Small Breweries Gain Traction in South Korea
Loosened governmental restrictions and reduced tax burdens have encouraged entrepreneurship in South Korea’s beer industry, leading to a series of small brewery launches. Recent regulatory changes have reduced the barrier to entry for brewers like Bryan Do, who last year opened Hand and Malt Brewing Co. in Namyangju, 15 miles from Seoul. “Before April 2014, you had to have [an annual] capacity (excluding brewhouse vessels) of over 150,000 liters (1,280 barrels) to qualify for a brewery license to distribute outside of your brewery,” says Do.
The new laws brought the production requirement down to 80,000 liters (681 barrels). In addition, the government lowered the tax rate on microbreweries from 80 percent to 60 percent, although it remains significantly higher than what the largest breweries pay. Finally, the change also allows the country’s preexisting brewpubs and microbreweries to sell their products to outside vendors.
While the reduced regulations and lower taxes have improved the environment for start-ups, South Korean breweries still have to contend with issues like supply chain gaps. “Basically, the only ingredient that you can locally source is the water,” says Do. “Korea has no malt, yeast or hops.” South Korean customs agents have been known to delay or prevent some materials from entering the country, too. “Getting products used for beer production is very new to the government, so I think it’s a matter of time before they understand and start to loosen those reins,” explains Do.
Despite several new entrants into the market, two breweries continue to dominate South Korea: Hite Jinro and AB InBev-owned Oriental Brewers. These beer giants observe trends and release new products, like Hite’s Queen’s Ale, to appeal to the growing craft beer demographic. According to Do, “it doesn’t sell very well, but you can see that they are keeping an eye out on the local craft beer industry.”