Prices of soju and beer products in South Korea are expected to rise soon due to increases in tax, as well as higher costs of logistics and raw materials, according to industry sources, Wednesday.
According to the Ministry of Economy and Finance, the liquor tax on one liter of beer will increase by 30.5 won ($0.023) to 885.7 won in April. The upcoming increase will be higher than last year's rise of 20.8 won.
Just by factoring in the tax increase, the factory price of a 500 milliliter beer product will increase by 15.25 won.
“The tax increase will be reflected on the company’s beer products,” said an official from Oriental Brewery. “The company, however, has not decided when it will hike prices on its beer products,” the official added.
Beer prices are anticipated to rise more than the planned tax increase, largely due to increases in the cost of transportation and the raw materials used in brewing beer.
“The company has not decided if it will reflect the increases in other expenses,” the OB official said.
In South Korea, it is OB, the country's largest beer maker, who leads price hikes. If OB raises its prices, it is likely that other players will follow suit, according to an industry source.
The liquor tax on soju products will remain the same this year, but increased expenses, particularly those related to spirit and bottle prices, could propel another price hike of soju products this year.
Last year, prices of spirits used in making soju products went up by around 8 percent, while bottle prices increased by 20 percent to reach 220 won from 180 won last month, according to a local soju maker.
Despite increased expenses, local firms are reluctant to raise soju prices just yet, as backlash is expected to follow a second consecutive year of price hikes on the country's most widely consumed alcoholic drink. “There are elements that are pressuring soju price hikes, but the company is not considering a raise at the moment,” said an official from Hite Jinro, the country’s leading soju maker.
In 2022, local soju makers increased the prices of their soju products. Hite Jinro raised the factory price of its soju products by 7.9 percent for the first time in three years. Lotte Chilsung Beverage also raised its soju product price by some 7 percent last year, their first price hike in three years.
Meanwhile, if local soju and beer makers increase their factory prices, customers are expected to see bigger jumps in the price of liquor, particularly at restaurants and bars as they get soju and beer through wholesalers, who are also burdened by the additional costs of transportation, storage and labor when delivering the products.
“Although it is not certain how much (wholesalers) will increase their soju prices, restaurant and bar owners will have to increase their soju prices by between 500-1,000 won,” said the owner of a restaurant in Seoul.
Increases in the prices of soju and beer at large-sized discount stores and convenience stores, on the other hand, are going to be limited as they can order in bulk, unlike smaller restaurants and bars.
When the factory price of soju increased by 85 won last year, the soju price at discount and convenience stores went up by around 100 to 150 won.