News - OB Oriental Brewery Co. Ltd, Anheuser Busch InBev Group

News - OB Oriental Brewery Co. Ltd, Anheuser Busch InBev Group

OB Oriental Brewery Co. Ltd, Anheuser Busch InBev Group



News - OB Oriental Brewery Co. Ltd, Anheuser Busch InBev Group


South Korea: Competition heating up in non-alcoholic beer market  (

With the hot summer season close at hand, competition is heating up in South Korea’s non-alcoholic beer market, the Korea Bizwire reported on June 19.

China’s Tsingtao Brewery Co. recently threw its hat into the ring to make a play in a market that has been led by HiteJinro Co. and Lotte Chilsung Beverage Co.

Oriental Brewery Co., the No. 1 brand in South Korea’s beer market, also plans to steer into this market by the end of this year.

According to industry sources on June 18, HiteJinro introduced non-alcoholic beer first in South Korea.

The company released Hite Zero 0.00 in Nov. 2012 and renovated the taste and package design in March 2016.

Hite Zero features a 0.00 percent alcohol content and only 60 kilocalories (kcal) per 355 milliliter can. Since Hite Zero 0.00 was first released, about 54 million cans have been sold.

Sales of Hite Zero 0.00 in the April-May period marked a robust year to year growth of 29 percent. During this period, the monthly average sales volume jumped by 34 percent compared to the figures recorded in the first quarter of this year.

Lotte Chilsung joined the market as a late comer in June 2017 with Cloud Clear Zero, which also has a 0.00 percent alcohol content and a low calorie count of only 30 kcal per 350 milliliter can.

In the first four months of this year, sales of Cloud Clear Zero rose by 50 percent from a year ago.

More recently, Tsingtao Brewery stepped into the market with Tsingtao Non Alcoholic. The brewery said that Tsingtao Non Alcoholic is an alcohol-free beer with an original lager taste.


South Korea: Beer tax system to be altered for the first time in half a century  (

South Korea on June 5 decided to alter the tax system on beer for the first time in half a century in a move to address imbalances in taxes between imported and domestic beer, the Korea Times reported citing the finance ministry.

The change - the first since 1968 - calls for a tax system based on amount rather than an ad valorem, a charge levied on prices of beer, according to the Ministry of Economy and Finance.

Currently, South Korea imposes a 72-percent liquor tax on beer. But the tax base for domestic beer includes manufacturing costs, profit as well as selling, general and administrative expenses.

In contrast, for imported beer, the tax base is only import prices, which do not include any other costs.

In 2018, the average liquor tax for domestic beer was estimated at 848 won (US$0.70) for a litre while that of imported beer is believed to be 709 won.

The imbalances have led to an increased share of imported beers in South Korea in recent years. Imported beers are estimated to have accounted for 20.2 percent in the local beer market in 2018, up from 8.5 percent in 2015.

Under the change, South Korea will uniformly levy 830.3 won in tax for a liter for either local or imported beer while collecting liquor tax of 41.7 won per litre of "makgeolli," a Korean rice brew.

Currently, South Korea imposes a five-percent liquor tax on makgeolli.

The ministry said prices of imported beers are unlikely to go up due to fierce competition in South Korea.

Three beer makers in South Korea - Oriental Brewery Co., HiteJinro Co. and Lotte Liquor - have indicated that they will not raise beer prices as a decreased tax burden of domestic beer is offset by an increased tax burden of foreign beer, according to the ministry.

The change could lead to the resumption of domestic production of some foreign brand beers in South Korea.

"We expect increased beer production in South Korea to create jobs in related industries and lead to new facility investments," Hong Nam-ki, the minister of economy and finance, said in a meeting with key officials of the ruling Democratic Party.

Oriental Brewery had produced canned Budweiser and Hoegaarden in South Korea before shifting to import of the two beers from the U.S. and Belgium, respectively, in 2017.

"We will consider producing canned Budweiser and Hoegaarden in South Korea again if the liquor tax is changed," Baek Joo-hwan, a spokesman for Oriental Brewery, said.

The ministry said it will reflect the change in its revision to liquor tax and submit it to parliament for approval.

Baek said the new liquor tax system would remove disadvantages of domestic beer production.

AB InBev, the world's largest beer producer, purchased Oriental Brewery Co., South Korea's biggest brewer, in 2014.

HiteJinro and Lotte Liquor, which imports beers, said they have no plan to produce foreign brand beers in South Korea.


South Korea: Consumers and restaurant owners frustrated with Oriental Brewery's price hikes  (

Consumers and restaurant owners are expressing frustration with Oriental Brewery (OB) for the brewer's decision to hike beer prices by 5.3 percent from April 4, the Korea Times reported on March 27.

Beer lovers complain it will be more financially burdensome to have a glass of beer with family or friends as many struggle with soaring housing prices and the tight job market. People running restaurants and other eateries say it will be difficult to charge more, despite higher beer prices, in fear of losing customers amid sluggish domestic consumption.

