Filling Japanese Beer Slots with Domestic Craft Beer... Impact of Boycott Movement and Specific Tax System

[Asia Economy Reporter Seungjin Lee] Along with the boycott of Japanese products, the liquor tax on beer has changed to an ad valorem tax based on quantity starting this year, marking the beginning of a full-scale market expansion for domestic craft beer.

According to CU on the 8th, due to the deterioration of Korea-Japan relations and the start of the boycott of Japanese products from July last year, sales of Japanese beer plummeted by more than 90% compared to the previous year.

Looking at the monthly year-on-year sales growth rate of Japanese beer in the second half of 2019, sales dropped by more than half in July at -52.2%, followed by -88.5% in August, -92.2% in September, -91.7% in October, -93.1% in November, and -93.8% in December, showing a sharp decline over the past six months.

As the position of Japanese beer weakened, domestic beer began to fill the gap.

Domestic beer sales increased by more than 30% in the second half of last year, up from a single-digit growth rate of 1-5% in the first half. Among them, the growth of craft beer, which emphasized differentiation from existing beers, surged noticeably.

At CU, craft beer showed a growth rate in the 40% range until the first half of last year, but from the second half when Japanese beer sales began to decline, sales soared year-on-year by 159.6% in July, 200.4% in August, 207.1% in September, 284.9% in October, 290.1% in November, and 306.8% in December.

Accordingly, the sales share of craft beer in domestic beer rose sharply from 1.9% in 2018 to 5.6% in 2019.

This popularity of craft beer is expected to accelerate further this year. Due to the shift to an ad valorem tax, craft beer, which had a high production cost due to difficulties in mass production, has gradually gained price competitiveness, enabling more aggressive marketing.

Starting in January, CU is running a promotion offering craft beer at a uniform price of 3,500 won per can and 9,900 won for three cans. The promotional products include a total of 12 types such as Toegun-gil Pilsner, Strong IPA, MacArthur Amber Ale, Heungcheongmangcheong Vienna Lager, Black Sugar Milky Stout, and Life Ale.

The usual price of craft beer ranges from 3,900 to 5,200 won, but with discounts, it can be purchased at 15% to 40% lower prices. As a result, competition between imported beer and domestic craft beer is expected to intensify.

Seungtaek Lee, MD of the Beverage Food Team at BGF Retail, said, “With the reform of the liquor tax system, domestic craft beer, which had been overshadowed by imported beer, is continuously launching new products with various tastes and types. As the lineup of craft beer available at convenience stores expands and prices gradually decrease, the related market is expected to grow further.”

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