After the price of soju went up, consumers are waiting to see if beer prices will follow suit. (Image : Yonhap)
SEOUL, Dec.23 (Korea Bizwire) – After the price of soju went up, consumers are waiting to see if beer prices will follow suit.
Brewery officials made an official statement that they are not looking into price increases, even though there are factors that could be seen as justifying a bump in prices. OB Beer and HiteJinro, the two giants of the beer industry, confirmed their stance on December 22.
In August 2012, OB Beer increased the factory prices of all products including Cass and OB Golden Larger by 5.89 percent. HiteJinro also raised their prices 5.93 percent in July 2012. Ever since, beer prices have remained steady.
Industry officials agree that although there are no plans to increase beer prices at the moment, there are factors that could lead to increased prices in the future.
Officials point out that the biggest reason to consider raising prices is the abolishment of quota tariffs.
Quota tariffs are part of a system that temporarily lowers the tariffs on a certain item to stabilize prices. However, last year, the government stopped applying quota tariffs on five items including barley for brewing and malt, resulting in a 30 percent increase in the cost of the ingredients needed to make beer. Beer companies explain that they have been bearing the increased costs for more than a year, but are reaching a limit.
Beer industry officials say that another factor is the increase in the cost of bottles. “Before, a bottle was recycled four or five times, but for various reasons, now we only recycle the bottles three times. As a result, the new bottle usage rate doubled from 10 percent to 20 percent recently.”
In the meantime, some say that it would be difficult to raise beer prices under current circumstances. They say that the demand for domestic beer will drop even further down if the prices are raised, as their popularity is plummeting due to the fruit flavored soju craze and high demand for imported beer.
Politics is another issue. With the general election coming up next year, the government might fear losing support if it raises the price of beer, shortly after raising the prices of soju.
Consumer opinions vary. Some say that domestic beer brands should increase their prices to develop a wider variety of beer that is of a better quality. On the other hand, the majority point out that raising prices without improving quality would be a huge mistake.
By Francine Jung (francine.jung@kobizmedia.co.kr)
