Voluntary Report - public distribution

**Date:** 8/26/2005

**GAIN Report Number:** KS5042

KS5042

**Korea, Republic of**

**Product Brief**

**Non-Alcoholic Beverages**

**2005**

**Approved by:**

![](media/image1.wmf)Ms. Susan B. Phillips

U.S. Embassy

**Prepared by:**

Ms. Sung, Young Eun, Intern

**Report Highlights:**

The Korean non-alcoholic beverage market is estimated at \$3.8 billion
in 2005, a growth of five percent from the previous year. Functional
beverages are responsible for much of the growth, while sales of
carbonated beverages have declined. The juice market is expected to
increase given the rising interest in health, however local
manufacturers are more interested in importing raw ingredients than
finished products. The total value of imported non-alcoholic beverages,
including juices (both finished product and raw ingredients), bases for
sodas and mineral water was \$62 million in 2004.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Seoul ATO \[KS2\]

\[KS\]

**Table of Contents**

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| d Pr |      |   |                     |                         | # |
| ices |      |   |                     |                         |   |
|      |      |   |                     |                         | 1 |
|      |      |   |                     |                         | 2 |
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+------+------+---+---------------------+-------------------------+---+

########  

######## ***Section 1. Market overview***

The total size of the non-alcoholic beverage market in Korea in 2005 is
estimated at \$3.8 billion, a growth of five percent from the previous
year.

Functional beverages, such as Aloe Morning, Pine Bud beverage and
Vitamin 500 are responsible for much of the growth, while sales of
carbonated beverages have slowed considerably. However, the variety of
functional beverages is currently limited, therefore most beverage
companies are concentrating their marketing strategies on such things as
container design and promotional activities. The juice market is
expected to increase given the rising interest in health. Concerns about
environmental pollution and safe drinking water have also triggered more
interest in mineral water.

**Table 1: The Sales Of Non-Alcoholic Beverage**

**Unit: \$Million**

  -------------------------------- ---------- ---------- -----------------
                                   **2003**   **2004**   **Percent
                                                         Change**

  Fruit and Vegetable Juice        983        1,013      3.1%

  Carbonated Beverages             1,118      1,162      3.9%

  Mineral Water                    253        302        19.4%

  Sports Beverages                 201        210        4.5%

  Canned Coffee                    307        318        3.6%

  Functional Beverages             253        302        19.4%

  Traditional Korean Drinks        90         78         -13.3%

  Flavored Water (Near Water)      129        140        8.5%

  TOTAL                            3,334      3,525      5.7%
  -------------------------------- ---------- ---------- -----------------

> Source: Food Distribution Annual 2005 by Food Journal

Table 2: Advantages and Challenges for United States

+----------------------------------+-----------------------------------+
| > **Advantages**                 | > **Challenges**                  |
+----------------------------------+-----------------------------------+
| > In general, the United States  | > Korean consumers are more       |
| > has a good reputation for high | > likely to purchase well-known   |
| > quality beverage products.     | > or domestic brands.             |
+----------------------------------+-----------------------------------+
| > Local companies are always     | > Distribution tends to be tied   |
| > looking for new products to    | > to a manufacturing company.     |
| > boost their market share.      |                                   |
+----------------------------------+-----------------------------------+
| > Tariffs of mineral water,      | > High tariffs for fruit and      |
| > extracts and essences at 8     | > vegetable juices. The average   |
| > percent are reasonable.        | > tariff is 46.6 percent.         |
+----------------------------------+-----------------------------------+
| > Consumers feel premium         | > Inspection procedures can be    |
| > products have a higher quality | > troublesome and are stricter    |
| > and are more trust worthy;     | > than in the United States.      |
| > they're willing to pay more    |                                   |
| > for these products.            |                                   |
+----------------------------------+-----------------------------------+
| > Imports of beverage products   |                                   |
| > are likely to be on a large    |                                   |
| > scale.                         |                                   |
+----------------------------------+-----------------------------------+
| > The large size of the beverage | > Competition from Korean         |
| > market affords greater         | > manufactured products is likely |
| > opportunities for U.S.         | > to be strong.                   |
| > exporters.                     |                                   |
+----------------------------------+-----------------------------------+

The total value of imported non-alcoholic beverages, including juices
both finished product sand base materials and mineral water was \$62
million in 2004. This represents 16 percent of the total market.
However, ninety nine percent of this amount was concentrate for bottling
in Korea. The value of finished product imported into Korea was probably
only around one percent.

# Section 2. MARKET SECTOR OPPORTUNITIES AND THREATS

Ninety percent of all beverage products are sold through the retail and
wholesale market, nine percent through the foodservice sector and one
percent for food processing.