"Why don't domestic beer companies take measures to upgrade instead of raising the price?" Jeon Hyung-joon, 29, a regular beer consumer, said. "From now on, I'd rather spend more money on imported beers or prestigious or specialty beer brands."

Another beer consumer, who asked not to be named, said "I'm worried OB's shift will lead to a collective price rise. If that happens, I'd have to be rational about selecting a beer from restaurants and bars for financial reasons."

Restaurant owners are also wary about the price hike as they are faced with the situation to increase beer prices in accordance to brewers' moves.

"We'll have to see how the industry reacts, but it seems inevitable for us to increase the beer price to 5,000 won ($4.4) from the current 4,000 won sometime during the first half of this year," a restaurant owner, who runs a restaurant in Samseong-dong, Seoul, said.

"If that happens, I think consumers will shift to other available alcohol products like soju or makgeoli."

On March 26, OB said the prices of its major beer brands, including Cass, Premier OB and Cafri, will go up by an average of 5.3 percent starting April 4. It is the first time for the Korea's largest brewer to adjust price since November 2016.

Under the new policy, the factory price of a 500ml bottle of Cass will rise from 1,147 won to 1,203.22 won, up 4.9 percent.

"The price hike was made in consideration of the overall business conditions, including increased costs associated with the production and supply of our beers," an OB official said. "But we tried to keep increases to a minimum for our customers."

The costs of packaging materials rose 65 percent in two years and aluminum can prices went up 25 percent. Furthermore, the commodity prices of barley rose 31 percent compared to last year.

Other brewers including Hite Jinro and Lotte Liquor are yet to reveal any price changes, but it is highly likely that price hikes by the liquor market leader will trigger other firms in the market to raise their prices.

"We're also facing a rise in production costs, but we don't have any immediate plan to increase the price yet," an official at Hite Jinro said. "In the second quarter, we're going to focus on promoting our new product Terra."

In 2016, Hite Jinro followed OB's price hike in less than two months, increasing the price by an average 6.33 percent.


South Korea: Brewers releasing more mini-size beers as more Koreans eat and drink alone  (

As more Koreans are starting to eat and drink alone, brewers and distillers are rushing to introduce smaller-size products, according to industry officials on August 15.

When releasing its Cass beer in 250 millilitre cans in July, Oriental Brewery (OB) said consumers can more conveniently enjoy a cold beer in summer as the smaller can cools much faster than the larger cans.

According to Korea's largest brewer, consumers said the small-size enables them to drink beer without difficulty. In particular, female consumers who don't drink as much as men prefer the small can to the conventional 500 millilitre can.

OB, which released Hoegaarden Rosee in 250 millilitre bottles in 2016, is considering producing more types of beer in small-size cans and bottles.

"We came up with Cass beer in 250 millilitre cans to satisfy young customers who tend to enjoy a glass of beer alone at home," an OB official said. "We will continue to make innovations with our products to satisfy the needs of various consumers."

HiteJinro also released Hite Extra Cold beer in 250 millilitre cans a few years ago. Lotte Asahi Liquor sells Asahi Super Dry beer in 135 millilitre cans.

Whisky makers, which have already vied over the past few years for leadership in the nation's low-alcohol whisky market, are no exception to the recent trend.

Diageo Korea introduced Johnnie Walker Black Label in 200 millilitre bottles to the Korean market last year, following the release of Johnnie Walker Red Label in 200 millilitre bottles in 2016, which gained huge popularity with young Korean consumers.

In 2015, Pernod Ricard Korea released Jameson in 200 millilitre bottles.

Lotte Liquor began selling Scotch Blue King in 500 millilitre bottles for 16,005 won ($14.12) in 2016 to win the hearts of more consumers.

As for wines, HiteJinro released Esta Sangria in 375 millilitre bottles last year. Also, Lotte Liquor sells Yellow Tail Shiraz in 187 millilitre bottles and Spell sparkling wine in 275 millilitre bottles.

Retailers have begun putting up shelves for liquors in small cans and bottles in line with the market trend.

The nation's 7-Eleven convenience stores are equipped with the "Seven Bar Signature" shelves specializing in the small-size bottles of liquor. Home plus sold gift sets consisting of small-size alcoholic drinks during the Chuseok holiday last year.

"The growing number of single households and people putting emphasis on their personal happiness has influenced the liquor market, leading the small-size products to gain popularity," said an official at BK, a Korean importer of foreign beers.


South Korea & China: Korean beer exports to China more than double in 2017  (

South Korea’s beer export to China more than doubled last year compared to a year ago amid unfazed popularity of Korean pop culture, while harder liquor varieties lost favor with Chinese drinkers, the Pulse News reported on August 22.

According to state-run Korea Agro-Fisheries & Food Trade Corp. on August 22, Korea shipped out 65 million litres of beer to China in 2017, more than doubled from 31.6 million litres in the previous year. Beer export value also doubled to $50.2 million from $23.99 million as average sale price rose $0.77 per litre from $0.76 over the cited period.

