Korea land of opportunity for winemakers

Australian Ambassador to Korea Bill Paterson, center, poses with officials during the Australian wine-tasting event at the Shilla Hotel in Seoul last Monday. From left are Jamie Sach, Penfolds Global ambassador; Andrew O'Brien, general manager of SEA, Japan, Korea, and India Treasury Wine Estates; Ambassador Paterson; Scott Walker, country manager of Tourism Australia Korea; and Brendan Berne, deputy head of mission of Australian Embassy in Seoul. / Courtesy of the Australian Embassy

By Kang Hyun-kyung

A flurry of wine-tasting events has taken place in Seoul in the first half of this year as Korea is rising as a hot wine market with great potential for consumption growth.

Competition to grab market share heated up as wine producers from countries like Australia, which recently concluded a free trade agreement (FTA) with Korea, launched aggressive marketing with tariffs to be reduced by 15 percent.

Jamie Sach, who represented premium Australian wine brand Penfolds, called Korea "a growing, large and exciting market" for Australian wine producers.

"Asia, in general, is a very important market for Penfolds. The thing we love about Korea is that consumers are more interested in drinking quality wines rather than drinking cheaper wines," he told The Korea Times during a recent Australian wine-tasting event at the Shilla Hotel.

"We only make quality wines so consumers in this market will be interested in tasting our wines. So Korea is a really exciting market."

The Embassy of Australia hosted the latest wine-tasting event to celebrate the conclusion of the Korea FTA in April. Hundreds of wine experts, restaurant owners and sommeliers flocked there to explore 68 Australian wine varieties.

This is the first time that the Australian Embassy hosted such a large wine-tasting gathering since 2009, illustrating wine producers' keen interest in the Korean market following the FTA.

Australian Ambassador Bill Paterson was excited about the possible FTA factor, saying that the sales record of Australian wines will go up.

If the FTA goes into full force after both parliaments ratify it, the envoy said, the 15-percent tariff on Australian wines will be scrapped. "This will bring us back into direct competition with other countries that already have FTAs with Korea."

Currently, Australian wines account for nearly 6 percent of the imported wine market.

The Australian ambassador's remarks reminded that countries like Chile benefitted a lot from its trade pact with Korea as its wines' market share in Korea surged after it took effect in 2004.

The Aussie wine-tasting event came two weeks after Chile had a big wine tour at the same hotel in early June. The three-stage Chilean wine promotion event consisted of a wine-tasting event and a seminar highlighting Chilean premium wines, which was followed by a reception in the evening.

Prior to these, Argentina, Bulgaria and Georgia also showcased their wine varieties to Korean consumers and experts.

Binge drinkers?

Kim Jun-cheol, president of JCK Wine School in Seoul, said that foreign wineries' deep interest in the Korean market seems to be a combined result of growing wine consumption here and the image that Koreans are heavy drinkers.

"Some Koreans are viewed by people outside the country as binge drinkers who consume large amounts of alcohol. Together with a remarkable increase in wine consumption in recent years, I think the binge-drinkers image also affected wine producers' aggressive wine marketing in Korea," he said.

In terms of wine consumption, Kim said that Koreans drink much less wine than other nationals do.

Koreans drink an average of one bottle of wine per year, far less than the global average of five bottles. "In the future, I think wine consumption in Korea may increase as much as the global average," said Kim.

According to the Korea International Trade Association (KITA), wine import reached its peak in 2013 with 29,191 tons and that was an increase of 16.3 percentage points compared with a year earlier.

Before this, wine import hit a record-high level in 2008 with 26,305 tons. Wine consumption had decreased for the following couple of years mainly due to the global financial crisis in 2009.

French and Chilean wines are the kinds Koreans consumed most. Wines from the United States, Italy and Spain are also on the top-five list.

Of these, Chilean wines have seen a dramatic increase of market share since 2004 from when the FTA went into effect.

In 2003, Chilean wines accounted for merely 6.5 percent of the imported wine market. But the figure sharply rose after the FTA went into effect and now its market share is over 20 percent.

Kim said the FTA is "one of the factors" having an impact on sales records and market shares of imported wines.

The wine expert argued that exchange rates, economic outlook and the pricing system of imported wines combined are far more important than a single FTA factor.

Regarding the prospect for the imported wine market, Kim said, sales of Chilean wines now seem to be at their height, and predicted that Chilean wine exporters will face tougher competition as an increasing number of New World wines launch aggressive marketing.

Wax and wane

Kim predicted that the next champion in the Korean wine market will be Argentine wines.

"Wine experts call Argentine wine ‘a sleeping giant' because they produce high quality wines and have a great deal of potential to be sold here, once consumers discover their tastes and flavors," Kim said.

He said Australian wines also enjoy a strong reputation among Korean consumers. But he cautioned that a lack of flagship Australian wines caused their sales record here to be relatively lackluster.

"Argentina has flagship Malbec wines, but there are no such star wines from Australia."

Plus, the wine expert said, relatively high prices of Australian wines are another setback in their endeavor to increase market share in Korea.

"Wages in Australia are more expensive than those of Latin American countries. And higher wages led to the rise of prices of Australian wines. This is another impediment."

Kim advised that a wise marketing tactic could make a difference.

"Australian Shiraz is quite popular among Korean wine lovers. You don't need to pay much money for this type of wine because even cheap Shiraz wines are very good," he said. "Thus, I believe Australian wines will be able to increase their market share in Korea if they launch aggressive marketing of Shiraz."

Sach from Penfolds remained optimistic about Australian wines in Korea, saying they are premium which Koreans like most.

He said multi-regional blending is unique to Australian wines.

"Pinfolds, for example, has championed the concept of multi-regional blending. Many of our wines include the blend of the very best fruits from the very best areas in South Australia using predominantly Shiraz."