Drinking inflation highest at restaurants, lower at stores

An array of soju brands lined up at a retail store in Seoul on Feb. 26. [YONHAP]

Drinking at restaurants has become more expensive faster than buying booze from retailers.

It’s proven in numbers, and the government is attempting to control the beverage price — although experts question how effective its measures will be.

For the last three years, soju and beer inflation at restaurant is higher than it is for the same alcohol bought at convenience stores and retailers, according to data released by Statistics Korea on Monday. The price for alcoholic beverages overall rose 5.7 percent in 2022, the biggest increase since the 11.8 percent rise in 1998 following the 1997 Asian Financial Crisis.

In particular, the price of soju while dining out rose 11.2 percent, while the price at retailers rose by 8.6 percent.

The gap is stark in comparison to February 2022, when the inflation rate for dining-out and store-bought alcoholic beverages was same — 0.9 percent.

For beer, the price rose 10.5 percent for restaurants, while beer sold by retailers rose by 5.9 percent. The price of makgeolli (Korean traditional rice wine) at restaurants rose by 5.1 percent, while the price for makgeolli sold on retailers rose by 1.6 percent.

It's the butterfly effect, as producers raised the factory price and retailers followed suit, then so did the restaurants.

The Ministry of Strategy and Finance plans to address some of the factors that are driving up prices.

Taxes for beer and takju were set proportional to the amount of alcohol within the beverage from 2020. Since 2021, they have been taxed by price.

Taxing proportionately to the alcohol amount allowed the tax to remain unchanged for the liquor manufacturers even if the factory price went up, in an aim to protect the domestic industry from imported beers, which were tariffed.

The government implemented a policy for the taxing based on the consumer price from 2021, not anticipating a huge hike in consumer prices from the following year. As the tax rose along with rising inflation, and the business upped the factory price, the price to the consumer rose quickly.

The 2021 implementation was abandoned.

This has left the authorities in a quandary, needing to increase the tax with the change in price in some way and also to be fair to soju makers, which are still taxed ad valorem proportionate to the factory price.

“It’s inconsistent to up the liquor price reflecting inflation, and when the actual consumer price rose, to lower the beverage price again,” said Ahn Chang-nam, taxation and finance professor, Kangnam University.

BY KIM Ki-HWAN, LEE JAE-LIM [lee.jaelim@joongang.co.kr]