1.  **Entry Strategy**

The current best strategy to enter the non-alcoholic beverage sector
with a new-to-market product is to contact and work with an established
importer as few retailers import directly. However, because three
companies, Lotte Chilsung Beverage, Haitai Beverage and Coca-Cola
currently account for over 50 percent of all non-alcoholic beverage
product sales and maintain competitive facilities with advanced
technology; meeting with these companies is recommended.

In addition, Korean beverage companies would prefer to manufacture a
domestic product with imported raw materials rather than to import a
finished beverage product, which will entail paying tariffs and
transportation charges.

-   Established importers should be able to provide market intelligence,
    up-to date information, guidance on business practices and trade
    related regulations, sales contacts with existing and potential
    buyers, and market development expertise.

-   The type of contract between the importer and exporter varies from
    joint investment partnership to exclusive agent-ship to non-binding
    broker-ship mainly depending on how the exporter sees the role of
    the importer in market development. The most common practice is
    maintaining a non-binding seller-buyer relationship during the
    test-market period and then up grading to a more binding option if
    the market shows bigger potential.

-   There are many things that the U.S. exporter should follow closely
    with the importer during the initial stage of export. The Korean
    government maintains very strict regulations on imports and requires
    various certificates/documents and product information before
    approving import of a new-to-market food product. Therefore, the
    exporter must provide the importer with necessary documents and
    information to submit to the government. More detailed regulatory
    information on food safety and labeling can be found in FAS report,
    #KS5037, ([www.fas.usda.gov](http://www.fas.usda.gov/)).

-   Protecting the company/product trademark and patents is an important
    issue in Korea and can be easily handled by working with local
    attorneys.

**2. Market Size, Structure, Trends**

a\. Fruit and Vegetable Juices:

As a result of steady R&D investment and choosy consumers, the Korean
fruit juice industry produces a wide variety of high quality products
that are recognized the world over. Juice product lines include apricot,
pineapple, pear, mango, guava, and pomegranate as well as orange, grape
and apple. An effort is made by manufacturers to diversify products by
packaging, capacity and variety.

**Table 3: The Sales of Fruit and Vegetable**

**Juices by Percentage of Concentrate**

**Unit: \$Million**

+----------------------+----------+----------+------------------------+
|                      | **2003** | **2004** | **Percent Change**     |
+----------------------+----------+----------+------------------------+
| 100% Juice           | 363      | 349      | -3.9%                  |
+----------------------+----------+----------+------------------------+
| 50% Juice            | 158      | 201      | 27.2%                  |
+----------------------+----------+----------+------------------------+
| Thin Juice           | 407      | 407      | \--                    |
|                      |          |          |                        |
| And Puree            |          |          |                        |
+----------------------+----------+----------+------------------------+
| Other[^1]            | 55       | 56       | 1.8%                   |
+----------------------+----------+----------+------------------------+
| Total                | 983      | 1,013    | 3.1%                   |
+----------------------+----------+----------+------------------------+

> Source: Food Distribution Annual 2005 by Food Journal

**Table 4. Imports of Fruit and Vegetable Juice from the United States**

**Unit: \$Thousand**

+------------+------+------+------+------+------+------+-----------+
| **Des      | **20 | **20 | **20 | **20 | **20 | **20 | **2004**  |
| cription** | 00** | 01** | 02** | 03** | 04** | 05** |           |
|            |      |      |      |      |      | [^2] | **Market  |
|            |      |      |      |      |      |      | Share**   |
+------------+------+------+------+------+------+------+-----------+
| Orange     | 1    | 1    | 15   | 15   | 12   | 9    | 26%       |
| Juice      | ,655 | ,355 | ,413 | ,575 | ,003 | ,588 |           |
+------------+------+------+------+------+------+------+-----------+
| Grapefruit | N/A  | N/A  | 608  | 347  | 606  | 506  | 30%       |
|            |      |      |      |      |      |      |           |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Other      | N/A  | N/A  | 683  | 527  | 710  | 512  | 72%       |
| Citrus     |      |      |      |      |      |      |           |
|            |      |      |      |      |      |      |           |
| Fruit      |      |      |      |      |      |      |           |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Pineapple  | N/A  | N/A  | 203  | 165  | 190  | 286  | 11.5%     |
|            |      |      |      |      |      |      |           |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Tomato     | 194  | 195  | 203  | 196  | 246  | 292  | 96%       |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Grape      | N/A  | N/A  | 12   | 9    | 9    | 10   | 50%       |
| Juice      |      |      | ,552 | ,797 | ,899 | ,628 |           |
+------------+------+------+------+------+------+------+-----------+
| Apple      | N/A  | N/A  | 101  | 188  | 343  | 624  | 18%       |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Other      | 1    | 2    | 4    | 5    | 5    | 5    | 29%       |
| fruit      | ,868 | ,876 | ,139 | ,342 | ,290 | ,740 |           |
|            |      |      |      |      |      |      |           |
| or         |      |      |      |      |      |      |           |
| vegetable  |      |      |      |      |      |      |           |
|            |      |      |      |      |      |      |           |
| Juice      |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Juice      | 1    | 1    | 2    | 6    | 2    | 4    | 44.5%     |
|            | ,655 | ,355 | ,099 | ,984 | ,639 | ,432 |           |
| Mixtures   |      |      |      |      |      |      |           |
+------------+------+------+------+------+------+------+-----------+
| Total      | 5    | 5    | 36   | 39   | 31   | 32   |           |
|            | ,372 | ,781 | ,001 | ,121 | ,926 | ,608 |           |
+------------+------+------+------+------+------+------+-----------+

