FOllow the requirement

ssh840962430

Beer_in_South_Korea.pdf

Home >Business & Finance homework help >Marketing homework help >FOllow the requirement

Beer in South Korea

Euromonitor International

July 2019

B E E R I N S O U T H K O R E A P a s s p o r t i

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Prospects ..................................................................................................................................... 1

Imported Beer Continues To Steal Total Volume Share ........................................................... 1 Changing Legislative Factors Will Benefit Domestic and Craft Beer......................................... 1 Convenience Drives Growth of Small Format Beer .................................................................. 1

Competitive Landscape ................................................................................................................ 2

Oriental Brewery Remains the Leading Beer Producer in South Korea.................................... 2 Economy Beer To Stand Out .................................................................................................... 2 the Craft Effect in Beer ............................................................................................................. 2

Category Background ................................................................................................................... 2

Lager Price Band Methodology ................................................................................................ 3

Summary 1 Lager by Price Band 2018 ............................................................................ 3 Table 1 Number of Breweries 2013-2018 ................................................................. 3

Category Data .............................................................................................................................. 3

Table 2 Sales of Beer by Category: Total Volume 2013-2018 .................................. 3 Table 3 Sales of Beer by Category: Total Value 2013-2018 ..................................... 4 Table 4 Sales of Beer by Category: % Total Volume Growth 2013-2018 .................. 4 Table 5 Sales of Beer by Category: % Total Value Growth 2013-2018 ..................... 5 Table 6 Sales of Beer by Off-trade vs On-trade: Volume 2013-2018 ........................ 5 Table 7 Sales of Beer by Off-trade vs On-trade: Value 2013-2018 ........................... 6 Table 8 Sales of Beer by Off-trade vs On-trade: % Volume Growth 2013-2018 ....... 6 Table 9 Sales of Beer by Off-trade vs On-trade: % Value Growth 2013-2018 .......... 6 Table 10 GBO Company Shares of Beer: % Total Volume 2014-2018 ....................... 6 Table 11 NBO Company Shares of Beer: % Total Volume 2014-2018 ....................... 7 Table 12 LBN Brand Shares of Beer: % Total Volume 2015-2018 .............................. 7 Table 13 Forecast Sales of Beer by Category: Total Volume 2018-2023 ................... 8 Table 14 Forecast Sales of Beer by Category: Total Value 2018-2023 ...................... 8 Table 15 Forecast Sales of Beer by Category: % Total Volume Growth 2018-

2023 ............................................................................................................. 9 Table 16 Forecast Sales of Beer by Category: % Total Value Growth 2018-

2023 ........................................................................................................... 10

B E E R I N S O U T H K O R E A P a s s p o r t 1

BEER IN SOUTH KOREA

HEADLINES ▪ In 2018, beer records 3.5% total volume sales growth to reach 2 billion litres

▪ Imported products and desire for convenience are key growth drivers

▪ Economy lager and imported lager experience biggest growth in beer in 2018

▪ Average unit price of beer in total value terms records 3% decline

▪ Oriental Brewery continues to lead beer in 2018 with a total volume share of 55.2%

▪ Beer is expected to record a 4.1% total volume CAGR over the forecast period to 2.4 billion

litres in 2023

PROSPECTS

Imported Beer Continues To Steal Total Volume Share

Beer in South Korea used to be dominated by domestic lagers with more than 90% volume

share. However, imported beer has been taking share over the review period. While the

presence of local beers is still significant via on-trade channels, imported beer targets the off-

trade and occupies space on retailers’ shelves. Imported beer appeals to consumers for two key

reasons; price promotion and premium positioning. South Korean consumers see imported beer

as a better quality and richer tasting option than domestic beer. Although domestic producers

launched premium products such as all-malt beer, they failed to break domestic beers’ cheap

and poor quality image. In addition to the premium positioning, imported beer improves its price

and accessibility through huge promotions in cooperation with convenience stores. For example,

“4 (cans) for 10,000 (won)” promotion allowed increasing consumer awareness and rapid

volume growth of imported beer. From 2018, imported beer from the US and the EU benefited

from customs tax exemption, according to trade agreements with South Korea, which allows

more room for price promotion.

Changing Legislative Factors Will Benefit Domestic and Craft Beer

The government plans to change the current ad valorem tax system to a price basis in 2019,

and this will benefit domestic and craft beer primarily, as a 20-30% price reduction is expected.

