Wine market in protracted slump

By Kim Tong-hyung

Korea was just beginning to earn its stripes as a wine-drinking nation when the recession hit and decimated the herds of glass raisers. The country has since been pulling away from the economic turmoil, but regaining its love affair for fermented grape juice is proving to be difficult.

According to recent figures by the Korea International Trade Association (KITA), the country’s wine imports last year were valued at $112.89 million, just a 0.4 percent increase from a dismal 2009, when imports annually declined by a staggering 32.5 percent from the $166.51 million in 2008.

The wine boom has been turning to gloom as credit-crunched wine lovers began reining in their spending. And wine is no longer the fad in drinking when everyone appears to be inventing excuses to gulp down ``makgeolli,’’ the cloudy Korean rice wine that is now being touted as a food-and-beverage treasure on a level with kimchi.

Wine imports in January and February this year increased 4.7 percent year-on-year due to increased demand generated by the Lunar New Year’s holidays, as wine remains a popular gift item, KITA said.

``The wine market had grown annually by around 30 percent in the first six or seven years of the 2000s, but we believe the gradual decline of the market to continue through the end of this year,’’ said an official from a wine importer.

``Amid the slowing market, the consumption pattern of wine drinkers is becoming more consistent. There is now a clear distinction between the low-end budget and high-end markets and this will help our marketing efforts next year when we believe wine consumption will pick up again.’’

Keumyang International, the country’s largest wine importer, managed a respectable 2010, with its 51.2 billion won (about $47 million) revenue and 2.3 billion won operating profit representing a 1 percent and 44 percent annual increase, respectively.

However, Nara Food, another major wine importer, saw its revenue annually drop 8.5 percent at 21.5 billion won last year and its operating profit decline more than 96 percent at 10.78 million won.

Although wine consumption had been growing in the past decade before being hurt by the economic downturn that hit in 2008, consumers have been complaining about high prices, even before the crisis had them tightening their purse strings.

Imported bottles are tagged with a 15-percent duty and a further 30-percent liquor tax and a 10-percent education surtax, all before importers and retailers look for their margins. As a result, the prices of bottles often bloat by three-fold or more when they reach consumers.

And aside of the growing pressure to lower prices, importers have been squeezed by the increasing testing fees imposed by the Korea Food and Drug Administration (KFDA), which inspects the wines before approving them for local consumption.

The inspection fees are currently at around 570,000 won per product, representing a six-fold increase in the last two years, although KFDA authorities claim that the increase was inevitable as the wines are being tested for more substances.

With consumers becoming reluctant to pay a premium for wine, importers have been competing to deliver a broader range that delivers a bigger bang for the buck, thus touching off a fierce price war. The country's three major department store chains ― Lotte, Hyundai and Shinsegae ― are now increasing the volume of direct imports in their wine offerings.

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