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The Best Article I've Ever Seen on the Korean Beer Industry
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jdog2050



Joined: 17 Dec 2006

PostPosted: Wed Jan 02, 2013 6:35 pm    Post subject: The Best Article I've Ever Seen on the Korean Beer Industry Reply with quote

http://koreajoongangdaily.joinsmsn.com/news/article/article.aspx?aid=2964841&cloc=joongangdaily%7Chome%7Conline

Well-researched, well-written, even exposes some shady practices between the tax service and the liquor industry. This is good stuff.
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FDNY



Joined: 27 Sep 2010

PostPosted: Wed Jan 02, 2013 8:46 pm    Post subject: Reply with quote

It boils down to Koreans being controlled, in mind and body, by large corporations and government. I have met very few informed Koreans, who through experience and analysis, can actually make rational choices when it comes to purchasing goods or services. 99% see Lee Hyo-Ri in a skimpy dress sipping SHITE beer and they follow suit. (like little North Korean kindergarten soldiers) 99% also go on tour packages for three days to Phuket and hit Noraebangs and eat Korean food. The market maturity in Korea does not match it's income. I recall the analogy: Farmers in suits.
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Brooks



Joined: 08 Apr 2003

PostPosted: Wed Jan 02, 2013 9:14 pm    Post subject: Reply with quote

What I don`t get is that, considering the climate, you would think darker beers or ales would be popular in the winter or cooler months.


I guess Koreans think the weak beer goes with their spicy food, or just acts as a chaser to hard liquor.

I thought that since Koreans have more money than before, that they would want to drink different stuff than just what is typically found.

In the US, the big beer companies are actually not doing well. This bodes well for the microbrews.
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dairyairy



Joined: 17 May 2012
Location: South Korea

PostPosted: Wed Jan 02, 2013 9:38 pm    Post subject: Reply with quote

Quote:
The domestic beer market is estimated to be worth around 4 trillion won ($3.76 billion). OB accounts for around 55 percent of local production while Hite-Jinro dominates almost all of the remaining 45 percent. The duopoly has done little to satisfy consumers, and imports are surging as a result.

There is little question as to why Cass, Hite and Max aren’t impressing. They are the reasons behind Korea’s unflattering titles like “The land of the bland,” “Home to the piss of the devil” and “Where beer tastes like cASS.” But what is less certain is why fuller, more assertive brews haven’t taken bites out of the market.



I've heard the "C-ass" one.

Quote:
Hite-Jinro and OB say they are capable of producing various types of beer other than their mass lagers, but they stick to their products based on thorough market research.

“We conduct surveys among thousands of consumers every year and a majority of them prefer the American lager style that is light and crisp,” says an official at OB who spoke on the condition of anonymity.



Who are they surveying? It sounds like the participants are mainly older men with low or limited income and experience overseas. They may be content with the Korean market but don't they understand that times and tastes will eventually change? Plus, they don't seem to care much about penetrating the foreign markets, which is puzzling considering the huge Chinese and Japanese markets loaded with potential profits that make the Korean market look like a Saturday night kegger.

Quote:
Under current laws, it is very difficult for local establishments to brew their own beer because of the tax system applied to alcohol production.

Most countries calculate taxes based on each brewery’s production capacity - the less you produce, the less you pay in taxes.

But the Korean government calculates taxes based on original costs.

If the original cost of producing one bottle of beer is 1,000 won, a beer manufacturer has to pay 720 won in liquor taxes (72 percent). An additional tax that collects revenue for education is also applied (30 percent of the liquor tax, which in this case is 216 won). Then there’s the 10 percent value-added tax.

“Taxes applied to Korean breweries are 100 times higher than those in Germany,” says Lee Dong-phil, president of the Korea Rural Economic Institute.

The only way for breweries to lower the tax burden is to cut down on the original cost. And as Korean drinkers know too well, cost reduction correlates strongly with a drop in quality.



It's the Korean government that prevents any innovation so newcomers are unable to compete. But why do that?

Quote:
“We have to follow the government’s direction when it comes to prices,” says an official at OB who spoke on the condition of anonymity.

“There is nothing we can decide by ourselves, from product planning to pricing,” says the industry insider. “We often wine and dine with NTS officials to find out solutions.”

The NTS even purchased barley used in beer and sold it to manufacturers until 2006, he said.

