Are you an exporter of wine, but never thought about exporting wine to Korea? In this blog post, I present the increase of wine consumption in Korea and how you can prepare for profitable exports there. Literally speaking, the imports of wine has skyrocketed since 2000 and the trend won’t change for a long time to come. There are no incentives why you should turn your back to this fact when you can get a decent market share in Korea as well.
Market analyzis for wine consumption in Korea
Wine imports increase with double digits on an annual basis in Korea, there’s a strong demand for sure. Still, red wine is dominating the imports (just over 71%) but luckily white-and sparkling wine is getting more appreciated too. It doesn’t matter if you produce red, white or sparkling wine. You can be sure to find customers for all products.
Like in other Asian countries, wine is considered to be a luxury product and consumed by a minor part of the population. People with higher incomes or savings are the main consumers. European prices of wine can be doubled or sometimes multiplied due to added import taxes, tariffs and customs fees.
The majority of the consumers are elder people in their 50-60’s. In general, these people have higher savings in comparison with younger people. Though younger people in their 30-40’s with higher incomes constitute of a big part as well.
Worth mentioning is that younger females start appreciating wine and you should consider to target these consumers. Younger people are in general more exploited to Western culture and trends, in the future we will see a higher demand here.
I recommend you to visit one or more trade fairs if you have the time and money to do so. However, it’s not easy for Western exporters know which trade fairs they should target. In this paragraph, I present two of the major trade fairs for wine that are held on an annual basis in Seoul. When it comes to Korean cities, Seoul is the city I would aim for. The majority of all fairs are held there and it’s the center for business and attracts the most buyers.
The name of this trade fair speaks for itself. If you ever go to Korea to exhibit wine, this is the one you should visit. The fair attracts around 30,000 visitors per year and you have good chances to meet a high number of potential importers or distributors. The remarkable benefit with this fair is the focus on wines and spirits. In fact, it’s the only fair in Korea specialized in wines and spirits.
Products on display:
Red wine/ White wine/ Rose wine/ Sparkling wine/ Fortified wine
- Beers, Spirits
Beer/ Whiskey/ Vodka/ Brandy/ Cognac/ Rum/ Gin/ Tequila/ Japanese sake/ Chinese spirits
- Cellars, Accessories
Wine cellar/ Accessory/ Glass/ Ice maker
Cheese/ Olive/ Bakery/ Ham/ Seafood/ Chocolate/ Snack/ Coffee
- Equipment, Shipping, Packaging
Production equipment/ Microbrewery/ Transport/ Storage/ Shipping/ Packaging/ Interior.
Application and fees
You can submit your application online and in English, it can’t be more convenient than that. Let’s have a look on the complete process from the submission of your application till the time the fair is over:
- You submit the initial application (the deadline is 14th of February).
- You submit a second application that includes services you want to add (for instance: interpreters, phone, internet and furnitures for your booth).
- You pay a deposit – half of the total booth fee to be paid one week after you submitted the application.
- You submit the essential application (The deadline is 16th of March).
- Full payment is required (The deadline if 16th of March).
- You arrange and prepare your booth (Preparation to be done 15th of April, two days before the exhibition starts).
- Your goods arrive on 16th of April.
- The exhibition is held (From 17th – 19th of April).
- The exhibition has finished and you bring your stuff from the booth (19th of February).
In general, the booth sizes are rather limited at trade fairs. But what can you expect from a fair that attracts tens of thousands of people and have several hundreds of exhibitors from all over the world? The booth size at this fair is 9 square meters and the price per booth stretches from 2800 USD to 3300 USD depending on what extra material you want (those can be seen above). You must pay for internet, electricity and phone calls in addition to the above costs.
Time and place
Date: April 17th (Thursday) – 19th (Saturday), 2014
Venue: COEX Hall C, Seoul, KOREA
Scale: 7,776 ㎡
Exhibitors expected: 200 companies from 20 countries
Visitors Expected: 30,000
Seoul Food & Hotel is one of the biggest food fairs in Korea and was visited by almost 41,000 people in 2013. The fair is located just 20 minutes from Seoul in the city of Goyang and attracts professionals from all over the world. If you visit Seoul food & Hotel, you can be sure to find the following products:
- Wines & spirits.
