Craft Beer Grew Thanks to Convenience Stores... But Distribution Concentration Holds It Back

Growing 10 Times Larger in 7 Years Through Accessible Convenience Stores
Last Year's Sales Reached 152 Billion KRW

Diversity and Originality Limited by Convenience Store 4-Cans for 10,000 KRW Marketing
Only Light and Low-Flavor Products Overflow to Meet Supply Prices
Recovery of Specialty Stores and Pubs Needed

[Asia Economy Reporter Koo Eun-mo] The domestic craft beer market in South Korea has grown nearly tenfold over the past seven years, riding the convenience store channel known for its excellent accessibility. Since 2020, an amendment to the liquor tax law has also provided wings to secure price competitiveness. However, distribution has concentrated on convenience stores promoting "4 cans for 10,000 won," and with sales prices effectively capped, this has limited the ability of craft beer to showcase its distinctiveness in diversity and originality. To sustain the recent growth trend of craft beer, voices are emerging that the nightlife channels, where the true essence of craft beer can be savored, must recover from the slump caused by COVID-19.

According to the Korea Craft Beer Association on the 23rd, last year, the sales revenue of domestic craft beer companies was recorded at 152 billion won. This represents an increase of nearly 30% compared to the previous year and marks nearly a tenfold growth over seven years since 2014 (16.4 billion won). The number of companies has also steadily increased. The number of craft beer manufacturing licenses, which was around 54 in 2014, rose to 163 as of January this year.

In the 2010s, the domestic craft beer market began to sprout as foreign craft beers were gradually introduced. A turning point came in January 2020 when the liquor tax system was restructured to an ad valorem tax system charging 830.3 won per liter. Under this volume-based tax system, production costs decrease, allowing craft beers produced in small quantities to have room for price reductions.

The domestic craft beer market is accelerating its growth by aligning the spirit of craft beer?which prioritizes diversity and originality?with the value consumption trend that emphasizes individuality and satisfaction. Craft beer has grown by differentiating itself from the light lagers of large liquor companies, which emphasize lightness and cleanliness, by freely using not only the basic beer ingredients such as malt, hops, and yeast but also various fruits and herbs, showcasing a variety of styles.

Moreover, the growth speed of the craft beer market has accelerated further as craft beers became available through highly accessible convenience store channels. Since 2018, with the revision of the enforcement decree of the liquor tax law allowing small-scale beer retail distribution, craft beer has climbed onto the convenience store channel, which boasts excellent accessibility, expanding its territory with marketing such as "4 cans for 10,000 won." The market share of craft beer in the domestic beer market, which was only 0.69% in 2016, steadily increased to 1.40% in 2018, 3.55% in 2020, and reached 4.92% last year, growing about sevenfold in five years.

Although this has driven market growth, there are criticisms that the convenience store "4 cans for 10,000 won" marketing is limiting the diversity and originality that are the distinguishing features and growth drivers of craft beer. Because the selling price in convenience stores is virtually fixed, only light and low-flavor similar products that can meet the supply price are flooding the market. Kim Man-je, director of the Korea Beer Education Institute, said, "Since only light and mild craft beers can generally be distributed, products may appear diverse at a glance, but most styles are actually similar."

The industry believes that nightlife channels such as craft beer specialty stores and pubs need to recover. This is because draft beer distributed through nightlife channels can showcase the true essence of craft beer. A representative from the Korea Craft Beer Association pointed out, "It is difficult to gain a comparative advantage against established large corporation beers with only convenience store craft beers produced under the current distribution structure, and it is also not easy to continuously attract consumer interest."

On the other hand, draft beer distributed in kegs through nightlife channels is not constrained by supply prices and is made with the philosophy and individuality of the brewery, making it easier to experience the diverse styles of craft beer. Consumers who have developed an interest in craft beer through convenience store products can also try various craft beers emphasizing the characteristics of beer elements such as malt, hops, and yeast, expanding their personal preferences.

The industry expects that if consumer interest and demand for various beer styles are generated through quality craft beer experiences distributed in nightlife channels, the price restrictions imposed by the "4 cans for 10,000 won" framework in convenience stores could naturally be broken. Lee In-gi, CEO of BeerPost, said, "Recently, consumers want to consume differently from others, and I believe there is definitely an opportunity at that point."

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