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South Korea, a Booming Market for U.S. Wine Exports
By Phillip Shull
U.S. wines are filling more and more
glasses on dinner tables in Korea than ever before, increasing
the demand for American labels and creating new markets of
opportunity for U.S. wine exporters. The future looks bright;
Korean wine imports are expected to grow at double-digit rates
through at least the year 2000.
Last year, Korea's demand for red wine began surging upward, with the trend expected to continue through 1998. According to the Korean Trade Information Service, the increased demand has more than doubled Korean wine imports in just a few short years. In 1993, wine imports to Korea totaled $5.9 million, but by 1996, wine imports grew to $16.4 million. And the trend continues. By June 1997, U.S. wine exports to Korea already surpassed $13 million.
The U.S. share of the Korean market is increasing by more than 50 percent per year, and by the turn of the century, it's expected to reach 25 percent of the total market.
There are several reasons for increased demand for foreign wines. Korea's minuscule wine production continues to decrease because of the high costs of maintaining local vineyards. In fact, much of the domestically bottled and labeled wine is actually imported bulk wine. This small percentage of Korean wine is unable to compete with that of other wine-producing nations on the international market.
Recent news reports by the Korean media touting the possible health benefits of red wine have helped fuel a tremendous surge in demand for imported red wine.
In addition, higher Korean incomes, the increasing popularity of wine products among consumers and a Westernization of lifestyles, especially among professionals, have resulted in double-digit increases in Korean wine consumption. All of these factors make it difficult for Korean importers to keep supplies of red wine in stock at local stores and restaurants.
Squeezing a Juicy Market
The European Union (EU), especially France, has traditionally dominated 80 percent of the Korean wine import market. French wineries market their products by participating in the major food shows in Korea and by holding yearly wine tasting seminars and tastings. These events are sponsored by the French Embassy and funded by SOPEXA, the French Food and Beverage Promotion agency.
Other competitors, such as Germany, Italy and Australia, also take part in various Korean food shows, wine tastings and receptions for wine importers and food service outlets.
However, the reputation of U.S. wines, especially those with California labels, is improving rapidly; they've earned an excellent reputation in Korea, especially the medium- and higher quality red wines. Market share reached nearly 10 percent in 1996. In fact, U.S. wine sales in Korea grew three times faster than total Korean wine imports in 1996. One Korean importer predicted that his U.S. wine imports could increase as much as 30 percent this year.
U.S. wine exporters stand to gain by participating in wine tastings, USDA-sponsored food shows and, most important, by visiting Korea to establish personal contacts.
An Expanding Wine Market
Korean wine imports have shown tremendous growth in the last few years, especially considering that the Korean market has only been available to all wine importers since 1988. Before that time, wines were imported only through the Korean National Tourism Corporation, which supplied wine to registered tourist hotels.
Today, wines can only be imported into Korea by licensed wine and liquor importers. There are about 130 licensed importers in Korea, but only 20 are active. Most importers also have a wholesaler's license, which allows them to distribute wine to retailers. However, the Korean Liquor Act prevents retailers and end-users from purchasing wine from other retailers and discount stores for resale purposes. These restrictions are one reason for the broad range of wine prices. Korean consumers pay very high prices for imported wines due to import duties, taxes and distribution costs.
For example, a $10 bottle of U.S. wine typically sells for about $22 at Korean discount stores, $46 in supermarkets and liquor stores and $64 in a hotel restaurant. The costs for advertisements and promotions, payment conditions and sales volume cause these big price differences between discount stores and liquor stores.
Inspections and Labeling
Established importers are the best source of information for all inspection and labeling requirements needed for U.S. wine exports. All foods and beverages imported into Korea are subject to inspections by the Ministry of Health and Welfare/Food Quarantine division. There are two kinds of food and beverage inspections: a detailed chemical analysis test and visual/document inspection.
Korean-language labels must include the following: name of the product; country of origin; type of product; importer's name, address and telephone number; business license number of importer; expiration date; alcohol percent and volume; name and volume of ingredients by percentage; name of place where the product can be returned or exchanged in case the product is damaged or defective; instructions for storage; name of food additives; the Government's health warning clause and lot number or manufacturing date.
U.S. wine exporters interested in tapping into the Korean market should contact Korean wine licensees to sell their products in Korea. For more information on the licensees and help in exporting, U.S. exporters should contact:
USDA-FAS Agricultural Trade Office
American Embassy Seoul
82 Sejong-Ro, Chongro-Ku
Seoul, Korea 110-050
Tel: (011-82-2) 397-4188
Fax: (011-82-2) 720-7921.
Perseverance Leads to Big Payoff
By Yong Ja Kim
For USDA negotiators working over the past 10 years to eliminate restrictive trade barriers with the Republic of South Korea, it may have seemed slow going at times. But their patience and skill led to a dramatic trade success story for U.S. exporters.
The negotiators' strategy: to target those imports with quantitative restrictions or previously limited only to special import channels for tourist hotels and restaurants. The results: trade statistics that reflect the success of resolutely chipping away at the trade barriers.
U.S. exports previously under quantitative restrictions, mainly intermediate and consumer-oriented products, have doubled from $500 million in 1988 to over $1 billion in 1996.
And these positive trade figures do not tell the whole story. Other resolved issues include elimination of restrictive shelf-life regulations and an import clearance initiative that has eased importing procedures for perishables. The Uruguay Round negotiations and Record of Understanding also led to further tariff reductions for products, such as grapefruit, that were not formerly under quantitative restrictions.
The author is director of the FAS Agricultural Trade Office at the American Embassy, Seoul, Korea. Tel. (011-82-2) 397-4188; fax. (011-82-2) 720-7921. E-mail: agaff@ktnet.co.kr. E-mail at the FAS ATO office: ShullP@fas.usda.gov
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