Korean beers accounted for 9.1 percent share of China’s overall import beer market in 2017, sharply up from 4.9 percent in the previous year based on volume. In dollar terms, Korean beer products’ share stood at 6.7 percent last year, compared with 3.6 percent in the previous year.

The best-selling Korean beer in China was ‘Blue Girl,’ sold by Korea’s leading brewer Oriental Brewery Co. (OB) as an original design manufacturer. Blue Girl, which penetrated into Chinese beer market through Hong Kong, accounted for 87.9 percent of Korean beer sales in China last year, up from 72 percent in the previous year. Next in line were OB’s Cass with 10 percent and Hite Jinro Co.’s Hite with 1.1 percent.

Korea’s other alcoholic beverages, however, lost their appeals to Chinese drinkers. Distilled rice liquor or soju export to China shrank to $7.34 million in 2017 from $9.39 million in 2016 and that of makgeolli, Korea’s traditional sweet fermented rice wine also shrivelled to $1.55 million from $2.09 million. Cheongju, refined rice wine shipment to China fell to $300,000 from $440,000 and fruit wine sharply down to $240,000 from $670,000 over the cited period.

Korean soju’s share in China’s imported soju market also fell to 46.3 percent in 2017 from 56.4 percent in the preceding year, based on volume. Makgeolii’s share also declined to 19.7 percent from 25.7 percent.

The state agency attributed Korean beer’s popularity in China to Korean dramas that often show scenes of people enjoying ‘chimaek’ - mix of deep fried chicken and maekju (beer), Koreans’ favorite nighttime delivery menu. It said nearly 80 percent of Korean beers are consumed by Chinese while Korean soju and makgeolii are mostly sold to Koreans and ethnic Koreans living in China.


South Korea & China: Oriental Brewery looking to export its Cass beer to China  (

Oriental Brewery (OB), a South Korean beer company, plans to export one of its flagship alcohol beverages to China this year, using the marketing and sales networks of its parent company Anheuser-Busch InBev (AB InBev) in the region, the company said on January 30.

The beer brand OB will be introducing to Chinese consumers will be Cass, which will be more expensive than Tsingtao and Harbin, but cheaper than AB InBev's Budweiser.

It seeks to use its export momentum in Japan, Hong Kong and Mongolia to extend its reach to mainland China, the world's second largest economy, it added.

OB's Blue Girl, which is distributed by Jebsen in Hong Kong, has been the No. 1 beer brand in the Chinese city since 2007.

The premium beer may be 50 percent more expensive than other alcohol beverages in Hong Kong, but it was able to surpass San Miguel's market share.

This is because OB used a localization strategy by making and distributing Blue Girl tailored to Hong Kong consumers.

OB's Cass is the No. 1 beer in Mongolia with a 40 percent market share, the company added.

It began marketing and selling Cass in Mongolia in December 1998 through its unique delivery system in which the beer can be transported unfrozen in extreme cold weather.

OB also has Barreal in Japan.

The company mainly makes its beers through an original design manufacturing system to appeal to regional consumers. They are distributed by OB's regional partners.

"With our momentum in Mongolia and other Asian markets, OB will continue to move forward with differentiated marketing strategies to boost our exports," said an OB official.

OB's beer exports account for about 65 percent of total beer shipped abroad.

AB InBev reacquired OB in April 2014, and unveiled its plan to further boost the brand value of Cass in Asia.


South Korea: South Korean brewers reported to be planning beer prices hike  (

South Korean breweries are apparently seeking to jack up beer prices in the wake of hikes in "soju" liquor prices in November last year, Yonhap News reported on May 22 citing the latest industry figures.

"(We) are considering price hikes internally," an official at Oriental Brewery (OB) Co. said. "The specific rate and timing have not been decided yet."

If the number one beer maker raises prices, its rivals Hite Jinro Co. and Lotte Chilsug Beverage Co. will probably follow suit, given their previous record.

There is a widespread rumor that OB has already notified wholesalers of plans to lift beer prices by 5-6 percent.

The production of beer has also allegedly soared recently due to wholesalers trying to hoard beer ahead of price hikes.

But OB officials denied the rumor. Also, Hite and Lotte officials claim that they are not thinking about raising prices yet.

"We heard the talk that OB is considering price hikes, but we are not doing so yet," a Hite official said. "We are going to have to watch the market situation."

The beer producers have frozen prices for more than three years since OB's 5.89-percent increase on average of all its products and Hite's 5.93-percent hike in 2012.

In November last year Hite raised the factory price of its signature Chamisul soju by 5.62 percent, encouraging other soju makers to follow in their footsteps.


South Korea: Oriental Brewery launches premium wheat beer  (

Oriental Brewery (OB) on June 17 launched a new premium wheat beer produced through a traditional German brewing process, The Korea Times reported.

