Korea and Wine – New Developments

Wine lovers in Korea are frustrated by the high prices on wines which are caused by tax and a cumbersome distribution system but there are moves afoot to combat the situation. Joshua Hall has his finger on the pulse of the wine scene in Korea and is a wine writer and consultant based in Seoul who writes for the Korean press as well as his own Wine Korea site. He recently wrote on the South Korean government’s changes to the wine distribution system for Yon Hap News. This is the first time in 29 years that the government has simplified the system in an attempt to cut prices for consumers. To read Joshua’s full feature article click here.

Joshua reports that:

The measure will help people like Kang Soon-pil, CEO of wine shop Gallery The Wine, who previously had to deal with three separate licenses: retail, restaurant and importer. It will also be a boon for consumers who can now call the phone number of the importer on the back of the bottle and order wines directly.”

Since the Free Trade Agreements with Chile, the EU (July 2011) and the USA wine importers have been under pressure from the media and consumer interest groups to provide lower priced wines. However the FTAs with Chile and the EU have done little to aid access to low cost wines thanks to red tape and complicated licences/distribution systems (see Joshua’s article EU FTA Red Tape Keeps Korean Wine Market Tied Up).

Yoon Myoung, policy director at Consumers Korea, points out that free trade agreements have been ineffective at lowering wine prices. “Our organization has researched wine price since 2008. According to that result, wine price in Korea is highest of 28 countries.” The survey was done in cooperation with local consumer rights organizations who visited department stores, supermarkets and wine shops in Asia, Europe, the U.S. and South America.

The Ministry of Strategy and Finance acknowledged that Consumer Korea’s dissatisfaction with the ineffectiveness of the Chilean free trade agreement (FTA) was one reason for the change in policy, as Chilean wine prices have continued to increase despite the FTA with Chile being fully completed.”

The new liquor license regulations that the Korean government have imposed have had a mixed reception. Consumers are now able to order wines directly from an importer and this will inevitably cut costs but whether these will be passed on to consumers is another matter.

While most welcome the government’s move to simplify the licensing system, they point out that changes to the taxation system would be more effective at lowering wine prices.”

Imported wine is taxed heavily – there is 15% Wine Tax (waived in the case of the countries with a FTA) and cumulative 30% Alcohol Tax, 10% Education Tax and 10% VAT.

The other issue that hampers the wine trade in Korea is that wine is not allowed to be sold online.

According to Vinexpo (despite the slump in wine imports in 2009 caused by the credit crunch) wine consumption is expected to grow between 2010 and 2014:

As the economy recovers and as a result of the bilateral trade agreements signed by the Korean government and the European Union, wine consumption is expected to grow substantially between 2010 and 2014, up 49.93%.”

Whatever the future holds for Korea I hope that wine lovers gain greater access to reasonably priced wines.

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