South Korea: Brewers bringing in foreign beers rather than investing in development of own brands

Beer companies in South Korea have been rushing to bring beer foreign brands to the country rather than investing to develop their own beers, citing the lower tax rates levied on imported beer, the Korea Times reported on June 6.

Growing consumer preference for beers imported from overseas, especially Europe and Japan, has also prompted local brewers to sign sales contracts with foreign rivals and bring many different kinds of beer into Asia's fourth-largest economy.

With some of them even beginning to bring in beer from their overseas factories, the analysts are raising concerns over the possible collapse of domestic beer production.

According to the Korea Alcohol & Liquor Industry Association, Korean beers face at least 20 percent higher taxes than imported beers.

"If the government continues to levy higher taxes on Korean beers, Korean breweries will lose their competitiveness," an official of the association said. "This will reduce jobs in Korea and weigh on the national economy."

Workers at Oriental Brewery (OB) have recently been the most concerned about job loss.

According to the company, it has been importing 740-milliliter cans of its Cass World Cup Package from the United Sates since last month, citing its Korean factory lacking a production line for the 740-milliliter can as a reason.

OB's labor union, which has protested the import of the special edition Cass beer, alleges the company is trying to take advantage of regulations favorable to imported beers, although management denies the allegation.

OB, which is owned by the world's largest beer company, AB InBev, has imported over 20 types of beers, including Mexico's Corona, Japan's Suntory, Belgium's Stella Artois and China's Harbin.

Sales of imported beers accounted for 6 percent of the company's sales last year, according to the company.

Lotte Liquors, another large brewery in Korea, recently began importing Coors Light and Blue Moon as well, following imports of Miller Lite and Genuine Draft started last March.

Some companies outside of the beer business have also joined the competition.

Golden Blue, a local whisky brand, signed an exclusive sales deal with Danish-based Carlsberg.

And 7-Eleven is selling four 500-milliliter cans of Burge Meester for 5,000 won ($4.6).

Discount chains in Korea sell four 500-milliliter cans of imported beers for 10,000 won.

According to Korean law, taxes on domestic beers are levied in accordance to their factory prices including costs for marketing, while those on imported beers are based on the sum of their production costs and tariffs, excluding marketing expenses.

Also, beers containing less than 10 percent malt or those mixed with other ingredients face lower tax rates.

HiteJinro took advantage of this regulation when it released Filite in April last year and Filite Fresh last month.

The Korean firm could avoid higher taxes, as the two products were categorized as sparkling liquor containing less than 10 percent malt.

HiteJinro has not come up with any other new beer products over the past few years.

According to E-mart, sales of imported beers accounted for 54.3 percent of the discount chain's total beer sales last month.

Data compiled by the Korea Customs Service showed the country imported $263 million worth of beer, up 45 percent from a year earlier.

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