The brand new product named Premier OB Weizen is the first premium beer OB developed in coordination with brewmasters at its parent company Anheuser-Busch InBev (AB InBev). Weizen means wheat beer in German.

The product was made only with wheat malts and hops harvested in Germany. It was brewed with high-quality yeasts selected jointly by brewmasters of the two companies, which resulted in creating German beer's typical smoky color and rich flavor, the company explained.

"Premier OB Weizen is the result of a lot of research, product development and analysis," OB CEO Frederico Freire said during the product's launching ceremony in downtown Seoul. "This will open a new chapter in Korea's beer history."

"Premier OB Weizen boasts traditional wheat flavors by following Germany's Bayern style wheat beers," he said. "World's famous brewmasters worked very hard with OB to create weizen beer that fits the taste of Korean consumers."

It has an alcohol content of 5 percent, slightly higher than 4.5 percent of OB's best-selling brand Cass. A 355-millimeter can of Premium OB Weizen is priced at 1,490 won ($1.33) and the product will be available from June 27.

Meanwhile, OB plans to launch more German style beers on the domestic market.
"We have many things under consideration," said Song Hyun-seok, chief marketing officer. "We will develop products that follow Germany's traditional brewing process and at the same time fit the taste of Korean consumers." He declined to reveal more detailed information.
In March, the OB CEO said his company will bring in more premium beer brands from AB InBev to meet diversifying tastes.
AB InBev acquired OB, which accounts for about 60 percent of Korea's beer market, in April 2014.
He also said the firm will foster its Cass brand as one of Asia's top 10 beers within two years.


South Korea: Craft beer segment growing in volume and popularity  (

It's Friday night in Seoul's hip Kyungridan district and young drinkers are packing themselves into a labyrinth of pubs specialising in craft beer hoping to enjoy the robust flavours of stouts, ales, lagers, and IPAs, BBC reported.

Considering that all of South Korea was, at least in beer terms, something of a barren landscape less than a decade ago, it's a remarkable scene.

Then the market was over-run with offerings from South Korea's two massive industrial brewers: Hite-Jinro and Oriental Brewers.

The rise of craft brewing in Seoul is something of a David and Goliath story, with a passionate handful of craft entrepreneurs overturning decades of beer boredom by tapping into pent up consumer demand and thawing South Korean public policy on how beer is regulated.

Dan Vroon and Chul Park met each other five years ago, when they were both selling craft beer for boat tours and other events.

They bonded over beer.

"Chul initially brought in the first craft beer into Korea from my hometown, Edmonton, Alberta, Canada," Dan Vroon recalls. "That's what sort of inspired us to create more and better beers."

Dan Vroon owns and runs Craftworks which opened in 2010 and has three "tap houses" operating in the country.

His own brand of beer is brewed at Chul Park's Ka-Brew contract brewery which makes different recipes for several of the new craft beer brands.

"We started with a single location and were moving roughly 50 kegs (5,147 pints) a week, " Dan Vroon said.

"We are now probably doing 300 kegs a week, and building a state of the art brewery, the likes of which has not been seen in Asia yet," he says.

As recently as three years ago, South Korea prohibited beer sales by any player incapable of putting out at least a million litres a year.

However, requirements for entering the beer making and distribution market have been lowered dramatically since.

Daniel Tudor, former Seoul Correspondent for The Economist magazine and co-owner of Kyungridan pub "The Booth," permits himself a small amount of credit for South Korea's change of tack on beer legislation.

His 2010 article "Fiery food, boring beer" started what he describes as a "media storm" in favour of loosening brewing controls.

Rising affluence and global awareness among Koreans were also important factors.

"I think there are more Koreans who have spent a significant length of time abroad, so they [are] expecting something better now." he says.

Craft beer pubs do not survive by good brewing alone, says Troy Zitzelsberger, co-founder of Reilly's Taphouse in Seoul.

He says success is also a process of teaching customers. "I oversee a homebrew club I started here a couple of years ago, called Seoul Brew Club and as of today we have 1,512 members," he says.

As one of only two cicerones (internationally certified brewmasters) operating in South Korea, Zitzelsberger says he personally oversees the contract brewing of two of the 30 beers he offers on tap.

Fruity "Jeju IPA" hits lighter notes of sour citrus, while "Seoul Cream Stout" appeals to palates that appreciate darker hints of coffee and black bread.

Rising demand for international imports has led to the opening of specialty beer "bottle shops" in Seoul.

Even though the beers are taking brewing back to its pre-industrial routes the way the trend has grown is entirely modern.

"Blogging is key here," he says. "You just get some good blogging with good products and talk to the right people and anything can happen."

Even with the success of expat craft brewers in Korea, the market remains miniscule, less than 1% of the overall beer market, including imports.

Domestic brewers, aware of the upside potential, are increasingly playing to craft sensibilities, rolling out brands like "Queen's Ale" and the Germanic-sounding "Kloud".

