Imported whisky prices rise despite EU FTA

Imported whisky prices rise despite EU FTA

Korea Herald 2012-06-10

Retail prices of imported whisky from Europe have not dropped but climbed in the local market despite the Korea-EU Free Trade Agreement which took effect in July 1, 2011, according to the antitrust regulator.

The Fair Trade Commission said Sunday that import prices of European-made whisky products rose by 1.41 percent during the first quarter of 2012, compared to the same period last year.

Among the products whose import prices surpassed the average growth of 1.41 percent were the Johnnie Walker Gold with 4.61 percent, Windsor 12 years old with 4 percent, J&B JET with 2.98 percent and Kingdom Whisky with 2.19 percent.

“Furthermore, consumer prices were 5.1 times higher than the import prices,” the FTC said in a statement.

While import prices of whisky per 100ml stayed at 2,664 won ($2.3), distributors sold the products to consumers for 13,501 won on average, the regulator said.

This marked a price growth rate of 400 percent during the process of initial imports and distributions.

In addition, FTC officials are considering launching an investigation into the allegation that large discount chains including Lotte Mart, E-Mart and Homeplus or a group of whisky distributors were implicated in price-fixing.

The regulator cited a civic group’s research report that whisky consumer prices offered by the three discount chains were similar.

According to the FTC, whisky consumer prices in the local market were 36 percent higher compared to those in major overseas markets.

In the case of Glenfiddich aged 21 years, the average price reached 44,667 won in Korea, though its price stayed at 28,172 won in Japan, 26,198 won in the United States and 18,426 in the United Kingdom.

The FTC carried out a full-fledged inspection on whisky prices between April 30 and May 20 in coordination with the Green Consumer Network.

Targets included 22 department stores, 49 discount chains and 14 liquor product-oriented stores.

European distilleries and wineries are aggressively tapping the local market as the Korea-EU FTA is scrapping tariffs on liquor.

Although the markets for wine and whisky have been booming in recent years here, heavy duties on imported bottles have limited choices of local drinkers.

Under the deal, 15 percent tariffs on wine were removed on July 1, 2011, the first day of its implementation. Twenty-percent duties on whisky will be abolished over three years, and other spirits such as vodka, brandy and tequila will take seven years to become tariff-free.

While customers are longing to toast to lower price tags, critics say the FTA’s impact would be minimal, given the extra surtaxes such as liquor tax and education tax on alcoholic beverages, all before importers and retailers add on their margins.

Some point out that customers would not directly benefit from lower prices as bars and pubs account for the biggest slice of whisky consumption.

Price hikes in Lotte Liquor BG’s Scotch Blue and Diageo Korea’s Johnnie Walker added fuel to such jitters.

“Whiskies are unlikely to become significantly cheaper considering that tariffs are imposed on import costs, not on retail prices. But we plan to reflect reduction factors brought by the FTA in prices of our products,” said an executive in the whisky industry.

By Kim Yon-se (kys@heraldm.com)

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source: Korea Herald