Source: Korea International Trade Association

Since 1997, the Korean juice industry has benefited from advanced cold
storage distribution technologies, which allows them to deliver very
fresh juice to retail outlets. One popular method of distribution is to
pack the fruit juice in cold temperatures like milk and distribute them
with cars equipped with a cold storage system. The package is made of
special materials that significantly reduced exposure to air and
ultraviolet rays, which helps to maintain the cold temperatures. This
cold storage method produces high quality fruit juice that has the taste
of fresh squeezed juice. This method received much acclaim from
consumers, resulting in a 20 percent increase in sales in 2001 and a 30
percent increase in 2002.

In Korea, Two major companies have monopolized the Korean fruit juice
market, Lotte Chilsung Beverage Company (currently with a fifty percent
market share) and Haitai Beverage Company (forty seven percent market
share). In 1975, Haitai Beverage Company introduced Haitai juice
products in Korea. Four years later, Lotte Chilsung Beverage Company
built a juice factory with modern facilities. The strong rivalry between
the two companies began in earnest when they entered into joint ventures
with popular American juice brands (Sunkist with Haitai, Delmont with
Lotte) in 1980.

Orange juice is the leading product in the fruit juice category. Orange
concentrates are imported mainly from Brazil and Florida. However,
because of recent hurricane damage in the United States, Brazilian
oranges are now more prices competitive. The difference in quality is
negligible. Most Korean companies import frozen concentrates or
concentrates in aseptic packaging (carried under minus ten degrees) and
manufacture the beverage locally.

**Table 5. Frozen Orange Concentrates Imports: Jan-May in 2005**

######### Unit: Dollars

+-------------+-----------------+---------------+----------+---------+
|             | **Quantity      | **Value**     | **Va     | **M     |
|             | (Kg)**          |               | lue/Kg** | arket** |
|             |                 |               |          |         |
|             |                 |               |          | **      |
|             |                 |               |          | Share** |
+-------------+-----------------+---------------+----------+---------+
| #####       | 12,789,281      | 13,238,308    | 1.04     | 77.5%   |
| #### Brazil |                 |               |          |         |
+-------------+-----------------+---------------+----------+---------+
| USA         | 3,507,434       | 4,303,967     | 1.23     | 21.3%   |
+-------------+-----------------+---------------+----------+---------+
| Canada      | 13,225          | 26,242        | 1.98     | 0.08%   |
+-------------+-----------------+---------------+----------+---------+
| Israel      | 9,275           | 12,799        | 1.37     | 0.05%   |
+-------------+-----------------+---------------+----------+---------+
| Italy       | 250             | 2,074         | 8.29     | 0.001%  |
+-------------+-----------------+---------------+----------+---------+
| Netherlands | 182,498         | 195,117       | 1.06     | 1.1%    |
+-------------+-----------------+---------------+----------+---------+
| Total       | 16,501,963      | 17,778,507    |          |         |
+-------------+-----------------+---------------+----------+---------+

> Source: Korea Customs Service

In March of 2005, the Coca-Cola Korea Bottling Company was able to
successfully penetrate the orange juice market with its Minute Maid
brand as a result of its improved packaging and superior taste. The
orange concentrate for this product is imported from Turkey, however,
the good reputation that American products enjoy played an important
role in gaining market share for this product in Korea.

b\. Carbonates:

In the mid 1990's, the carbonated beverage market expanded to include
many diverse brands in order to compete in the global market place. As a
result, the 1997 Asian Financial Crisis did not have much effect on this
industry. Since 2000 however, retail consolidation, links between
production and sales, and Internet marketing activities has accelerated
competition in this field;and combined with health concerns have
resulted in decreased sales.

