Foreign beer brands growing fast; Rising popularity poses threat to OB-Hite duopoly who account for over 90 percent of the market

2013-08-13 16:40

Foreign beer brands growing fast

Rising popularity poses threat to OB-Hite duopoly
By Yi Whan-woo
Two local powerhouses ― Oriental Brewery (OB) and Hite-Jinro ― are facing a growing challenge from foreign makers. The two Korean breweries account for over 90 percent of the market, but market observers anticipate the share of foreign alcoholic beverage firms will consistently rise as more consumers become willing to spend money on premium beers.
The market share of foreign firms reached 5.7 percent in the first quarter of this year, up from 4 percent in 2010, according to Korea Alcohol & Liquor Industry Association (KALIA).
Japan’s Asahi tops the list of international beer brands in terms of sales. Its average annual sales in Korea increased by 47 percent from 2005 to 2012.In Korea, Asahi beers are sold by Lotte Asahi, a joint venture between Lotte Chilsung, a Korean leading food and beverage company, and Asahi Breweries, a leading beverage manufacturer in Japan.
The Tokyo-based beer manufacturer reportedly plans to raise the market share of Asahi beers in Korea to 0.9 percent by the end of this year.
“The figure may seem trivial compared to the combined market share of OB and Hite-Jinro,” a market observer said. “However, we expect that rate can reach the 1-percent range or higher in a shorter period of time because more middle-class consumers favor Asahi over local brands.”
Asahi Breweries expanded its stake in Lotte Asahi from 15 percent in March to 34 percent in August, as sales of its flagship beer product in Korea continue to grow.
“Korea is our biggest overseas market among the 70 countries in which we have entered,” said a company official who declined to be named.
Last Thursday, Lotte Asahi opened a pub near Gangnam Station in southern Seoul to promote its draft Asahi beer. The pub will operate until Sept. 30 to encourage consumers to try the new beer while enjoying their leisure hours at one of the country’s most popular hangouts.
Another Japanese brewery is taking steps to increase its Korean market share. Kirin Ichiban is running a promotional event in Busan to introduce a frozen craft beer named after the company. This event comes after a previous event that took place between June and July in Sinsa-dong, southern Seoul.
Some domestic companies are also taking steps to steal market share from OB and Hite-Jinro. Lotte Chilsung will complete the construction of a beer brewery this year in Cheongju, North Chungcheong Province.
“We have completed 75 percent of the construction work and plan to produce our bottled beers from the first half of next year,” the company said.
Lotte Group’s beverage affiliate already produces soju, a Korean distilled liquor, and holds a 14-percent share in the soju market. The firm said its entry will likely change the local beer industry because of the firm’s significant know-how in the alcoholic beverage business.
A medium-sized beer manufacturer, 7 Brau, which has been selling its products to discount chain stores and department stores since 2011, is also working to increase its market share.
“Our sales this year has increased seven times so far compared to last year, and we often cannot cope with the high demand,” the company’s spokesman said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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