By Lee Hyo-sik
Hite-Jinro and other liquor companies are rushing to hike the prices of soju and beer ahead of a government plan to raise bottle deposits in January.
This will likely displease policymakers, who have asked the distillers and brewers to refrain from raising prices, as it places an additional financial burden particularly on low-income households struggling with soaring debts.
Hite-Jinro said Monday that it increased the wholesale price of soju by 5.62 percent to 1,015.70 won for its 360 milliliter bottle last Friday, the first hike since December 2012. The company said it needs to charge consumers more, citing growing marketing and manufacturing expenses.
Lotte Chilsung and other soju makers are widely expected to follow suit this month.
Brewers have also hinted that they could increase prices, saying they will have to pay a higher deposit to consumers who return empty glass bottles next year. They also said the cost for brewing beer has risen due to rising raw material and labor costs.
“The costs of making soju have increased sharply since the last price hike three years ago,” a Hite-Jinro official said. “We have to raise the price by at least 12.5 percent if we reflect the increasing costs of raw materials, packaging, marketing and logistics. But we decided to keep the increase below 6 percent.”
Hite-Jinro’s latest price hike will likely encourage other soju and beer makers to do the same.
Besides higher labor and material costs, the companies have argued that they need to raise retail prices if the government forces them to pay higher bottle deposits to consumers and others who return empty soju and beer bottles.
On Sept. 3, the Ministry of Environment unveiled its revised recycling promotion bill, stipulating that the deposits consumers can receive from retailers for returning empty bottles will go up, a move aimed at promoting the reuse of bottles.
According to the revision, which will go into effect on Jan. 21, the deposit on a bottle of soju will increase to 100 won from the 40 won paid now, and that of beer to 130 won from 50 won. The 60 won hike is the first since 1993.
In addition, the fees that liquor and beer firms pay to retailers for the handling of empty bottles will go up to 36 won from soju’s 16 won and beer’s 19 won.
Following Hite-Jinro’s controversial move, its share prices rose as high as 2.49 percent on Monday but closed the session up 0.42 percent at 24,150 won last Friday.
Shares of Bohae jumped 1.95 percent to close at 1,830 won per share. Shares of other liquor firms finished the trading modestly higher, despite the benchmark KOSPI’s 1.82 percent decline.
Hana Financial Investment said the price hike will boost Hite-Jinro’s revenue by 2.4 percent to 802 billion won this year from 2014.
“The latest increase will boost the company’s sales by 43 billion won for the remainder of the year,” Hana analyst Shim Eun-joo said. “In 2016, Hite-Jinro’s operating profit is projected to jump 15.8 percent thanks to the latest price hike.”
KDB Daewoo Securities said Lotte Chilsung and other distillers will likely raise prices in the near future, adding that the hike will bolster their corporate value.