Top craft brewers in Seoul predict the market is likely to follow a similar famine-to-glut pattern as upscale coffee; these days, it's nearly impossible to walk 100 metres without brushing by a cafe franchise.

At that point, brewers agree, the novelty of the craft beer genre will subside and consumers will focus exclusively on the quality of the product.

"A wise man once said, an honest beer makes its own friends," says Dan Vroon of Craftworks. "We have been getting a lot of friends lately."


South Korea: Oriental Brewery launches premium all-malt beer  (

Oriental Brewery, South Korea’s largest beer manufacturer, launched a new premium all-malt beer in a move to increase its stake in the fast-growing premium beer market, The Korea Herald reported on November 11.

At a news conference on November 11, it unveiled The Premier OB, a thick all-malt beer made of German noble hops and premium yeast.

“The Premier OB is the combined result of OB’s 80-year brewing history and its devotion to creating better taste,” said OB CEO Chang In-soo.

The new product is an upgraded version of OB’s Golden Lager, which is currently the third best-selling beer in Korea. The Premium OB also benchmarked rival all-malt beer brands such as Hite Jinro’s Max and Lotte Liquor’s Kloud.

“The Premier OB was created by applying a long-term aging technology to our OB Golden Lager to get a denser flavor and richer aroma,” said OB chief marketing officer Alex Song.

The company also used a different fort and logo for The Premier OB to distinguish it from OB Golden Lager, Song said.

“Korean consumers used to prefer light-flavored beer, but their palates seem to have changed and diversified over the years,” Song said. “Our No. 1 brand Cass fits the existing conventional customer needs, but it also reflects our efforts to break new ground, which is why we came up with a stronger-tasting product.”

As an all-malt beer, The Premier OB is manufactured in accordance to the Reinheitsgebot, the German Beer Purity Law ― a regulation which states that beer should only be made using water, barley, hops and yeast.

“We insist that the hops and yeast used in The Premier OB precisely follow the traditional recipe of the Bavarian Imperial House beer,” Song said.

Despite the high costs and technology involved, OB’s newest product will be priced at the same level as its Golden Lager. This is because OB is aware that it is a late-mover in the segment.

“In order to overcome disadvantages and better promote our brand image, we decided our key strategy would be to offer good tastes at good prices,” the chief marketing officer said.


South Korea: Oriental Brewery to invest $117 mln in improving quality of its products  (

Oriental Brewery (OB) CEO Chang In-soo apologized on September 16 for a recent dispute over the alleged odour of disinfectant in its Cass beer and pledged to invest 120 billion won ($117 million) to improve the quality of the company's products, The Korea Times reported.

In a press conference, Chang said the brewer has been making all-out efforts to upgrade its quality-control system to be on a par with those of Anheuser-Busch InBev (AB InBev) and other global brewers.

''OB is overhauling its entire business process, spanning from production to sourcing and distribution, to introduce world-class product quality management systems at our three plants,'' Jang said. "I apologize for causing concerns for the dispute (over the smell)."

OB operates three plants in Gwangju and Icheon, Gyeonggi Province; and Cheongju, North Chungcheong Province.

"In 2006, AB InBev introduced a stringent quality management program called Voyager Plant Optimization (VPO). In cooperation with our parent firm, we will produce Cass and other beer brands in accordance with the VPO standard. We will place top priority on our quality control procedures and meeting customer needs,'' the CEO said.

In April, AB InBev acquired OB, which accounts for about 60 percent of Korea's beer market, for $5.8 billion.

Jang's apology and pledge to improve product quality came after complaints posted on the Internet in June that some people had detected the smell of disinfectant in OB's Cass-branded canned, bottled and draft beers.

OB filed a complaint with police, asking law enforcement authorities to investigate those who spread what the firm called baseless rumors about its products. As part of their investigation, police officers raided the headquarters of Hite Jinro, the second-largest brewer, over allegations that the company had spread rumors about its larger rival.

In August, the Ministry of Food and Drug Safety said the substance causing the smell in the beer was harmless. It said trans-2-nonenal, an organic compound formed in the brewing process as a result of oxidation, was the cause. It recommended that the company monitor its brewing facilities more closely.

''I have been known as a good salesman in the liquor industry over the past 30 years. From now on, I want to become a businessman who successfully transforms OB into a brewer that produce the highest-quality products,'' Jang said.

In addition, OB plans to launch a ''shared-growth'' program. The company will invite brew masters from AB InBev to share their knowhow on beer brewing with those who make their own beer or open a small beer bar.


South Korea & China: Oriental Brewery to start exporting its flagship beer to China  (

Oriental Brewery will begin exporting its flagship beer Cass to China from the second half of this year by using the sales network of its parent company Anheuser-Busch InBev, The Chosun Ilbo reported on June 27.
AB InBev, the world's largest brewer, acquired OB back in January some five years after it sold it to KKR and Affinity in 2009.
"AB InBev is producing Harbin and Sedrin, which are the third and fourth largest beer brands in the Chinese market," OB CEO Jang In-soo said. "If we take advantage of this network, we think we can fare well in China."
OB is already exporting US$150 million worth of beer to Hong Kong and Japan each year.


