Wine to Korea
Trends and opportunities
The signing of the Korea Australia Free Trade Agreement (KAFTA) in April 2014 is significant and great news for the Australian wine industry. When KAFTA enters into force on 12 December 2014, the present 15 per cent import tax on Australian wines will be eliminated. KAFTA will help Australian wine producers to regain price competitiveness and increase sales in coming years.
The South Korean wine market was badly affected by the 2008 Global Financial crisis and has taken five years to fully recover. The value of wine imports peaked at US$165.51 million in 2008 and dropped down 32.5 per cent in 2009 to US$112.45. However, the market has rebounded quickly since 2011. According to the Korea Customs Service, by December 2013, the total value of wine imports had reached US$172 million, representing a 17 per cent increase in value compared to the same period the previous year.
Imported wines from Australia in 2013 amounted to US$7.3 million or 1.07 million litres, down 11.4 per cent in value and 19 per cent in volume compared to the same period in 2012. (Source: Korea Customs Service, Trade Statistics, 1 Oct 2014)
KAFTA will present new and exciting opportunities for Australian exporters wanting to enter the Korean market.
The following trends offer insight into the market:
- Imported red wine continues to dominate the Korean wine market, with 72.6 per cent of total wine imports in terms of value in 2013.
- There is a rapid growth in the demand for sparkling wine. In particular, female consumers and those new to wine are enjoying a diverse range of varieties. The market share of sparkling wines increased from 2 per cent in 2007, to 10.8 per cent in 2013 (Source: Korea Customs Service, Trade Statistics, 1 Oct 2014).
- As Korean wine consumer’s taste diversifies, there will be increased demand for new and ‘exotic’ varieties of wine, including red, white and sparkling.
- As recently as a few years ago, the On-Premise market and Off-Premise market sales ratio was evenly split at 50/50. While there are no official statistics available from the Korean Government, industry sources estimate that off-market sales now account for more than 70 per cent of total wine sales in Korea.
A recent trend sees Spanish wine replacing Chilean wine in the lower price market. Chilean wines are now taking a greater share of the mid-priced wine market.
Current rankings of imported wine into Korea based on value are:
- France - 31 per cent
- Chile - 21 per cent
- Italy - 17 per cent
- United States - 11.5 per cent
- Spain - 8 per cent
- Australia - 4.3 per cent.
The rankings based on volume are:
- Chile - 25 per cent
- Spain - 22 per cent
- Italy - 15 per cent
- France - 14 per cent
- United States - 12 per cent
- Australia - 3 per cent.
(Source: Korea Customs Service, Trade Statistics, 1 Oct 2014)
Tariffs, regulations and customs
A large amount of liquor is produced locally, whereas most wine is imported. As a result, consumer prices for wine are comparatively high. The combination of import duties, taxes, high distribution costs and mark-ups make wine prices two to four times higher than in Australia.
The tariff and tax system is as follows:
- Import Tariff - zero per cent
- Liquor Tax - 30 per cent
- Education Tax - 10 per cent
- Value Added Tax (VAT) - 10 per cent.
The VAT is refunded to the importer because the tax is carried over to the final consumer.
In addition to duties and taxes, an additional cost of seven to eight per cent of CIF value will occur due to customs clearance fee, warehousing fee, transportation cost, etc. The amount of this additional cost depends mainly on the kind of inspection the shipment is subject to. (Source: Korea Wines & Spirits Importers Association, FAQ, Oct 2012 with Austrade updates)
The alcoholic content of wine should not be lower than four per cent or greater than 18 per cent.
Imported wine is required by law to have a Korean language label, in many cases, the importer attaches a Korean label manually after the shipment has arrived and should contain the:
- Name of the product
- Country of origin
- Type of the product
- Importer’s name, address and phone number
- Business license number of importer
- Expiration date (Voluntary)
- Alcohol per cent and volume
- Name and volume of ingredients by percentage
- Place where the product can be returned or exchanged if damaged or defective
- Instructions for storage
- Name of food additives
- Government’s health warning clause
- Bottling date.
All foods and beverages imported into Korea are subject to Ministry of Food and Drug Safety/Food Quarantine inspection. There are two kinds of inspections: a detailed inspection (chemical analysis test) and a visual inspection (eye/document inspection).
The first shipment of a particular imported product is always subject to a detailed inspection. By regulation this is supposed to take a maximum of 10 working days, but can take much longer. Subsequent shipments of the same product are subject to visual/document inspections. This should take no more than two working days if the product is identical in label, product name, alcohol degree, vintage, and net weight (millilitre) to the first shipment.
Importers are required to submit front labels in English and back labels in Korean to food inspection authorities.
Experienced importers are well aware of all inspection and labelling requirements and are the best source of up-to-date information.
Marketing your products and services
Korean consumers have little knowledge of the diverse range of good quality regional Australian wines. The lack of marketing and promotion activities by Australian suppliers compounds this challenge. The USA, European Union (EU) and China are more active in promoting and marketing their products on the Korean market.
Sales of any kind of alcohol through the internet are prohibited by Korean law. However, the Korean Government allows the sales of Korean traditional liquors, including Makgeoli (Korean rice wine) through the post office online shopping mall to support the local liquor industry.
Links and industry contacts
Korea Wines & Spirits Importers Association
Korea Customs Service
Wine Review Magazine
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