Once upon a time the Korean wine market was highly prioritised and hotly contested. It might yet be that way again. Prior to the Global Financial Crisis of 2008 Korea had demonstrated its ability to develop quickly – its achievements in electronics and engineering are testimony to that – and there was an expectation that it would take to wine with the similar enthusiasm.
Seoul was a fast-moving city that was expanding dramatically and there seemed no limit either to the cash available to its upper classes or their aspirations to engage with wine. Some of the better new wine stores I have seen anywhere were opened in Seoul around this time and its top wine bars were way more creative than anything then seen in Australia, with that healthy injection of craziness that Koreans so enjoy. Wine imports were growing steadily and by 2008 were valued at USD 165 million. Korea had become an important and rapidly maturing market.
Like many other emerging wine markets in Asia, it was dominated by Bordeaux – the French having arrived first and left their calling card of prestige and price. Helped by a FTA between Korea and the EU in 2011, France has remained the market leader, although its share has declined steadily as competitive producers in Chile, the US, Italy and Spain have steadily expanded their presence.
The GFC then arrived with chilling effect for wine – imports to Korea crashed by 32.5% in 2009 to USD 112.45 million.
Three years later, as the Korean economy began its recovery, wine sales began to rebound. By 2013, with a resurgent economy, Korean wine imports managed to surpassed pre-GFC levels, with sales valued at USD 171 million. By 2015 this figure had reached USD 193 million, continuing a linear, but hardly parabolic growth as we have witnessed recently in China, the Central Government’s austerity measures notwithstanding.
There remains however a huge potential in Korea for this number to go much, much higher. Sales of imported wine accounted for a mere 4.6% by value of total alcohol sales in Korea in 2013 and a trifling 0.9% by volume. There’s plenty of slack for wine to make up. Consider also that Japan, whose population is roughly 2.5 times that of Korea, imported nine times the value of wine in 2013 (USD 1.47 billion).
Part of the Korea problem for wine exporters is its combination of high distribution costs and a complex regulatory set up which combine to increase wine retail prices considerably. Imported wines must be sold via a Korean distributor and the gaining of import licences can be challenging. So wine is still considered as a premium product among the general public and not a daily beverage as it is within most mature wine markets.
Typically, as seen in several developing wine markets, there’s a strong skew towards red wine in Korea. In 2014 66.9% of imports by volume were red – largely due to the perceived and highly publicised health benefits it brings.
Younger Koreans in the exploratory 20-40 millennial age range are rather more interested in a more contemporary approach to wine – they’re more likely to experiment with ‘newer’ styles and show an interest in the pairing of wine with cuisine. This is the group that will drive future trends within Korea. The job of the big companies is to make sure they’re well positioned for when that happens. The big growth area in Korea over recent years has been sparkling wine, which in 2014 grew by 13.6% by value, against 5.5% in 2008. Nobody knows what’s next.
Australia is only the sixth largest wine supplier to Korea. To thank for this are the relatively high value of the AUD over recent years, the tightness of the relationship between Korea and the US and to a large extent the focus by Australian companies on markets such as China, Hong Kong, Taiwan, Singapore and Malaysia. Australia sells 20% more wine to Thailand than Korea, despite the taxes and red tape evident in that country.
The latest export figures show that to the year ended June 2016, sales of Australian wine to Korea increased by 27% by volume and 29% by value. Good news is that the big growth is largely above $5 per litre at a marginally higher average of $6.48 per litre. Sales of red are powering along from a relatively good base, while whites are accelerating more quickly, but from about 20% of the value of red wine sales.
History has well shown that with wine exports, it’s wise to keep options open. As we’re seeing right now, global change is a constant. An FTA between Australia and Korea was implemented late in 2014. Korea might one day be a very significant market for Australian wine.
