South Korea: Craft beer market expands following eased regulations

South Korea’s domestic craft beer market has become larger and more diverse following the government's efforts to ease regulations, in a move aimed at enhancing market competitiveness for the country's small and medium-sized enterprise (SME) breweries, according to the Fair Trade Commission (FTC), January 21.

The measures have boosted fair competition between SMEs and larger breweries, leading to the companies introducing more products and reducing retail prices. The FTC compared the outcome favorably to the domestic market in 2016 when it found conditions that restricted the SMEs from competing in the market.

According to the state-run antitrust agency, the government in 2018 increased the maximum vat size limit for SME breweries to 120 kiloliters from 75 kiloliters. The year also saw the FTC allowing the breweries to sell their products at convenience stores and major retail store chains.

The following year saw the government expand legal distributive means for the breweries so that the companies could have more options for their wholesale and retail distribution.

In 2020, the government switched the taxation system for the breweries from the assessed value tax (ad valorem tax) to per unit tax which is based on a fixed amount per product. It reduced taxes levied on the companies, lowering production costs and fixing the unlevel playing field that levied less tax on imported beers and more on domestic products.

These mitigations, according to the FTC, allowed the domestic craft beer market to see the number of local breweries jump to 81 in 2023, up from 33 in 2019. Their market shares in the domestic beer market also increased to 2.8 percent in 2022 from 0.2 percent in 2019. During the period, imported beers saw their market shares decline.

The market shares of local craft beers were particularly notable in convenience stores and major retail stores. In convenience stores, craft beer cans accounted for 0.18 percent of the market share in 2019. The figure jumped to 5.3 percent in 2022.

The number of domestic craft beer brands also increased. At convenience stores, the number of brands increased from 26 in 2019 to 154 in 2023. Their prices also dropped from as high as over 3,700 won ($2.57) per can to 2,765 won.

The FTC said the mitigations have “increased the number of businesses, spurred market competition, expanded choices for consumers and ultimately widened the price range consumers are willing to spend on their products.”

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .