The Wine Market of Korea Part 2

or... Great QPR, the EU Korea FTA and Pairing Wine with Korean Food

Previously I commented on the state of the wine market in Korea.  Here, I continue to comment on this piece (duplicated here) by Joshua Hall which summarizes the big trends of 2010.  Part one of the series can be found here: The Wine Market of Korea Part 1

Value for Money Wines

It has been some time since Chile took over France as the numero uno country for wine sales by volume.  To me this indicates a clear shift in the way Koreans drink wine and an end to the long time dominance of preference for European wines. Koreans are more and more drinking wine because they like it rather than simple prestige. And thus, Korean's are looking for good value – or what is commonly called high QPR (Quality-Price-Ratio). The 2004 Chile-Korea FTA along with a large marketing push by the Chilean government has given that country a leg up on the rest of the new world wine industry. Chile was aggressively moving into Korea at a time when the rest of the new world overlooked Korea as an immature market and forever to be enamored by France and the rest of Europe.

QPR - Great ValueAs of late, the wine industry in Korea has been forced to reduce margins to some degree in an attempt to reignite the wine boom that had fizzled with the global economic crisis. But the fact is there is plenty of room to go in reducing margin and improving the quality of wine the consumer has access to at the value end of the market. For U.S. imports, there is a ~53% premium over CIF value just to get past customs. When considering brokers on both sides of the ocean, warehousing and labeling costs in Korea, ~77% overhead can be spent in import costs excluding shipping. When markups are included for three tiers of distribution, by my calculations, many value oriented wines carry a total of ~500% or more of markup. The consumer must furthermore pay a 10% VAT.

As the Korean wine drinker continues to mature, there should be a wide realization that the Korean consumer has been snookered. There simple is not any of what we would consider middle tiered quality wines available to the average consumer for reasonable prices. Our plethora of $20 wines in the U.S. retail in the neighborhood of $100 in Seoul. This specific issue and my love of Korea is what sparked my interest in possibly participating in the Korean wine market. There needs to be a flattening of the distribution system in order to provide high quality wine to a market with a developing palate.

EU-Korea FTA

Now that the EU-Korea FTA has been ratified, what can we expect in the Korean market? The high-end wine market in Korea is still dominated by France save for the occasional Barolo or Opus One. With competition for fine French wines from the EU, China, the U.S. and Japan (never mind Russia, India and the rest of the world), I wouldn't expect the FTA to result in significant price reductions to the consumer. However, at the 2010 Seoul Wine and Spirits Expo, I saw a large presence by second and third tier French and Italian regions. These regions along with their value oriented wines will surely take advantage of reduced tariffs to fight their way into the medium and lower priced points. As well all know, Europe makes some fantastic value wines.

Incidentally, the forever upcoming US-Korea FTA would drop the above mentioned tariff and custom fees for import in Korea from ~53% to ~33%. I hope to see the U.S. wine importers drop their prices and make it known to the consumer.  If the consumers don't see lower prices, then the middle men must be absorbing it. My hope is that the consumer will wake up to this realization and demand lower prices.

Korean Food Pairing

Korean KimchiKorean food pairing is difficult in general but further handicapped by Koreans overwhelming preference for red wines.  Back in 1993 the Korean media widely reported on the health benefits of red wine. Liquor is a significant part of Korean culture and the Koreans have had a tough time facing up to the negative health consequences of liquor. These media reports were enough to start the spark of the wine boom we see today and a general preference for reds.

Now back to Korean food… There is some hope for pairing with light bodied reds, Beaujolais (which is fairly popular in Korea) and maybe lighter Grenache (more up my alley). The real opportunity I feel for Korean food paring is Champagne and Sparkling wine. A real palate cleanser is what's needed with Korean food and a snappy off-dry sparkling wine I feel would do nicely. However, drinking sparkling wine with a $10 Korean meal has perception problems. This is where the Gastropubs come in. High-end Korean fusion food paired Sparkling wine has a chance and it certainly can be marketed. One very popular foodie restaurant in Seoul, Star Chef, is famous for serving Bombay Sapphire gin with their meals. Hmm, a nice palate cleansing bubbly gin and tonic with Korean food? Sounds good to me.


I see great opportunity for the U.S. in the Korean wine market. The first step is to overcome perception issues — California is more than just Napa… the U.S. produces more than just Zinfandel… But more importantly, the U.S. cannot compete with the rest of the world at the extreme low/value end of the wine market. The opportunity exists in the middle tier of wines which retail in the U.S. for $15-$30. To realize this opportunity, the U.S. wine industry needs to seriously engage the Korean consumer, market their products to the consumer directly and bully the distribution system a bit.

Do you see opportunity for the U.S. wines in Korea? Hit the comments and share!

Twitter Facebook LinkedIn Digg Delicious StumbleUpon Technorati Email

5 Responses to “The Wine Market of Korea Part 2”

  1. Insightful commentary.
    Yes, many more lesser known appellations from France and Italy are entering the market to secure their position before the FTA kick in. Good news for QPR.
    As you noted tax has a significant impact on prices here. US producers will benefit when their FTA gets approved. Targeting consumers helps too.
    Star Chef is a great restaurant and excellent food. Their wine list is dominated by mass market brands so better to go with the G&T.
    I've found that champagne tends to clash violently with kimchi and hot dishes. I find Pinot Gris and Rose most versatile but it totally depends on the dish.
     

    • I’ve too been disappointed with Star Chef’s wine list; and I wouldn’t mind if they updated the food menu more often as well.

      I was thinking, I do need to actually play around with Sparkling wine and Korean food more. The wine does work well with some of the side dishes served at the Korean pubs in Seoul. Kimchi is a pretty hard bugger to tackle, especially on its own and I suppose some of Sparkling’s effervescents may highlight flavors rather than cleanse them. I’ve seen some Tobin James sparkling wine here in Paso on deep discount at the supermarket after the New Year… and I’ve got a big ol’ container of kimchi to experiment with…

  2. Chef Kim is usually open to suggestions at Star Chef. If there was a way to put good quality wines on his list that would be profitable to him, I'm sure he'd totally go for it.

  3. Jeannie Cho Lee (Master of Wine) has a broader perspective on pairing with with Asian food:

    "Some come asking me to recommend a wine to pair with a single Asian dish. But who eats galbijjim (braised short ribs) without banchan (side dishes) and rice? And nobody eats kimchi alone, it’s not a salad. Of course there is a center point, I do grant that, but what is also important is the combination of other banchan,"

    Sounds smart if ever more difficult.  Has anyone here had a chance to read her book on pairing?  The Korea Herald has a nice write-up on her: http://www.koreaherald.com/national/Detail.jsp?newsMLId=20110201000472

Trackbacks/Pingbacks

  1. Wine Market Korea - Twitter, Social Media and Wine Clubs | Vinum Vita | Terrence Jones - January 6, 2011

    […] Korean consumers, bringing in new wine and helping to reduce prices on the Korean market.  See The Wine Market of Korea Part 2 for […]