“Beer prices are hugely influenced by grain, oil and packaging prices,” says someone who used to work for OB.

Whenever prices of such commodities surge, however, breweries often say they freeze beer prices for the sake of the public. But the former OB official says it didn’t come without a cost: “that meant they would lower original costs.”

NTS has serious clout not just over breweries, but over entire liquor market. Retired officials of the taxation service garner privileges and work as high-ranking employees at many liquor companies.



Corruption?
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Steelrails



Joined: 12 Mar 2009
Location: Earth, Solar System

PostPosted: Wed Jan 02, 2013 11:41 pm    Post subject: Reply with quote

FDNY wrote:
It boils down to Koreans being controlled, in mind and body, by large corporations and government. I have met very few informed Koreans, who through experience and analysis, can actually make rational choices when it comes to purchasing goods or services. 99% see Lee Hyo-Ri in a skimpy dress sipping SHITE beer and they follow suit. (like little North Korean kindergarten soldiers) 99% also go on tour packages for three days to Phuket and hit Noraebangs and eat Korean food. The market maturity in Korea does not match it's income. I recall the analogy: Farmers in suits.



This inability to choose for themselves is clearly evident in the utter subservience to OB-Hite and the complete lack of foreign beers available at EMart, Homeplus, Bars, and more.

Maybe Korean consumers want something like cheap Hite for their chug fests and an imported brew for sippin.

Think about it- People who drink a lot back home, say college students or regular heavy drinkers, they drink a lot of cheap, mediocre generic beer too. Natty Light, Old Style, PBR, Busch, Milwaukee's Worst, Red Dog, and 40s of Malt Liquor (which tastes a lot like a so-maek). But that doesn't mean they also don't go down to the multi-tap and get their microbrew on once a week. It's all about what makes sense. Drop 25 bucks on a pitcher, a plate of chips, and a bottle of soju or two and get nice and buzzed 3-4X a week=100 bucks spent. Drop 50 bucks a night on good booze to get buzzed 3-4X a week and end up spending twice as much, not such a great idea. 100 bucks sure could go to something a lot better than better beer.

Regardless, contrary to your critical thinking fail of a post (big on critical, short on thinking), Korean consumers appear to be behaving in an economically rational fashion- drinking light, cheap beer when wanting to do so in mass quantities and being consumed with large amounts of food, and enjoying quality imported, more expensive beers in situations where the drinking pace is less frantic.

Seems highly rational to me.

Maybe you could learn from their rational choices when it comes to not being able to rationally analyze their behavior.

I'd also wager that if you put Max or Cass in a bottle of some foreign brew like MGD or Labbatt Blue Light and served it. 9/10 hoopleheads couldn't tell the difference.
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Zyzyfer



Joined: 29 Jan 2003
Location: who, what, where, when, why, how?

PostPosted: Thu Jan 03, 2013 12:22 am    Post subject: Reply with quote

dairyairy wrote:
I've heard the "C-ass" one.


Cass is ass, Hite is shite, OB is BO.

All we need is for someone to make a haiku out of it.
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cdninkorea



Joined: 27 Jan 2006
Location: Seoul

PostPosted: Thu Jan 03, 2013 2:22 am    Post subject: Reply with quote

dairyairy wrote:
It's the Korean government that prevents any innovation so newcomers are unable to compete. But why do that?

Because it protects established companies. Same reason why there are high barriers to entry in any industry where established companies collude to lobby government (e.g. until recently you needed to take an expensive, time-consuming course to get a license to be a florist in New Orleans. Guess who made the course, did the tests, etc?).

This article explains a lot about the Korean beer industry. Still, there certainly are a lot of great imports available in large supermarkets (especially HomePlus in my experience) and more and more bars as time goes on. Do the large breweries try to keep them out through things like high tariffs?
Also, what about the new local microbrews, like 7Brau, Magpie's, and Craftworks? They're well-priced and delicious (Magpie's IPA is my personal favourite). I see 7Brau had and continues to have a hard time, but if they've found a way, is that a sign that things are getting better?
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Seoulman69



Joined: 14 Dec 2009

PostPosted: Thu Jan 03, 2013 2:33 am    Post subject: Reply with quote

Quote:
Also, what about the new local microbrews, like 7Brau, Magpie's, and Craftworks? They're well-priced and delicious (Magpie's IPA is my personal favourite). I see 7Brau had and continues to have a hard time, but if they've found a way, is that a sign that things are getting better?


