U.S. Juices Competitive in South Korea Despite High Tariffs

Thanks to growing consumer incomes, increasing health consciousness and changing taste preferences, South Korea’s fruit and vegetable juice imports jumped from $79 million in 1991 to $129 million in 1995, a 63-percent increase.

During this four-year span, U.S. juice exporters took advantage of this developing market to gain market share with a 138-percent increase, from $17 million in 1991 to more than $40 million in 1995. Fruit juices dominate this import market, as vegetable juices account for less than 3 percent of the total.

South Korea To Relax Tariffs

*Orange Juice:*	Fixed at high of 58.8 percent in 1996, tariffs will decrease 0.6 percent yearly until reaching 54 percent in 2004.
*Grape and Apple:*	From 49 percent in 1996, tariffs will decrease 0.5 percent per year through 2009.
*Grapefruit:*	Tariffs will be 46 percent until 1998; 45 percent in 1999, decreasing 3 percent per year through 2009.
*Pineapple, Lemon, Lime and Fruit Juice Mixtures:*	Fixed at 50 percent.
*Vegetable:*	Fixed at 30 percent.

The market climate for imported frozen concentrated orange juice (FCOJ) will get even better after July 1997. (Most juices are imported in concentrate form due to transportation costs.) Quotas for orange juice will be eliminated, and the current practice of using local mandarin oranges for a negotiated share (10 percent in recent years) of total orange juice production will end.

U.S. juice exporters compete easily with domestic juice production, despite high tariffs. Most locally produced fruit is consumed fresh, leaving little for processing. And Korea’s 1996 domestic orange crop was down, which further reduced oranges available for processing last year.

While orange juice retains first place in the fruit beverage market, grape and apple juices are gaining favor and market share. Currently, orange juice accounts for 58 percent of the total fruit drink market. Grape juice follows with 18 percent, apple with 14 percent.

Market liberalization for grape juice in 1995 and apple juice in 1996 resulted in sharp increases of sales for these products. However, these gains have come at the expense of mixed fruit juice imports that often contain large amounts of grape or apple juice.

All-natural, 100-percent juices have increased in market share from 25 percent in 1991 to 67 percent in 1996. Conversely, fruit drinks with lower juice content decreased to 32 percent in 1996, down from 63 percent in 1991.

The South Korean market for imported juices is dominated by FCOJ. Brazil’s lower prices allowed it to capture $67 million of the $88-million FCOJ market in South Korea during 1995.

U.S. exporters supplied the balance of this market. Besides the $21-million orange juice market, the United States also dominates the South Korean market for other juices. The total juice market share for U.S. exporters is a $40-million business that is almost one-third of total South Korean juice imports. Taiwan, the only other significant competitor, took $9.2 million (7.1 percent) of the market in 1995, while all other competitors supplied $12 million (9.3 percent).

During the first seven months of 1996, fruit and vegetable juice imports fell 25 percent from the same timeframe in 1995. This decline resulted from efforts by the South Korean government to discourage imports because of its trade deficit, slower economic growth (estimated at 6.5 percent for 1996) and the growing popularity of health teas and other traditional drinks.

Soft drinks and juices have long dominated the non-alcoholic beverage market in South Korea. During the past few years, however, some products have made inroads into this market, including traditional Korean beverages such as fermented rice drinks and jujube tea, sports drinks, health drinks and drinks for beauty and hangovers.

These trendy drinks may cause temporary declines in the 100-percent-juice markets, but they tend to have a one- to two-year life cycle, while fruit drink consumption remains relatively stable.

A complete copy of the market brief on which this article was based is available from:

Trade Assistance and Promotion Office
AgExport Services/FAS/USDA
Ag Stop 1052
1400 Independence Ave., SW
Washington, DC 20250-1052
Tel: (202) 720-7420
Fax: (202) 690-4374

AgExport Connections
AgExport Services/FAS/USDA
Ag Stop 1052
1400 Independence Ave., SW
Washington, DC 20250-1052
Tel: (202) 720-7103
Fax: (202) 690-4374

For general information on the fruit and vegetable juice market in South Korea:

Office of Agricultural Affairs
American Embassy-Seoul
Unit 15550
APO AP 96205-0001
Tel: (011-82-2) 397-4297
Fax: (011-82-2) 738-7147

Y.J. Kim is an agricultural assistant with the Foreign Agricultural Service’s (FAS) Office of Agricultural Affairs at the American Embassy in Seoul, Korea. Tel. (011-82-2) 397-4297; Fax (011-82-2) 738-7147. Philip A. Shull is the Agricultural Trade Officer with the FAS Agricultural Trade Office in Seoul, Korea. Tel. (011-82-2) 397-4188; Fax (011-82-2) 720-7921.