The revised law will accelerate new product development using premium ingredients for craft

beer breweries. Under the ad valorem system, more tax is imposed on products with higher

manufacturing costs. Prices for craft beer are therefore 2-3 times higher than the average beer

price. This was the biggest obstacle for craft and premium beer in targeting a wider range of

consumers. The price of domestic mid-priced lager is expected to fall KRW200-300 and this will

help to restore lost share due to the growth of imported beer.

Convenience Drives Growth of Small Format Beer

Beer in small packaging shows good performance thanks to its convenience and light drinking

trend. The market leader Oriental Brewery launched Cass in a 250ml one-serving can in 2018.

Restaurants promote small-sized cans during lunchtime to attract consumers who want a

refreshing drink but do not want to get drunk. Such pack sizes take less time to refrigerate and

are also cheaper.

B E E R I N S O U T H K O R E A P a s s p o r t 2

There are even micro-mini cans. The second biggest beer player Hite Jinro’s Japanese

imported beer Kirin Ichiban offers a mini 135ml can which is almost the half size of Cass.

People’s interest in small packaging is on the rise, and there are many postings on Instagram

highlighting how popular the packaging is. Sales of smaller packaging are expected to grow, as

Asahi, the most popular imported beer, has also launched micro-mini cans and others are also

expected to launch in 2019.

COMPETITIVE LANDSCAPE

Oriental Brewery Remains the Leading Beer Producer in South Korea

Oriental Brewery remained the leading beer player in 2018 due to its number one domestic

lager brand Cass, as well as its wide range of imported premium beer brands from Oriental

Brewery’s global owner, AB InBev. While sales of domestic lager have experienced continuing

decline since 2014, the positive performance of imported beer lines underpins Oriental

Brewery’s strong position as category leader. The acquisition of Korean local craft beer brewery,

The Hand and Malt Brewing Company, shows the company’s focus on diversifying its portfolio.

Economy Beer To Stand Out

Local economy beer showed outstanding performance in 2018. Hite Jinro’s Filite is the

protagonist. It is a new type of beer benefiting from lower tax. Under the Korean tax system,

beer containing less than 10% ABV is categorised as “Other liquor” and incurs less tax. Filite ran

a very aggressive promotion offering 12 cans for KRW10,000, which is half the price of existing

lager.

Domestic lagers have been facing a significant problem as consumers question their quality.

Domestic lagers have failed to overcome this low-quality image despite focusing efforts on

marketing high-quality, premium local beer. Consumers would choose imported beer over a

premium domestic one. On the other hand, economy beer attracts consumers with its lower

price. The target for domestic economy beer is a consumer who does not have a specific

preference in terms of beer taste. Many consumers who previously drank mid-priced lager

moved to economy lager. This is the reason why other competitors see Hite’s Filite as a double-

edged sword. The economy beer may cannibalise the company’s existing mid-priced beer.

However, the economy beer segment is expected to increase as Oriental Brewery, inspired by

the huge success of Filite, also launched the economy beer Filgood.

the Craft Effect in Beer

Domestic craft beer sees growth due to increasing consumer demand for more diversified

taste in beer while domestic lager experiences decline. The number of beer breweries almost

doubled in the last five years since the revision of the liquor law which allowed microbreweries

to sell via retail channels.

However, it is questionable whether craft beer can become sustainable in the Korean beer

industry. Although current growth is rapid, sales are negligible in volume terms. Craft beers’ high

prices are the biggest obstacle to expand the consumer base. Microbreweries experience

difficulties distributing their products to the off-trade due to quality control issues, and most sales

remain via the on-trade.

CATEGORY BACKGROUND

B E E R I N S O U T H K O R E A P a s s p o r t 3

Lager Price Band Methodology

▪ Premium lager in South Korea includes imported brands such as Sapporo and Heineken. A

domestically produced lager brand that falls into the premium price range is Cafri.

▪ Mid-priced lager in South Korea includes domestic brands such as Cass and Hite.

▪ Economy lager in South Korea includes Filite.

Summary 1 Lager by Price Band 2018

Category Price range per litre

Premium Above KRW4,700 for imported lager/Above

KRW3,800 for domestic lager Mid-priced

KRW2,800-3,800 Economy