Here is where the key to change lies. Drink these beers and give the local swill a wide berth. When you go to Homeplus buy 7brau instead of Cass. When you're out with your friends encourage them to try different beers.
Posting nasty, hate filled messages isn't going to change anything.
When I go home I buy as many local brews from smaller brewers as possible. I do the same in Korea.
As an aside I've met a lot of Americans claiming that IPA is an American beer and that America saved it from disappearing. Total nonsense. I like a lot of American beers but don't kid yourself you're the beer capital of the world or brave new pioneers in the world of beer.
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fermentation



Joined: 22 Jun 2009

PostPosted: Thu Jan 03, 2013 3:05 am    Post subject: Reply with quote

Shows you that government involvement and taxation isn't for the "greater good."
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dairyairy



Joined: 17 May 2012
Location: South Korea

PostPosted: Thu Jan 03, 2013 3:29 am    Post subject: Re: The Best Article I've Ever Seen on the Korean Beer Indus Reply with quote

jdog2050 wrote:
http://koreajoongangdaily.joinsmsn.com/news/article/article.aspx?aid=2964841&cloc=joongangdaily%7Chome%7Conline

Well-researched, well-written, even exposes some shady practices between the tax service and the liquor industry. This is good stuff.


You're correct. For a Korean newspaper examining a Korean industry this is Pulitzer Prize winning journalism.
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Adventurer



Joined: 28 Jan 2006

PostPosted: Thu Jan 03, 2013 7:02 am    Post subject: Reply with quote

cdninkorea wrote:
dairyairy wrote:
It's the Korean government that prevents any innovation so newcomers are unable to compete. But why do that?

Because it protects established companies. Same reason why there are high barriers to entry in any industry where established companies collude to lobby government (e.g. until recently you needed to take an expensive, time-consuming course to get a license to be a florist in New Orleans. Guess who made the course, did the tests, etc?).

This article explains a lot about the Korean beer industry. Still, there certainly are a lot of great imports available in large supermarkets (especially HomePlus in my experience) and more and more bars as time goes on. Do the large breweries try to keep them out through things like high tariffs?
Also, what about the new local microbrews, like 7Brau, Magpie's, and Craftworks? They're well-priced and delicious (Magpie's IPA is my personal favourite). I see 7Brau had and continues to have a hard time, but if they've found a way, is that a sign that things are getting better?


I do like 7Brau. I had the other day, and I was impressed. What's the scoop on that beer? As far as Craftworks, they serve it at a local foreign joint in Gwangju.

There's definitely plenty of decent beers at Homeplus. I was impressed with the variety.

At any rate, OB is better than what it used to be. Has anyway heard that some Korean bars don't clean the lines properly. I have sometimes had Cass at bars tasting differently than at other bars and being surprised. However, I don't like Cass. Generally, when I've had it at bars I felt like I was a hot air balloon about to take off in the sky.Smile
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dairyairy



Joined: 17 May 2012
Location: South Korea

PostPosted: Thu Jan 03, 2013 7:06 am    Post subject: Reply with quote

Quote:
Regardless, contrary to your critical thinking fail of a post (big on critical, short on thinking), Korean consumers appear to be behaving in an economically rational fashion- drinking light, cheap beer when wanting to do so in mass quantities and being consumed with large amounts of food, and enjoying quality imported, more expensive beers in situations where the drinking pace is less frantic.

Seems highly rational to me.



Did you read the article, steelrails? The "rational choices" are being made by consumers who are left with no other choices by the tax system that blocks newer companies and stunts innovation. The tax system also discourages higher quality products from reaching consumers.
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Steelrails



Joined: 12 Mar 2009
Location: Earth, Solar System

PostPosted: Thu Jan 03, 2013 8:50 am    Post subject: Reply with quote

dairyairy wrote:
Quote:
Regardless, contrary to your critical thinking fail of a post (big on critical, short on thinking), Korean consumers appear to be behaving in an economically rational fashion- drinking light, cheap beer when wanting to do so in mass quantities and being consumed with large amounts of food, and enjoying quality imported, more expensive beers in situations where the drinking pace is less frantic.

Seems highly rational to me.



Did you read the article, steelrails? The "rational choices" are being made by consumers who are left with no other choices by the tax system that blocks newer companies and stunts innovation. The tax system also discourages higher quality products from reaching consumers.


