Diageo axes plan to hike spirit prices

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Diageo axes plan to hike spirit prices

Apparently caving to pressure from the government, Diageo Korea yesterday suspended its decision to raise the factory prices of its whiskies including Johnnie Walker and Windsor.

The move comes just two weeks after it informed the public of the planned hike.

The whiskey distributor said on March 27 that it would raise the prices of its 12-year, 17-year and 21-year Windsor vintages by 5.9 percent, 5.7 percent and 6.5 percent, respectively. It also said it would charge an extra 4.9 percent for Johnnie Walker Black Label, citing rising costs of raw materials, logistics, and production.

The company was scheduled to raise the factory prices of its whiskies starting this Friday, but it suddenly jettisoned the plan.

“Diageo Korea originally planned to change the prices of 39 products including Windsor and Johnnie Walker from Friday, but having taken various factors into account, we decided to hold the plan,” Diageo Korea said in a press release without further explaining the delay.

If the whiskey price hike was carried out as planned, it would have come 19 months after the company raised its prices in September 2010. However, the company said it will still lower its wine prices. Some 22 brands will be reduced by up to 20 percent in the wake of implemented free trade agreements last July with the European Union, and last month with the United States, the company explained. They include Schidione and Thomas Barton Bordeaux.

Industry observers said the company reversed its original plan as it took flak from the public for trying to generate more profit in times of economic hardship. This was seen as running counter to the Lee Myung-bak administration’s recent policies to tame inflation.

Meanwhile, the company’s March 27 announcement forced wholesale retailers to hoard Diageo’s whiskies before their prices rose, meaning 125,630 boxes were sold in March, 38.9 percent higher than January and February combined. Each box contains 18 half-liter (.1 gallon) bottles of whiskey.

This is not the first time that a liquor company has withdrawn its decision to raise its prices in recent months to appease public outrage.

Oriental Brewery, which leapfrogged Hite-Jinro in the domestic market for the first time in 15 years in 2011, said it would raise the prices of five of its products by over 7 percent in December. But it put off the plan three days later after its executives met National Tax Service officials.

By Kim Mi-ju [mijukim@joongang.co.kr]

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