South Korea, Seoul: South Korea's largest brewery, Hite Brewery Co., announced on Wednesday, December 29, 2004, it will down its wholesale beer prices by 1 % after the government decided to lower taxes on alcohol. From January 1, 2005, the government will lower tax rates on beer from 100 % of its wholesale price to 90 %. The Danish Brewery Carlsberg owns 25% of Hite.

Under the price cut, which will be effective from Saturday, the wholesale price of 500-milliliter bottle of beer will be cut to 1,005 won (U.S. 96.4 cents) from the current 1,015 won, the company said in a statement. The wholesale price of a 355-milliliter can of beer will be lowered to 1,086 won from 1,097 won, it said.

Although the growing trend of the beer market is stumbling, due to economic depression, the future prospect is bright, deriving from the 5-day workweek system and increase of preference of low alcohol drinks. Since beer tax is planned to be reduced from 100% to 72% over three years from 2005 to 2007, firm's growth is projected. Sluggish profit is worried, because the firm needs to share some portion of the wholesalers' cash flows burden, stemming from fierce competition with Oriental Brewery.

Since the brewery took up gain the No.1 spot in the industry since 1996, it took overwhelming market share with 58.25% in the first half of 2004, based on continued growth. Its beer business is a dominant business with 97.9% of sales of the gross sales of the firm. Drinking mineral water and other businesses ratio is only 2%. Due to raw material prices and pitcher beer selling expenses increase, gross profit on sales declined. Writing off bad debts burden has increased, owing to management difficulties of small and medium distributors.

The beer market in South Korea saw a slight drop in consumption due mainly to the depressed economy according to the latest South Korea Beer Report from Canadean. Changes in the market included the renaming of OB Lager Beer to OB and the introduction in November of a large PET bottle. This latter initiative by Hite and Oriental Brewery was an instant hit. Hite Brewery continues to lead the market with more than half the volume but Cass Brewing was able to overtake Oriental Brewery to take the second position.

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