The wine buyers of South Korea

The South Korean market is undergoing an upswing at present, says Jung Yong Cho. But market consolidation means fewer opportunities to get into the market through an importer, as the big companies are sourcing directly.

Jun Wan Kim, Kwang Jo Kwon
Jun Wan Kim, Kwang Jo Kwon

When it comes to wine consumption, South Korea has enormous potential to grow. While the average consumption per capita is still about a bottle a year, the market has begun increasing again after the downturn caused by the global recession in 2008. In 2013, the value of wine imported to South Korea was $172m, higher than the ­previous high of $167m in 2008. But while the numbers look good, market players are still struggling to survive. 

This is mainly because of the supermarkets, which dominate the wine sector. E-mart, Lotte Mart, and Home Plus (Tesco) absorb the demand, doing price reductions at their own outlets nationwide. Restaurateurs and wine bar owners see their sales going down. Department stores, managed by conglomerates, request wine suppliers for discounted wines, so they can promote new wines each week. As a result, the large supermarkets and department stores keep on gaining market share, while small and individual wine shops need exit plans.  

Because of high tax rates, pricing is of ­utmost importance in South Korea: 53% based on CIF to the EU, USA and Chile, which have free trade agreements in place, and 68% to non-FTA nations like Australia, New Zealand and South Africa.  The market diverges when it comes to the off-premise and on-premise ­markets; ten years ago, it was estimated to be 5:5. Today, it’s estimated at 7:3. 

As always, France − with a current market share of 31% − is the number one in terms of import value. Then comes Chile (21%), Italy (17%), US (11%), Spain (8%) and Australia (4%). The newcomer is Spain, which has gained the most since the FTA between South Korea and the EU; however, it supplies low-priced wines to the supermarkets, and is gaining a reputation as low-end. 

While the market is dominated by global wine brands, there are small and specialized importers working within market niches. These include Handock and Vinovus for Burgundy, Tiger for South of France, Cape Wine Cellar for South Africa, Vinovino for Italy and Curious for Austria and Spain.
 

Jun Wan Kim, head of wine division, Lotte Liquors 

www.wine.co.kr

Lotte Liqours is a subsidiary of Lotte Group, which is one of the top ten conglomerates in Korea. It produces liquors such as soju (a local spirit), along with beer, whisky, and even wine. Given that, Lotte Liquors is highly competitive in the market. The Lotte Group also includes Lotte Mart, one of the top three discount stores. While synergy between Lotte Liquors and Lotte Mart can be expected, Kim says, “We make it a rule to work without any privileges.”

Although he leads one of the top two wine importers, Kim  - who studied wine in Australia – is not high profile. He is a good listener. He is also responsible for Majuang, a Korean wine brand, produced locally from wine sourced globally. Kim says, “If we regard Majuang as an imported wine, we are the number one importer in Korea.” Without Majuang, Lotte is slightly behind Keumyang in terms of sales. Lotte ­Liquors selection includes Yellow Tail, Castel, Joseph Drouhin, Banfi, Penfolds and so on.

What’s the big wine trend of 2014?

The wine market grows when incomes go up. Our economy is showing robust growth, so we anticipate a bright future. Sluggish wine consumption is starting to change, step by step. 

What advice would you give a wine producer looking to enter the Korean wine market?

Wine producers should find good partners who are similar sized. We have seen lots of failures in the market. Big global brands with small importers, or medium-sized importers see a rosy future, but it can’t last. Changing partners is not definately a good answer. Brand can suffer severely from previous importers if they are not ready to depart from the brand.

 

Sang Doek Joe, marketing director, Kiljin 

www.kiljin.co.kr

Joe is an experienced marketing specialist, who – until recently – used to work for Keumyang, South ­Korea’s number one importer.

Kiljin, like Keumyang, is a strong player in the off-premise market; Joe is trying to widen the focus. In his previous role he created the Chilean bestseller 1865: the idea is that after drinking 1865, you can complete 18 holes of golf in 65 shots. Plenty of golf courses still display this wine, thus proving Joe’s skill in storytelling. Now, he is eager to find an alternative to 1865. He is also looking for small wineries, to help build a ­balanced portfolio: Chile’s Santa Helena and Cousiño Macul, and the Italian moscato Balbi Soprani are currently Kiljin’s bestsellers.
 
What’s the big wine trend of 2014?

The balance between the on- and off-premise­ has been severely harmed in the ­recession. The on-premise is decreasing while the off-premise is increasing. While ­upscale restaurants are eager to find distinctive wines, consumers are rushing to the ­supermarkets to buy wines.

What advice would you give a wine producer looking to enter the wine market?

