Restaurant owners rue the price of soju

After Hite Jinro, the No. 1 seller of soju in Korea, announced that it would raise the price of a bottle of Chamisul soju by 65.5 won (5.6 cents) from next month, restaurants are now left struggling to decide whether to pay the difference or pass it on to customers.

“I raised bottled beer prices by 500 won to 4,500 won in January,” said Kim, who owns a bar in Seochon, Jongno District, central Seoul, Wednesday night, the same day the price hike was announced. “My business targets regulars, so I can’t raise prices again.”

Despite being in a popular neighborhood booming with visitors, Kim didn’t have a single customer that night.

Hite Jinro’s announcement adds pressure to businesses coping with rising alcohol prices as major brewer OB raised prices for its widely-popular Cass beer by 56 won to 1,203 won earlier this month.

Cass has a 46 percent market share in the Korean beer market, according to Euromonitor.

The JoongAng Ilbo surveyed 11 establishments in the Seochon area on Wednesday and found that only one business had raised prices following the Cass price hike.

Five bars said they were maintaining prices for a bottle of beer at 4,500 won, while five restaurants responded that they were keeping prices the same at 4,000 won.

The owners said they were concerned of losing customers if they raised prices.

A bar just 30 meters (98 feet) away from Kim’s business was also empty.

“We can’t raise prices because of our customers,” said the bar owner. “Manufacturers and wholesale dealers could profit [from the hike], but small establishments like ourselves have to carry the burden.”

The price changes may be small, but for business owners they quickly add up.

“Starting from this week, a box of 20 bottles of Cass costs 37,000 won,” explained Kim. “It’s 2,000 won more than last month.”

Wholesale dealer margins are added on top of the 56 won hike to a bottle of Cass beer.

All 11 establishments said a box of Cass beer rose by 2,000 won, leading to a total additional burden on businesses of 100 won per bottle.

The businesses said a box of soju costs around 34,000 won.

Business owners were wary of potential consumer backlash if they raised alcohol prices.

“I read online comments today and they were outraged at [a bottle of] soju and [a bottle of] beer costing 10,000 won in total,” said Lee, an owner of a barbecue restaurant. “Who is going to charge 5,000 won for a bottle of soju in this atmosphere?”

The recent price hikes by OB and Hite Jinro also came out of the blue.

While pricing changes have traditionally been announced a month in advance, the recent changes were announced just a week prior to the hike.

They were also made before an overhaul of alcohol-related taxes expected to be announced early next month.

The government is currently planning to change taxes on alcohol beverages. Taxes are currently based on production price but could be changed to focus on total volume and alcohol content.

The change could lower taxes on beer while increasing those on soju, which has a higher alcohol content. The Ministry of Economy and Finance, however, has said that it will maintain soju prices.

Companies have essentially raised prices just before major changes in pricing.

“Chamisul soju’s alcohol content has already been lowered two times to its current level at 17 percent,” explained an alcohol industry source. “If it is lowered even further, it wouldn’t be soju anymore, so that could have played a role in raising prices.”

“Hite Jinro released its new Terra beer last month, and it might try to make up for marketing costs through soju,” added the source.

BY KIM YOUNG-JU [chae.yunhwan@joongang.co.kr]