South Korea: Oriental Brewery to launch its first ale by the end of the year  (

Oriental Brewery, South Korea’s largest beer maker, announced plans to launch its first ale, Yonhap News reported on September 23.
The company intends to introduce its new product in the lager-dominated market already by the end of this year.
The nation’s second-largest brewer, Hite Jinro, was Korea’s first large brewer to launch an ale, called Queen’s Ale, on September 5, after three years of research and cooperation with the Danish research institute Alectia.
“The ale we plan to launch will be different from our rival Hite Jinro’s,” an Oriental Brewery representative is quoted as saying. “To be ahead of the ale market, we will launch a product with a special taste.”


South Korea: Beer exports about four times larger than imports in H1 2013  (

Exports by South Korean brewers are about four times larger than imports from foreign brewers in the first half of the year, data showed on August 26.

According to the data by the local drink industry and Korea Customs Service, two South Korean beer makers - Oriental Brewery Co. (OB) and Hite Jiro Co. - exported beer worth a combined 180 billion won (US$161 million) in the January-June period.


South Korea: Changing tastes and planned beer reform in South Korea expected ... 

... to lead to craft beer boom at last

If there’s one key art form where North Korea beats the South, it’s beer-making, Global Post reported on June, 26.

Pyongyang is home to Taedonggang, a government-made, full-bodied lager that The New York Times called one of the finest beers on the Korean peninsula. The beverage is named after Pyongyang’s Taedong River.

In 2000, North Korea’s former ambassador to Switzerland backed a plan to take apart and ship home an entire 180-year-old British brewery. The edifice was reassembled in the isolated state, despite the seller’s fears that the machinery could be used to make chemical weapons.

South Korea lacks similar tales of globe-trotting beer quest. For decades, a maze of regulations has protected big South Korean brewers and their dull beer, smothering the entrepreneurial creativity that North Korea showed with Taedonggang.

Before 2007, drinkers stuck in the south could purchase legally-imported Taedonggang at DMZ tourist shops along the North-South border, and at a handful of Seoul Bars. It’s not a superstar beverage. The lager tastes more like ale. But it is exotic — a slightly sweet alternative to the deadening South Korean fare.

Sadly, Taedonggang has vanished from the south due to an unexplained price hike.

But tastes are changing, and South Koreans are pushing back.

The country is home to an oligopoly of two beer makers known as Hite and OB, which command 96 percent of market share. Grocery stores also sell imported beers like Miller and Japan’s Asahi, with sales of many foreign beers on the rise thanks to two trade agreements (FTAs) with the US and European Union that went into effect over the past two years.

Critics say the giants, which have been insulated from competition since the 1950s, churn out bland drinks that sometimes include cheap ingredients like corn.

The mediocre swill has caught the attention of the National Assembly, which is attempting to enact beer reform by year’s end. The law would lower import taxes for microbrewers, and halve the minimum production capacity needed to get a license.

A lineup of craft breweries are poised to seize the opportunity.

“For decades there were few people with the expertise to do malting, which is a complicated process,” said Kim Kyo-ju, a building architect who became the director of 7brau, a recent start-up that imports barley malt from Germany.

A few Western boozers have also gained quasi-celebrity serving up good beer to Koreans.

Daniel Tudor, The Economist’s Seoul correspondent recently resigned from the magazine and helped set up The Booth, an enormously crowded pub serving an IPA craft beer. After its third month, the hangout is already expanding to a second location.

In 2011, a first, minor beer law liberalization allowed Kim’s small-time business to get the country’s first beer production license in 77 years. “The hard part was that all the officials who understood the process of setting up a factory and getting a license were dead,” he explains.

Under the National Assembly’s proposed reform, the government could lower the tax for microbrewers to 30 percent, from the 72 percent percent tax that both microbrewers and regular brewers face. Currently, any firm with the capacity to produce 120,000 litres can get a license.

The craft brewers’ efforts are a testament to how badly drinkers yearn for better beer. South Korea, long dominated by large conglomerates, has never been home to a vibrant startup culture.

During the military dictatorships of the 1960s to the 1980s, tariffs and laws insulated South Korean businesses from foreign and local competition. To drive national development, the government poured easy loans into conglomerates that encouraged them to expand.

Today, many of the same corporate players are pushing out smaller competitors. In its 2012 Doing Business rankings, the World Bank reported that starting a company in South Korea was harder than in Madagascar and Azerbaijan.

Before 2011, the state alcohol regulator required that businesses have the capacity to produce more than 1 million liters at a time before doling out a wholesale license.

Another source of red tape lies in South Korea’s tax laws.

The government treats some ingredients as agricultural imports, which are subject to higher taxes to protect country’s farmers.

