government that embraces free trade. As of July 2016, South Korea has free trade agreements with the vast majority of wine-producing nations, and generally imposes no external tariffs on imported alcohol. This fact alone puts South Korea way ahead of its neighbours in Southeast Asia, most of which impose crippling tariffs on foreign brands.
 

Keti Mazzi

Asia brand manager, Tasca d’Almerita group, a family of wine estates in Sicily, Italy.

Tasca d’Almerita began exporting into South Korea in 2012 and has witnessed a dramatic change in the perception of Italian wines during that period. Until relatively recently, the import market was heavily dominated by France and Chile – still key categories – but a greater diversification has occurred over the past four years. Increasingly, millennial consumers in the market for imported wine are asking questions and showing an interest in Italy’s great diversity of indigenous varieties. This well-travelled generation are very different to their parents, being far more inquisitive and open to learning about foreign cultures and traditions, not least of all wine. 

Tasca’s sales growth has been driven by the retail sector, which in our experience dominates sales of imported wine in Korea. This marks out South Korea from other Southeast Asian countries, where the on-trade tends to dominate. In contrast, the on-trade in Seoul clearly needs time, but I have witnessed sustained growth in the number of restaurants, hotels and bars opening in Seoul since 2012. In addition, a younger generation of sommeliers are emerging, and they’re very eager to diversify their wine offering away from Bordeaux and Champagne.

Of course, building up any brand in Asia is an extremely risky business – Korea is still a new and relatively immature market for imported wine. It’s vital to pick the right partner who shares your values, and to be patient. And brands must ensure their staff are based in the market: living, working and engaging with people. And even then, it’s a long and hard process. 

But I still believe that Korea is one of the most interesting and promising markets in Asia. The country has a legacy of treating food and mealtimes as sacred – this gives us the opportunity to explore the endless possibilities of matching imported wines with their varied, colourful and rich food culture. 

 

Charles Sichel 

export director, Maison Sichel, a family business based in Bordeaux which is both a wine trading company and a wine producer.

Sichel has been exporting to South Korea for 25 years and the market has evolved in leaps and bounds since we started in 1991. However, the last five years have been marked by what I would describe as a “back to basics” consumer shift. Over the past 15 years, the New World has given countries like France quite a lot of competition, but it seems to have gone full circle and there is renewed interest in mid- and top-level Bordeaux.

Currently, the retail market in Seoul is showing the most promising growth, although from Sichel’s point of view, sales haven’t grown at the rate we expected, or hoped. As with most markets, the enormous margins required in the on-trade mean that most consumers are discouraged from choosing imported wine. Gifting plays a huge part in driving consumption, although a culture of consuming imported wine habitually is increasing steadily. 

There is also much to admire about the South Korean market; it’s certainly not immature and there are numerous distributors who are very knowledgeable, highly motivated, efficient, dedicated and very professional. However, competition for listing is intense and some outfits are not reputable. 

My advice to brands is simple: go to Seoul, meet the people and listen to what they want/need. You need detailed knowledge of the market requirements, taste and of course the competition. Understanding a country’s culture (short of being able to speak the language) is also key to success. South Korea has an extremely deep and rich culture.

Sunjoo Choi 

WSET educator, Seoul

South Korea is still in the midst of a long-term recession, yet the retail market (current value $880m) for imported wine has been expanding over the past two years, albeit slowly. Increasingly, Koreans are consuming alcohol at home while on-trade sales (current value $420m) continue to stagnate, as a result of the high costs involved. But as the general level of public knowledge concerning wine increases, there are opportunities for brands aiming at the mid-market – the on- trade in particular lacks enough affordable wine choices. 

The consumption of imported wine continues to revolve around Seoul, although our second-biggest city, Busan, and the touristy Jeju Island have potential, particularly as those markets are less saturated.

However, I strongly urge brands to research their importer carefully and do extensive homework; many companies go bankrupt each month. Also remember that consumption is limited to a relatively small number of upper-middle class households, and that there are major barriers to growth, not least the high domestic taxation on imported wine and the fact that the government forbids the sale of alcohol via the internet. 

Nonetheless, I predict that the market for low- to mid-priced wines will expand over the next five years. Sales will be dominated by the hypermarket chains, which are exceedingly popular in Seoul. WSET student numbers increase each year, and the level of wine knowledge is definitely improving. But in the end, brands must be prepared to offer something unique – a wine with an interesting story to tell, offered at the right price point. The South Korean market for imported wine is very competitive, so don’t expect a rapid return on your investment. 

 

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