Popularizing wine consumption in Korean Market

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Introduction This paper aims to analyze objective thoughts to promote the popularization of wine consumption in Korea. Popularizing wine consumption in Korean Market A reasonable benchmark of that popularization would be Japan, which already has a very mature wine market. This paper also has ramifications beyond wine consumption in Korea. This is because of the potential for substantial growth of wine consumption throughout the Pacific Rim. This projected growth makes Asia the wine market of tomorrow. This is particularly important when the world wine industry is currently experiencing excess supply. A Korean case study on wine consumption patterns and projections will thus be of use not only to Korean but also foreign stakeholders in the Korean wine market. The actual condition of Korean Market At the present the Korean wine industry is on the brink of a breakthrough to mass consumption Korean wine market The scale of the Korean wine market is no more than 10% of that of its Japanese counterpart, but its rate of growth is the highest in the world. Wine consumption increased from 7 000 000 l in 1999 to 23 700 000 l in 2004 and is expected to reach 38 600 000 l in 2009.

Graph 1: Wine consumption in Korea (unit: 10000l) The growth trend of Korean wine import market The causes of the increase in wine consumption The growth trend of Korean wine The Westernization of Korean eating habits: Wine culture has spread throughout Korea with the growth of Western foods and eating habits. Health-oriented lifestyles: A medical report, in1997 titled the French paradox promoted the positive health effects of wine consumption. This caused wine consumption to peak in that year. Income Impacts: Preference for wine has increased among people in the upper income bracket. Wine distribution Market shares by distribution channels Channels of distribution: 1. Importers 2. hotels, restaurants, outlets, department stores 3. consumers

Market shares by wine importers The change of wine distribution channels Period: Initial Rapid Growth (1988- the mid 1990): This period saw the appearance of private distributors. Korea Tourism Organization and KTS were the main wine distribution channels. Market foundation development Market foundation development: (the mid 1990 s 2000): This tracked Korea s economic development from the point of $USD 10 000 per-capita income to the financial crisis of 1997-1998. Large outlet malls and department stores became the main wine distributors during this stage The expansion period (2000-2006): The expansion period (2000-2006): This period capitalized on the wellness ( well-being in Korean) trend in Korea. Sales expanded to off premises venues: liquor department stores, specialized wine shops, and convenient stores. On- premises consumption included specialized wine bars and high-end restaurants became the main wine channels. Also, general Korean restaurants began to serve wine. The growth process of Korean wine production In 1974, Haitai company released Noble Wine, the first Korean wine. In 1977 Doosan group debuted its Majuang label. The growth process of Korean wine production In 1980s, domestic wine production and sales increased by 10-30%. In 1987, due to the liberalization of the wine import market, sales promotions by foreign wine companies, and the preference of Korean wine consumers for imported wines, Korean wine companies lost market share.

The growth process of Korean wine production Korean wine imports Korean wine companies produced domestic wines by importing foreign bulk wines or by utilizing the OEM system. Only Majuang red and white wines domestically produced by Doosan Liquor BG have survived on the market to date. France has the greatest share of Korean wine imports (50%). Recently, due to educational and promotional efforts by USA, Germany and Australia and the Korea-Chile FTA, the French share has decreased. Wine import ratio by country Marketing Consumer databases on key men in discount stores (working class), restaurants (upper middle class), hotels (upper class), department stores & specialty wine shops (middle class). Saleswomen in discount stores distributed questionnaires to customers. Executing consumer databases by region on wine site(wine.co.kr) Market-oriented strategy In the Korean wine market where wine consumers are still developing, key men in wine distribution recommend this marketing strategy. Attracting consumer attention by discount coupons or giveaway events The sales of products strongly driven by wine importers tend to increase. Thus, product release and success pivot on a close relationship of sales and marketing teams and a capitalization on consumer & market trends.

The present situation of Japanese wines From 1995 to 2002 a wine boom was at its height in Japan, even though wine consumption shows a -2% growth rate now. The causes of the wine boom in Japan Since 1995, when Mr. Shinya Tasaki became the first Japanese to win the annual World's Greatest Sommelier Concours, Japanese people have been interested in wine. Now wine has become so popular that even izakayas (Japanese small taverns) serves wine. It is largely owing to the success of marketing both the distinctiveness and the health benefits of wine. At the same time, wine met developing social needs or craving for new alcohol cultures and products. Wine consumption per capita Japanese wine production The Japanese wine industry depends heavily on foreign ingredients because of their low costs. France 62.8l Italy 54l UK 14l US 7.9l Japan 2l For instance, 90% of Japanese grapes are directly consumed: only 10% are used for brewing purposes. Further, grape growing and wine making are separated. As a means to improve the quality of domestic wine, Japanese wine makers use imported ingredients and brand them by using their remarkable brewing skills. Japanese wine production Japanese small and medium wine makers The number of Japanese wine makers totals 300, with the market share of the top five more than 80%. These 5 major companies have not only taken part in forming a Japanese vision of wine through a large sum of advertisement & cultural marketing, but also contributed to the propagation of Japanese wine. On the other hand, Japanese small and medium wine makers in the main have endeavored to survive on the market through their differentiated strategies like product differentiation (100% pure domestic wine, preservative-free wine, organic wine, etc.), service differentiation, winery tours and similar strategies..