Seoul Homebrew, the country’s first storefront home brewing shop, is bringing in its first shipment of barley malt from Wisconsin. But much of the stock could be dumped in the ocean thanks to the endless pit of regulations. Some customs brokers “don’t seem to know what the laws are and what’s going on,” said Mitchell Nichols, the part-owner of Seoul Homebrew, which is set to open in July. “Finding out what we need to bring in barley has been incredibly difficult.”

He added that his original plans are up in the air thanks to inspection fees and excessive taxes.

Bizarrely, one private customs broker “told us we needed a physical [health exam] to get our ingredients,” he said. After getting a note from the doctor, he later learned the books contained no such rule.

He thinks the coming legislation, and the changing taste of Korean consumers, could be the best chance for fostering a vibrant beer scene, regardless of the obstacles of Korean bureaucracy.


South Korea: Craft brewer 7brau attempting to make a dent in South Korea’s beer market duopoly  (

Although the corporate tiles changed a few times due to reasons such as mergers and acquisitions, the domestic beer market in South Korea has been dominated by Hite-Jinro and Oriental Brewery (OB) since 1930, The Korea Times reported on October, 15.

Hundreds of foreign brands have tried to carve out a niche over the past two decades but they still account for a small fraction of the market, in the neighbourhood of 5 percent.

In this climate, the country’s first small-sized brewery, 7brau, is attempting to make a dent in the time-honoured duopoly by offering alternative craft beers, which were permitted to be distributed just two years ago.

“We were the first player to win a government license last year after the Seoul administration allowed craft beer companies in 2010 to boost the economy,” 7brau founder and CEO Kim Kang-sam said.

“Based on our flagship product, an India Pale Ale (IPA) produced with super-clean water from Gangwon Province, we are poised to storm the market. Responses have been good thus far.”

The original pale ale refers to a beer first produced in the United Kingdom in the 19th century. As the British colonial empire expanded into places such as the Indian subcontinent, the beverage was also shipped to the colonially administered territory. But the long voyages compromised the original taste of the pale ale that arrived in British India.

To address this, the hops content was increased to produce what has become known as IPA. It succeeded in maintaining its unique taste during the voyage to India from the U.K.

Kim’s company currently produces three beers, an IPA, a pilsner and a stout. It started marketing canned IPA at Home plus earlier this month.

Some 30 stores of the country’s No. 2 discount chain put the new beer on their shelves and the number is expected to increase to 50 later this year and to more than 100 by 2013.

“Presently, the canned IPA is available mainly at Home plus outlets in Seoul and its vicinity. They almost sold out in less than a month despite a higher price tag than other major brands,” he said.

“By next year, they will be available throughout the country to compete in the high-end segment.”

With only 11 employees and about 10,000 litres in daily capacity, 7brau is a minnow compared to its mammoth competitors of OB and Hite-Jinro that each boast a capacity of more than 1 million kiloliters.

Yet, Kim is resolutely determined to grapple with the challenge before him.

“The beer industry costs a lot through investment. As a result, small-sized outfits tend to struggle in competing with mega-sized established companies,” the 54-year-old said.

“Yet the eased regulations, coupled with government support for medium- and small-sized enterprises are of help. We are doing well so far, largely in part to the collective support of our workforce.”

Kim expects more new entrants into the industry down the road.

“Various imported brands have gained popularity of late, which shows Korean consumers have turned their sights to alternative options and the trend is expected to accelerate with the advent of craft beer companies,” he said.

“Many others are likely to jump into the ring and as a trailblazer; I think 7brau is required to play an important role while taking big responsibilities.”

Kim has been in the beer industry throughout his career. He opened brewpubs in Seoul in 2003, which caught on with several end users.

He expanded the pubs, dubbed 7brau, to other regions near Seoul and has prepared for his craft beer company through such efforts as inviting a brewmaster from Europe.


South Korea: Imported premium beer sales up 11% in 2011  (

Sales of imported premium beer are on the rise with a growing number of young consumers preferring foreign beers to domestic brands, prompting Korean brewers to pump up imports of Japanese brands, The Korea Herald reported on February, 28.

About 45 million litres of imported beer was sold in Korea last year, up 11 percent from a year ago.

Japanese beer was the most popular with 18,252 tons worth $12.35 million sold, followed by Dutch (9,509 tons worth $10.92 million) and American (5,601 tons worth $8.82 million), according to statistics from the Korea Customs Service.

Imported beer still accounts for only about 4 percent of the annual Korean beer demand which amounts to 3.5 trillion won. The share of imported beer used to be in the 3 percent range two to three years ago, but is now nearing 5 percent.

According to the nation’s largest supermarket chain E-Mart, sales of imported beer in the first month and half of this year jumped 56.2 percent from a year ago, while sales of most other booze dropped.

Only sales of imported beer gained in the same period at third largest retail outlet Lotte Mart as well.

