by Jung Yong Cho

The Korean wine market is now returning to normal in the aftermath of unusually strong growth last year. Comparatively ‘sluggish’ sales are expected this year. Nonetheless, compared to the same period last year imports rose again by 29.3% in the first half in 2008 to $69.7m. That is far from the 70% recorded over the whole of 2007, but is nonetheless buoyant considering the volatile local economy and battered exchange rate.

James Kim, president of Dongwon Wine Plus, attributed the continued expansion to the increased demand for quality wines, especially those from France. “We have strengthened our portfolio with more Bordeaux and Burgundy in order to meet the consumer’s needs for premium wines,” he said. This is verified by statistics, for while value rose by 29.3% in the 1st half 2008, volume was up by only 7%.

The driving force behind this result can be attributed primarily to those active importers who belong to conglomerates (chaebol) such as Dongwon, Lotte, Keumyang, Maeil and LG.

Prospect for the second half of 2008 seem less rosy. The global economy is suffering and the exchange rate is working to the Korean wine drinker’s disadvantage. In particular the strong euro, which accounts for more than two thirds of the foreign exchange settlements in the Korean wine trade, hurts buyers. As of 30 September 2007, one euro was worth 1,302 Korean won. Today it stands at 1,733, an appreciation of 33%. A bottle of Chianti Classico, for example, which used to be a daily wine for many consumers, is now less popular. What once cost 30,000 won retail, now sells for 50,000.

Importer DJ Huh, who controls Sunkey trading, one of the new importers, expressed his concerns: “I am not quite sure that the market will continue to increase at such a rapid clip. We probably will not even realise double digit growth this year.” Other analysts are even more pessimistic and estimate that sales would be down 50% on last year during Chuseok, the Korean Thanksgiving that just took place on the 14th of September. Seasonal holiday’s sales often equal a three-month performance.