We experienced a wine boom about ten years ago. Our future brightens because our average consumption is still a bottle per capita.­ Wine is like a car – the richer you ­become, the better you need. The young ­generation is learning wine culture by their parents, so we see a massive potential ­increase. Opportunities remain everywhere.

 

Kwang Jo Kwon, marketing director of Hite-Jinro 

www.hitejinro.com

Hite-Jinro also makes liquor. As a wine importer, Hite-Jinro has been less important, but its wine division was ignited after Kwon was appointed. He used to be a marketing specialist for Dongwon WinePlus, one of the country’s top ten players. Hite-Jinro has recently acquired Taittinger from Cave de Vin, another top ten importer. Henkell Trocken has also moved from DongWon to Hite-Jinro. Kwon, who studied at Geisenheim, has a character more Italian than German, being very positive and personable. 
 
What’s the big wine trend of 2014 in Korea?

The big retailers have established their own importing houses, so it’s becoming very hard for importers to sustain their business. The wine market is becoming a money fight, mainly due to Shinsegae, which owns ­E-Mart as well as Shinsegae L&B, which is a new importer. The number one wine retailer, E-Mart, used to buy wines outside its house, but now buys more wines from its sister company Shinsegae L&B. Therefore, wine importers should find alternative outlets. 

What advice would you give a wine producer looking to enter the wine market?

There is no more room for wines from Australia, New Zealand and Chile. On the other hand, wines from Spain and South France have good opportunities to increase their market share in Korea.

 

Jong Hun Lee, president of Nara Cellar

www.naracellar.com

Nara Cellar is famous for the total package, including wine bar, wine academy, cooking school, restaurants and even a winery in Napa. Its strong Californian selection still dominates, but it also has the Chilean brand Montes, a bestseller in South Korea. Members of the local wine trade found themselves surprised when Lee left Shindong, where he’d been working for about 20 years, for Nara ­Cellar. More than a marketing person, he is well known in the industry, with a clear view about the wine future of South Korea.

What’s the big wine trend of 2014?

The on-premise markets have shrunk, so it is very hard for importers to keep on going. Worse comes from the off-premise market, because national distribution channels are busy importing wines through their affiliate ­companies. Outside of these channels, there are no more sales possibilities.

What advice would you give a wine producer looking to enter the wine market?

You should know your size, and find importers of a similar size. I feel that it is already late for the big global wine brands to enter the Korean market, as that market section is fully occupied. However, market niches remain. Importers still want wine brands which won’t push them into quantity stress. 

 

Jin Sub Kim, president, Enoteca Korea

Enoteca Korea was ­established in 2011 by the big Asian buyer, Japan-based Enoteca. The major brands of Enoteca Korea derive from Japan’s stock, but it will sometimes import what it needs. Enoteca Korea’s strong point comes from Bordeaux, Louis Roederer, Gaja, Sileni and so on.  Kim used to work as a wine buyer at Galleria Department Store, ranked number four in the department store category. His experience of having studied in Japan saw him begin at Enoteca wine shop, a joint venture project between Galleria and Enoteca in 2000. The contract was terminated in 2011 when Enoteca Korea launched. 

What’s the big wine trend of 2014 in Korea?

At the moment, price itself is the most ­important variable. I think that each category for each wine has been fully occupied for years, so I often need lowest-priced wines if possible. 

What advice would you give a wine producer looking to enter the Korean wine market?

If you are not that famous, you should get some points from Parker, Wine Spectator, etc. Otherwise, any kind of wine award could do good for you. It would be even better if you ­create your own story-telling content. That kind of stuff is sure to be effective to penetrate the market. 

 

Hak Gyun Kim, owner, Handock 

The company name ‘Handock’ means ‘Korea-Germany’, but the company’s portfolio is far more than the name suggests. Since Kim obtained its full ownership in 1996, ­Handock has been considered to be a small but credible importer. Handock’s portfolio is well selected, and its specialty comes from Burgundy small producers. His new-born twins make him feel happier than ever before, and drive him to work harder. 

What’s the big wine trend of 2014?

As importers who belong to conglomerates start to dominate the market, best-­selling wines begin to change, from Bordeaux to global brands such as Chilean reds and ­Italian Moscato.­ The consumers’ palate has ­become more varied than before, and seeks both ­unusual and traditional wines. Demand for whites and sparklings is stronger than before. 

What advice would you give a wine producer looking to enter the wine market?

I would like to cite the Bible, “Your ­beginnings will seem humble, so prosperous will your future be.” I suggest that wine ­producers should not expect big things at the beginning, and should think about a long-term relationship. I am confident that a wine ­producer’s character is very important. My previous experiences show me some evidences that German producers could wait a long time, but Chileans won’t.

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