Market watchers said Korean retailers are increasing imports of European beers as the Seoul-Brussels free trade agreement phases out tariffs on European beers within seven years. The FTA took effect on July 1 last year.

E-Mart, which sells 200 types of imported beer including Tibetan and Brazilian brands, increased the volume of beers in its imported beer corner this year.

Imports of Japanese beer have soared most.

Japan’s Asahi has the biggest share ― 30 percent ― of the imported beer market, which excludes foreign beers that are produced in Korea, such as Budweiser and Hoegarden. Asahi beat Heineken, which had kept the No. 1 spot for years, for the first time last year.

Sales of Asahi surged 20 percent from 2010 to some 12.6 million litres last year, which translates into more than 100 billion won in revenue.

Lotte began importing Asahi in 2000. Starting with sales in hotels, Japanese restaurants and clubs, Asahi expanded into supermarkets and convenience stores, showing an annual average sales growth of 48 percent between 2005 and 2011.

“We aim at a 20 percent growth to sales of 1.5 million boxes this year through an aggressive sales promotion policy,” a Lotte Asahi Co. official said.

The company plans to increase the number of bars that sell Asahi draft beer from last year’s 500 to 4,000 this year.

As Asahi, which takes up more than 90 percent of the Japanese beer sales in Korea, is produced in China, it tastes fresher than beer imported from further away, according to industry watchers.

They attribute Asahi’s success also to Koreans’ preference for Japanese companies’ brewing methods and Lotte’s distribution power.

With the demand for Japanese beer expected to keep growing, other Korean companies have jumped into the import business.

Oriental Brewery Co. has imported Suntory Premium Malts of Japan’s third largest brewer Suntory since late 2010.

Hiscot Co., a subsidiary of Hite-Jinro Group, has imported Kirin’s premium bottled beer Ichiban Shibori since 2004, and added canned beer and draft beer to its import list this year. Hite-Jinro is reviewing domestic production of Kirin beers through a technological partnership.

Maeil Dairies Co. began sales of Sapporo beers last year through a subsidiary named M’s Beverage Co. To reinforce the sales of Sapporo premium beers in Korea, Sapporo International Inc. acquired a 15-percent stake in M’s Beverage last month.

Maeil is also reportedly seeking to import Yebisu, Sapporo’s premium beer brand.

Korean breweries are taking steps to expand the sales of imported premium beer in a bid to improve profitability, as it is easier to raise the prices of imported booze compared to domestic beverages, market analysts say.

The decades-old rivalry between Oriental Brewery and Hite, which acquired soju maker Jinro in 2005, is expected to enter a new stage when Lotte Chilsung Beverage Co. builds a beer factory by 2017.

The beverage arm of Lotte signed a preliminary agreement with the municipal government of Cheongju, North Chungcheong Province, last month to build a brewery with an annual beer production capacity of 500 million litres in the city’s new industrial park from 2015 to 2017.


South Korea: Smaller brewers still hindered by limited distribution rights  (

Entry barriers hurt Korean beer industry, The Korea Herald communicated on February, 7.
Brewers say trade barriers must go to add colour to Korean beer market as the market dominated by just two local beer giants – South Korea: Smaller brewers still hindered by limited distribution rights Hite and Oriental Brewery (OB).
Smaller breweries have been trying for years to take some part of a market where the share between the big two is split nearly fifty-fifty.
Many beer lovers crave diversity, finding local products “watery” and of lower quality when compared to German or Japanese brands.
Much of this wateriness could be blamed on the nation’s regulations, which impose loose ingredient requirements but tough entry barriers.
Good news came in December that the Finance Ministry, overseeing the liquor tax law, lowered manufacturing license capacity requirements from 1,850 kiloliters to 100 kiloliters. One might think this huge reduction would allow more microbrewers to enter the scene and add some much needed colour to the market. However, this is not the case while the second hurdle of limited distribution rights still hinders smaller players.
“The lowered entry barrier has no meaning for us, in that most microbrewers have a manufacturing capacity of less than 25 litres. The government hasn’t even given us an environment for us to grow in the first place because we’re not allowed to sell our production outside our own stores anyway,” Kim Deok-ki, chief of the Korea Microbrewery Association said.
“Many of the brewmasters at smaller breweries develop unique tastes through independent roasting and fermentation processes yet all circulation routes are blocked for us.”
According to the Fair Trade Commission, Hite and OB generate operating profit margins of 62.6 percent on average and have no other local competitors. The antitrust regulator’s December report warned that the industry would remain vulnerable to market power abuses should the duopoly continue.
The drive for a more competitive local beer market, valued at about 3.5 trillion won ($3.1 billion) by revenue, began with the beer boom during the 2002 FIFA World Cup co-hosted by Korea and Japan. The right to sell house beers was granted then for breweries with manufacturing capacity of at least 5 kiloliters, but no more than 25 kiloliters.
The government is aware of the need for more competition, yet it is still in wait-and-see mode.

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