Imported wine, diversity in selection expanded, but satisfaction level towards price is low

- need to improve distribution structure to lower domestic selling prices -

    As wine imports* continue a steady growth with the growing interest in and preference for wine among consumers, and it has been shown that domestic consumers show relatively high levels of satisfaction with‘diversity in selection’of imported wine.

* (2012) $147.26 million → (2014) $182.18 million → (2016) $191.45 million (source: Korea   International Trade Association)

□ Diversity in place of origin, type and capacity of imported wine widens the range of options open to consumers.

    The Korea Consumer Agency (KCA) conducted a nationwide survey of 1,000 consumers aged 20 and older who had purchased imported wine, and found that‘satisfaction level towards diversity in selection’was the highest (5.26 out of 7 points), followed by‘satisfaction level towards quality (4.71 points)’and ‘satisfaction level towards price (4.69 points).’

    The survey revealed that the places of origin of the largest-selling imported wine were Chile, France, Italy, and the U.S., but as consumers welcome wines from more diverse origins, other countries including Australia and Spain expanded their presence in the market, and various types of wine including red and white wine, and sparkling wine were consumed.

    In addition, it was found that the capacity and type of imported wine container were diversified from 750ml bottles into small pouches, cups, cans and large-capacity containers holding 2L or more, and the imported wine was also sold at various prices ranging from 10,000 won or less to 100,000 won or more, and as a result, the range of options open to consumers significantly widened.

□ The price gap between the import price and selling price of imported wine is larger compared to other items.

    Meanwhile, the KCA analysed the price gap between the average import price and selling price of imported wine from July, 2016 to June, 2017, and found that the gap was 11.4-fold for red wine, and 9.8-fold for white wine, showing relatively larger gap compared to other imported items.

    And it has been identified that the main reason why the domestic selling price is higher than the import price of imported wine is due to distribution costs including shipping costs, storage costs, rent, commissions, sales promotion costs, and distribution margins apart from taxes (about 1.46 times the CIF* price if customs duty is excluded).

    * Cost, Insurance and Freight(CIF): refers to an international shipping agreement used in the transportation of goods between a buyer and a seller in which the seller has responsibility for the cost of the goods in transit, providing insurance and paying freight charges to move the goods to a destination chosen by the buyer, and the CIF price includes the price of transporting goods by ship as well as the price of insurance.

    In this regard, based on the result of the analysis, the KCA has considered that it is necessary to improve the distribution structure for imported wine to promote price competition among small and medium-sized importers by expanding their participation in the market, and will propose related matters to relevant organizations.