The First Liquor Tax Law Revision in 52 Years... Brewing Price War Tensions Rise

Domestic Canned Beer Wholesale and Retail Prices Expected to Drop
Lotte Liquor Lowers Prices... HiteJinro 'Under Review'
Craft Beer Boom: 4 Cans for 10,000 Won Marketing Also

[Asia Economy Reporter Lee Seon-ae] Starting this year, the liquor tax on beer and Makgeolli has changed from an ad valorem tax based on price to a specific tax based on volume for the first time in 52 years, which is expected to trigger a beer price war this year.

According to the National Tax Service on the 6th, domestically produced beer paid an average liquor tax of 848 KRW per 1 liter until last year, but with the shift to a specific tax, it now pays an average of 830.3 KRW per liter. When adding education tax and value-added tax, the total tax burden on domestic canned beer decreases by 415 KRW per liter due to the tax reform. Draft beer (20L keg) will see an average increase of 445 KRW per liter, but will receive a 20% tax rate reduction for two years. Taxes on bottled beer and PET beer will increase by 23 KRW and 39 KRW per liter, respectively. In response, the National Tax Service released a document titled "Understanding Alcohol and Taxes" on the 5th, forecasting that the tax reform will lower the ex-factory price of domestic canned beer while increasing the tax burden on imported beer compared to now.

Although the increased taxes on bottled and PET beer are expected to have little impact on ex-factory and consumer prices, canned beer is expected to see price reductions in both ex-factory and consumer prices due to the tax decrease. The industry has already started to engage in strategic moves. The first to raise the flag was Lotte Liquor.

Lotte Liquor lowered the ex-factory price of its canned beer based on 500ml: Kloud from 1,880 KRW to 1,565 KRW, and Fitz from 1,690 KRW to 1,467 KRW. The top two beer companies, OB Beer and Hite Jinro, have not yet adjusted their ex-factory prices. OB Beer took a preemptive measure by lowering the price of Cass by an average of 4.7% in October last year ahead of the tax reform and plans to supply at this price until the end of this year. Hite Jinro stated that it will consider price reductions depending on market conditions.

An industry insider said, "Only Lotte Liquor, which urgently needs to recover market share, has lowered prices for now. It will take some time for the tax burden reduction from the specific tax reform to be fully reflected in consumer prices," adding, "However, due to the revision of the liquor tax law, aggressive marketing by craft beer is inevitable, so if competition intensifies, OB Beer and Hite Jinro will also have no choice but to consider price adjustments."

Jeju Beer’s Jeju Pellong Ale.

The biggest beneficiaries of the specific tax are craft beers. Craft beers, which had relatively high production costs and paid high liquor taxes, will see their tax burden reduced by about 30% starting this year. The industry is actively moving to target the market by emphasizing price competitiveness. Jeju Beer has proactively lowered its ex-factory price by 20% and is expanding its brewery, while Amazing Brewing Company and Kabrew are also building factories.

At convenience stores and elsewhere, it is expected that four cans of craft beer will be available for 10,000 KRW. An industry insider said, "As a variety of craft beers with diverse flavors flood the market at affordable prices and become popularized, the domestic beer market will engage in qualitative competition," and predicted, "Beer companies' canned beers will inevitably have to compete with craft beers in the market, leading to price adjustments."

On the other hand, imported beers are expected to lose competitiveness as their tax burden increases. Imported beer is already showing a declining trend. According to the Korea Trade Statistics Promotion Institute, the import value of beer last year was 280.88 million USD, down 9.3% from the previous year. This marks the first contraction since 2009. Due to the diversification of craft beers and the price competitiveness of domestic beers, imported beer is expected to continue decreasing.

This content was produced with the assistance of AI translation services.