- Tea & coffee.
- Cheese & dairy.
- Organic food.
- Health products.
- Baby food.
Application & expenses
The application can be printed from the website, filled in and sent to the organizer’s email address. You pay for the area rented and the equipment needed. The extra equipment can be carpets, walls, phones, interpreters and tables for instance.
Time & place
Date: 13-16th of May, on annual basis (Application deadline January 31st)
Venue: KINTEX, Daehwa-dong
Shipping and packaging
There are two ways of transporting commodities world wide – by air freight or sea freight. Wine bottles are heavy and the most suitable freight option is for sure sea freight. Though, due to various circumstances, there are times when air freight is the better choice. I recommend you to use air freight for the following scenarios:
- If you plan to exhibit a low amount of bottles at a trade fair or similar
- If you send product samples for testing
- If you send product samples to be checked by potential importers or distributors
- If the importer’s demand increases rapidly and there’s not enough time to use sea freight
Wine bottles are fragile and require robust packaging. In addition, the price for a wine bottle can stretch up to several hundreds of dollars. I guess you understand the importance to use sturdily packaging in order to prevent crushing bottles. In fact, many shipping companies have packaging requirements and regulations that exporters must follow (can be found on UPS’ website).
Make your own analyzis and evaluate what packaging that suits your products better, from a cost and quality point of view. Bear in mind that the packaging need to meet the requirements set by your shipping company.
Comparison in costs – Tariffs, mark ups and taxes
Europeans, like myself, know that it’s quite easy to find a decent bottle of wine for the cost of five to ten euros. Well, we are privileged, but the same bottles of wine can be sold for far higher prices in Korea. In fact, the price can be doubled or multiplied several times due to added import tariffs, distribution fees, taxes and mark ups.
Below is an example that shows how taxes and import tariffs are applied to American imported wine as of 2012. The bottle in this example has a value of 10 USD (CIF import value):
- Import tariff:0%
- Liquor tax: 30%
- Education tax: 10%
A: Initial value: 10 USD
B: Import tariff: A x 0% = 0 USD
C: Liquor tax: (A+B) x 30% = 3 USD
D: Education tax: C x 10% = 0,30 USD
E: Subtotal: A+B+C+D = 13,30 USD
F: Value added tax: E x 10% = 1,33 USD
G: Handling fees for customs clearance: A x 8% = 0,80 USD
H: Total cost of wine at customs clearance: E+F+G = 15,43 USD
I: Importer mark-up (Mark-up is the profit made by a seller, i.e. selling price minus the cost for a product):
- Importer selling to large-scale retail store: Mark-up 15-40%
- Importer selling to wholesaler: Mark-up 15-20%
- Importer selling to luxury hotel: Mark up 40-50%
J: Wholesaler selling price to liquor store: Mark up 15-30%
K: Retailer mark-ups:
Hypermarket stores’ mark-up: 20-30%
Liquor stores’ mark-up: 30-40%
Luxury hotels’ mark-up: 50-200%
The price for the same bottle of wine can stretch from 19-63 USD in Korea.
Labeling of bottles
A separate Korean label is required on imported wine bottles and the label is usually attached by the importer prior to customs clearance, in the duty-free warehouse. The following information must be included on the label:
- Product Name.
- Country of origin.
- Product Type (e.g. Grape wine).
- The name, address and phone number of the importImporter‟s name, address, and phone number.
- Date of bottling.
- Alcohol percentage and volume.
- Name of major ingredients (e.g. Grape).
- Name of the place where the product can be returned if any problems.
- Information regarding storage.
- Name of food additives used (e.g. Sulfur Dioxide).
- Health warning clause.
- Warning clause to prevent liquor sales to minors.
- The name of the distributor needs to be included on bottles sold in retail stores.
In addition to above, the label cannot include a picture of fruits if the wine contains synthetic flavors.
The tolerance of the alcohol percentage can be 0,5% (e.g. if your label states that the wine contains 13% alcohol, it can contain 12,5% to 13,5% alcohol).
The regulations for imports and exports of alcohol are strict and you must plan and prepare thoroughly well in advance. But one thing is sure, if you spend enough time and have the motivation to embark the Korean market, you can expect increased profits in return.