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(Yonhap Interview) Jeju Beer eyes bigger share of S. Korea's craft brewing market

All News 17:11 August 31, 2021

By Choi Kyong-ae

SEOUL, Aug. 31 (Yonhap) -- Jeju Beer Co., South Korea's leading craft beer maker, is betting on a growing local appetite for higher quality and more diverse beers as it expects annual sales to exceed the previous year's level.

Jeju Beer, whose brands launched in 2017, has introduced three major ale beer products in the domestic market and recently began to export them to European markets, such as Germany, Britain and France.

"We expect double-digit sales growth this year from a year earlier, helped by changing market demand for beer and overseas sales of our products," Moon Hyuk-kee, founder and CEO of Jeju Beer, said in a recent interview with Yonhap News Agency.

Moon Hyuk-kee, founder and CEO of Jeju Beer, answers questions during an interview with Yonhap News Agency at the company's headquarters in central Seoul on Aug. 30, 2021. (Yonhap)

Jeju Beer's entry to the Korean outlets of U.S. retailer Costco Wholesale in June will also help its sales for the year, he said, adding Jeju Beer products will be available at Costco's British outlets within this year.

Last year, the Jeju-based company hit the shelves of the country's five major convenience stores -- GS25, CU, 7-Eleven, Ministop and Emart 24.

Increased sales channels boosted Jeju Beer's sales to 32 billion won (US$27 million) last year from 15.1 billion won a year earlier. Jeju Beer accounted for 28 percent of the domestic craft beer market.

In the January-June period, its sales already jumped 29 percent to 17.8 billion won from 14.1 billion won a year earlier.

A revised liquor tax and increased household demand for craft beers helped buoy sales amid the prolonged COVID-19 pandemic, the 42-year-old said.

"The previous liquor tax system for beer was a major obstacle to do business but the policy change reduces the cost of higher value beers in the market and offers a level playing field for local beer companies," he said.

Last year, South Korea implemented the revised 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 change -- the first since 1968 -- calls for a tax system based on volume rather than an ad valorem, a charge levied on prices of beer.

Any beer -- regardless of production costs or retail prices -- is subject to 830.3 won (72 cents) per liter liquor tax under the revised tax system.

The previous ad valorem tax allowed imported beer brands to pay lower taxes than their South Korean competitors, an imbalance that has led to an increased share of imported beers in South Korea in recent years.

As for shipments to Europe, the CEO said, "Sales of Jeju Beer products fully depend on the capability of its importing partners there but there is a growing interest in Korean beer due mainly to the popularity of K-pop sensation BTS."

South Korea sees K-pop and the broader Korean Wave as soft power that can appeal to young people around the world and increase its relevance to them.

Experts said the Korean Wave generated by K-pop and TV dramas could turn fans in foreign countries into active consumers of South Korean products.

Jeju Beer said it plans to set up a subsidiary in Vietnam, the biggest producer and consumer of beer in Southeast Asia, in 2022 to make a presence in global markets.

Jeju Beer already sells its three products -- a wheat beer made with tangerine peel called Jeju Wit Ale; Jeju Pellong Ale, a citrusy yet bitter pale ale; and Jeju Geomeong Ale, a dark beer with notes of chocolate wheat malt and black barley -- in Singapore, and Wit and Pellong Ale products in Hong Kong through local importers.

This undated file photo provided by Jeju Beer shows the company's craft beer manufacturing facility on Jeju Island. (PHOTO NOT FOR SALE) (Yonhap)

South Korea's 118 billion won ($100 million) craft beer market pales in comparison with the $22 billion U.S. market in terms of size and number of participating companies.

Craft beer makers account for 25 percent of the U.S. beer market, while the proportion stands at a mere 3 percent in South Korea.

"It means the Korean craft beer market has room to grow eightfold (in the next decade) compared to the U.S. market," Moon said.

The Korean craft beer market is expected to reach 370 billion won in 2023 from 43.3 billion won in 2017 and 118 billion won in 2020, according to the Korea Craft Brewers Association.

In the past decade, some 50 craft beer brands in the U.S. made investments in facilities and products, which in turn boosted the U.S. craft beer market. Currently, the number of U.S. craft beer brands reaches 4,000.

Jeju Beer, listed on the tech-heavy KOSDAQ market in May, has invested a total of 60 billion won in its brewing facility on the southern resort island of Jeju.

The company does not have additional investment plans for the time being as the country's beer-producing capacity already exceeds demand.

"There are about 150 craft beer brands in Korea. They need to take a similar path by making investments in automation to achieve the economies of scale and compete with import rivals," Moon said.

This photo taken on Aug. 31, 2021, shows craft beer products on the shelves of a GS supermarket outlet in Seoul. (Yonhap)

kyongae.choi@yna.co.kr
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