Working-class liquors lose their edge as Korea's alcohol prices rise

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Working-class liquors lose their edge as Korea's alcohol prices rise

Soju and beer are sold for 6,000 won per bottle in a restaurant in Seoul on Monday. [YONHAP]

Soju and beer are sold for 6,000 won per bottle in a restaurant in Seoul on Monday. [YONHAP]

 
Soju, long dubbed the “liquor of the working class,” is losing character as alcoholic beverage prices rise, and the hike catapults even further in restaurants where it is popularly consumed.
 
Hwang Jae-hyun, a 41-year-old commuter, was astounded by the price of soju while dining with a colleague at a samgyeopsal (pork belly) restaurant near Gyodae Station in Seocho District, southern Seoul. The menu read 6,000 won ($4.60) per bottle.
 
When he asked why the price was so high, the restaurant owner said it was because of inflation.
 
“I almost blurted out, ‘a bottle of soju, please!’” Hwang said. “Now I have to think twice before ordering soju.”
 
The consumer price for alcoholic beverages including soju, beer and makgeolli (Korean traditional rice wine) rose altogether as producers raised the factory price and retailers tacked on distribution costs.
 
The price for alcoholic beverages including soju, beer, rice wines as a whole and imported liquor rose 5.7 percent on year, according to the Korean Statistical Information Service on Sunday. This is the steepest hike in 24 years since the 11.8 percent rise in 1998, following the 1997 Asia Financial Crisis.
 
Yearly inflation for alcoholic beverages lingered below 2 percent after 1998, except for the 4-percent range hikes in 2003, 2009, 2013 and 2017, before nearing 6 percent last year. In particular, beer rose 5.5 percent and soju jumped 7.6 percent.
 
The price of raw and subsidiary materials accounted for the soju price hike.
 
The price of ethanol, which is the base substance for soju, rose 7.8 percent on year for the first time in 10 years. For beer, a series of increases in the costs of barley, energy, distribution, labor and exchange rates accounted for the hike in its factory price. Alcohol taxes also rose by 20.8 won in April last year.
 
As producers raised the factory price, retailers such as Emart, Lotte Mart, Homeplus and convenience stores raised the cost per bottle by some 150 won. A bottle of Chamisul, one of the most popular soju brands, is now sold for some 1,900 won in convenience stores.
 
Imported liquor such as whiskey and Champagne rose by 4.2 percent, the highest since the 4.8 percent increase in 2013. Makgeolli rose by 7.2 percent, and rice wines in general rose by 4.8 percent, also the highest since 2013. Fruit wine was the only alcoholic beverage that fell, dropping 1.1 percent.
 
More factors may need to be taken into account for any further hikes this year.
 
Soju spirit companies, which saw a sharp decline in operating profits despite raising prices, are projected to make another increase this year. Soju bottle manufacturers have also raised the cost per bottle from 180 won to 220 won.
 
The alcohol tax on beer will increase by 30.5 won per liter this April to reach 885.7 won per liter. A rise in alcohol tax tends to lead to a rise in factory prices. When the alcohol tax rose by 0.5 percent in 2021, Oriental Brewery (OB) and Hite Jinro raised the factory price by 1.36 percent on average.
 
“This is the smallest possible increase considering the high consumer price increase last year” of 5.8 percent, the Finance Ministry’s environment and energy tax director Cho Yong-lae said. “The rise in raw material and energy costs account more for alcohol price increases than alcohol tax hikes.”
 
Because alcoholic beverages reach consumers after going through the distribution process that involves spirit companies and importing companies, licensed alcohol wholesalers and retailers, a few hundred-won hikes in alcohol tax and factory prices results in a thousand-won increase in restaurants.
 
A bottle of soju, which was commonly sold for some 4,000 won in 2021, is now sold for 6,000 won in many restaurants. A bottle of beer, which was in the 6,000-won range, is now around 8,000 won. Now, customers who want to have somaek, a mix of soju and beer, will have to pay close to 15,000 won.
 
“We have no choice but to raise alcohol prices, which customers are less sensitive to than food prices, in order to respond to rising consumer prices and labor costs,” said Lee, the owner of a lamb skewer restaurant in Songpa District, southern Seoul.
 
Of the 130 restaurant owners surveyed by the Korea Food Service Industry Research last year, 55.4 percent said that they either plan to raise their soju price or have raised it already.

BY KIM KI-HWAN [sohn.dongjoo@joongang.co.kr]
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