The irrationality of the Korean beer regulations does not prevent the Korean consumer from making rational choices. I completely agree that the system in place is irrational and dysfunctional. But I stridently object to the idea that Korean consumers aren't making rational choices as FDNY claimed.

Why do Korean people want to drink Cass or Hite? Haven't you noticed that dinners, bar outings, and kareoke sojurns are highly social events where the custom is to serve alcohol together? It's cheap, it matches the food, it's the lowest common denominator which means you can get 20 bottles of it at the noraebang or a pitcher of it at the watering hole and its tolerable to everyone.

As I said, are westerners irrational when they get a keg of MGD or a 30 case of Busch for a party or the pitcher of Labatt on special to watch the game a the local watering hole? Are they irrational when the next day they go out to a multitap and get an import on draft? Are they not making the same economic choices as Koreans?

If you want to buy more flavorful imports you simply go to a bar that specializes in such things, of which there are legions. Even in my podunk hometown we have beerbars that offer 20 different imports.

Korean consumers are making rational choices when they choose to buy such things, especially in the context of how they drink.

Now I completely agree that the government regulations are uber-protectionist bureacratic fails, but FDNY wasn't targeting the producers or the government, he was targeting the consumers. But as the popularity of import beer bars demonstrates, its not like the Korean consumer is some zombie mindlessly drinking Hite, rather sometimes they choose to drink Hite in certain situations and company, and they choose to drink flavorful imports in another situation. If they had flavorful domestics to choose from, they would likely do so.

If Koreans were so mindless as some people claim they are, then everyone would be eating BBQ Chicken or BHC because they get all the celebrity endorsements and there would not be 50 different chicken places in a given city.

Lastly, according to the article, it said that 95% of beer drinkers in America drank Bud, Miller, or Coors. Well a little math from the article shows that the numbers are almost similar for Koreans when it comes to drinking imports. Imports were about 4% of Korean beer sales and are strongly trending upwards. EMart wouldn't have 3 different foreign beers sitting on the shelves if they didn't think they would sell.

Harp on the government regulations as much as you want, and I would agree with you- If they loosened up, Korean beer could become as diverse and as noted as Korean Fried Chicken, a boon for the market. But I think this whole "Korean consumers are mindless drones, unlike beer drinkers back home" is nonsense and not born out by drinking habits, bars, beers sold in stores, and market data. Clearly they are making rational choices and are demonstrating a taste for more than just cAss's Golden Shower.

EDIT- Import market share in the US is actually 13%. Certainly more, bt given its geograpahic and cultural proximity to the US & Canada, as well as say, NAFTA, those numbers are not overwhelming.
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NQ



Joined: 16 Feb 2012

PostPosted: Thu Jan 03, 2013 12:15 pm    Post subject: Reply with quote

Steelrails wrote:


This inability to choose for themselves is clearly evident in the utter subservience to OB-Hite and the complete lack of foreign beers available at EMart, Homeplus, Bars, and more.

.


There's actually a lot of foreign beers available at Homeplus where I live. There's beers from Mexico, Indonesia, Singapore etc.. They sell brands not even available in Canada, and they also sell beers from this one microbrewery in California.

I've been to one E-Mart only and I was surprised to see two Canadian brands there (Molson Export, which is garbage but at least they had it and Moosehead)

The only problem with all these beers are the prices which are high but at least they're here in some format. I just wish more of them were available at CVS and other convenience stores and at the restaurants.
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dairyairy



Joined: 17 May 2012
Location: South Korea

PostPosted: Thu Jan 03, 2013 3:41 pm    Post subject: Reply with quote

Quote:
Lastly, according to the article, it said that 95% of beer drinkers in America drank Bud, Miller, or Coors. Well a little math from the article shows that the numbers are almost similar for Koreans when it comes to drinking imports. Imports were about 4% of Korean beer sales and are strongly trending upwards. EMart wouldn't have 3 different foreign beers sitting on the shelves if they didn't think they would sell.



"Bud, Miller, and Coors" applies to many different beers produced by those labels.
Annheuser-Busch alone accounts for a number of brands.
http://en.wikipedia.org/wiki/Anheuser-Busch_brands


Last edited by dairyairy on Thu Jan 03, 2013 3:54 pm; edited 1 time in total
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