The future direction of and tasks of the Japanese wine industry The future direction of and tasks of the Japanese wine industry For this purpose, the following tasks are needed: The first task of Japanese wine industry is to create a truly Japanese wine indigenous to the Japanese climate. the development of a new brand of Japanese grape, a stabilized supply of domestic wine ingredients through a symbiosis between Japanese wine industry and agriculture, the reorganization of laws relating to wine, a campaign emphasizing wine s health, environmental friendliness, the consolidation of on and offline wine marketing. SWOT SWOT O(opportunity) T(threat) SO ST High interest in well-being trend Continuous growth in Korean wine market Extension of low-alcohol-drinking culture Increase in women s income High possibility of market growth Appearance of low-priced wine Westernization of Korean eating habits Less controlled distribution channels Lack of wine knowledge of Korean consumers Korean drinking culture mainly based on soju (Korean distilled spirit) and beer Competition among wine importers scrambling to grow market share and margins A small number of wine selling places High-priced brand s image of wine Making the best use of the public s high interest in health as a strategy to expand the wine market Establishing a strategy for propagating the idea that wine is suitable for western food Cultural marketing by using of wine s noble image Consumers interest and market expansion through the various kinds of wine import & distribution WO The renewal of wine image under the slogan cultural taste + moderate price Conquering both high-priced and low-priced wine market through the amplitude of price choice Strate gy for diffusing heath-related wine image into public WT S(strength) Health benefits of red wine; for example, decreasing the risk of heart disease, cancer and stroke Various tastes and scents according to wine producing countries Good match with Western food Cultural delicacy of wine Broader choice by price: low to high W(weakness) Korean consumers preference for high-alcoholic beverages like soju Koreans binge drinking culture Lack of nation-wide marketing Few varieties of imported wines Wine is less convenient to carry than beer or soju Disseminating low-alcohol and well-being- related wine image Market growth strategy through the diversification of wine import Marketing for everyone (i.e. men/women and young/elderly people) Presenting wine consumption as an alternative to Korean heavy drinking culture Launching wine can products and varying the volume of wine Expansion of market and consumers through the systematization of distribution channels and import/distribution of various kinds of wine Structural reorganization of wine importers Improving consumer access & acquaintance to wine by increasing the number of wine selling places Conclusion In comparison to Japan, the great majority of wines consumed in Korea are exclusively imported ones. According to Korean research on the ratio of domestic and imported wine consumption, the market share of domestic wine may approach zero after 2011. For the long-term development of domestic grape cultivation and the domestic wine industry, and for the creation of proper Korean wine, it is necessary to cultivate a domestic brand of grape exclusively destined for wine-making, to establish a cooperative system between farms and the wine industry, and to develop independent wine technologies.

Once considered symbol of elegance, wine is now a fundamental part of mass culture. The causes of wine consumption are due to the increases of Koreans interest in health, the diversity of food culture (including growth of a restaurant culture), the growth of wine bars and shops, private wine clubs for wine-lovers, and wine institutions/academies. This trend has also been impacted by an increase in Korean tourists or students going abroad, the liberalization of imports, and the change of Korean drinking culture: for example, preference for less powerful alcohols For the growth of the wine market the promotion of wine consumption and its popularization are needed. Thus, it is necessary for the Korean wine industry to reorganize wine distribution networks, to extend consumers interest in wine and market scale by diversifying the category of wine import products, to propagate a well-made vision of wine by restructuring wine importers structure, and to conquer at the same time low, medium, and high-priced wine markets through the maximization of various choices in price. They should also emphasize the cultural marketing of wine through the wine s noble and elegant image and/or the public s interest in health. Korean Wine Theme Park Finally, I d like to suggest a Korean wine theme park which could secure a wine production and distribution network for popularizing wine consumption and familiarizing Korean consumers with wine. A referent is the Bordeaux Wine Park in France.