**Table 6: The Sales Of Carbonates**

**Unit: \$Million**

+------------------------+-----------+-----------+--------------------+
|                        | **2003**  | **2004**  | **Percent Change** |
+------------------------+-----------+-----------+--------------------+
| Uncaramelized          | 315       | 347       | 10.2%              |
|                        |           |           |                    |
| Soda (e.g. SPRITE)     |           |           |                    |
+------------------------+-----------+-----------+--------------------+
| Caramelized            | 507       | 505       | -0.4%              |
|                        |           |           |                    |
| Soda (e.g. COKE)       |           |           |                    |
+------------------------+-----------+-----------+--------------------+
| Flavored Soda          | 38        | 244       | 2.5%               |
|                        |           |           |                    |
| (e.g. FANTA)           |           |           |                    |
+------------------------+-----------+-----------+--------------------+
| Other[^3]              | 58        | 66        | 13.8%              |
+------------------------+-----------+-----------+--------------------+
| Total                  | 1,118     | 1,162     | 3.9%               |
+------------------------+-----------+-----------+--------------------+

> Source: Food Distribution Annual 2005 by Food Journal

**Table 7: Imports of Carbonates Beverage from USA**

**Unit: \$Thousand**

+--------+-------+----+----+----+------+------+------+------------+
| **D    |       | ** | ** | ** | **20 | **20 | **20 | **2004**   |
| escrip |       | 20 | 20 | 20 | 03** | 04** | 05** |            |
| tion** |       | 00 | 01 | 02 |      |      | [^4] | **Market   |
|        |       | ** | ** | ** |      |      |      | Share**    |
+--------+-------+----+----+----+------+------+------+------------+
| M      | Co    | 2  | 2  | 3  | 10   | 10   | 17   | 97%        |
| ineral | lored | ,1 | ,2 | ,6 | ,922 | ,506 | ,475 |            |
| Water, |       | 35 | 40 | 14 |      |      |      |            |
| Flavor |       |    |    |    |      |      |      |            |
| ed[^5] |       |    |    |    |      |      |      |            |
+--------+-------+----+----+----+------+------+------+------------+
|        | Other | N  | 1  | 1  | 149  | 330  | 650  | 26%        |
|        |       | /A | 38 | 56 |      |      |      |            |
+--------+-------+----+----+----+------+------+------+------------+
| Total  |       | 2  | 2  | 3  | 11   | 10   | 18   | 90%        |
|        |       | ,1 | ,3 | ,7 | ,071 | ,836 | ,125 |            |
|        |       | 35 | 78 | 70 |      |      |      |            |
+--------+-------+----+----+----+------+------+------+------------+

> Source: Korea International Trade Association

Other flavored sodas, such as dairy based sodas, have seen strong demand
from consumers. In 2004, the sales of carbonated beverages actually
increased by three percent despite Coke's downward tendency. New flavors
continue to create excitement. The introduction of new flavors has been
a major marketing strategy in Korea. The well-being trend and concerns
about obesity, consumption of low or no calories has steadily increased
and shows no signs of abating. In addition, consumers' desire for new
products is very strong.

c\. Mineral Water:

South Korea's bottled water market is booming despite overall
sluggishness in the country's beverage sector. While consumers in Japan,
Europe and the United States are used to purchasing bottled water,
Korean consumers haven't always been interested, even though inexpensive
products were available. However, concerns over excessive sugar intake
and related health problems, such as diabetes and obesity, has changed
people's ideas about bottled water and resulted in a steady sales
growth. In addition, consumer confidence in the municipal water supply
is not as strong as it once was.

The mineral water business was legalized in 1995 in Korea and every year
since then has seen an expansion in sales. The country's bottled water
market, which expanded to about \$300 million last year, is expected to
rise another 20 billion won in value by the end of the year. The Korea
Mineral Water Association (KNMWA) expects the market to double the
current level by 2010.

Four main domestic companies have captured the bulk of the market
although there are several other manufacturers. The key players are
Nongshim, Jinro, Dongwon F&B and Lotte Chilsung Beverage. In 2004,
Nongshim held the biggest share of the market with 19 percent, followed
by Jinro with 16 percent. Dongwon F&B ranked third with a 13 percent
share and Lotte Chilsung accounted for six percent.

Foreign companies are rapidly expanding the market. Evian, a leading
global brand in the mineral water business, has advanced into the South
Korean water market through cooperation with Lotte Chilsung. Evian has
joined up with the Korean company and its nationwide sale network to
raise its market share from the current one percent. Evian will target
customers at spas and gymnasiums, where highly health-conscious people
gather. It will launch a so-called star marketing strategy, promoting
products with popular sports stars and entertainers

Another global leading food company linked up with the Korean company
Pulmuone in January. Nestle and Pulmuone's mineral water business
affiliate Pulmuonesammul signed a contract to establish a joint venture.
The new company will use the name of the Korean firm and Nestle will
control 51 percent. They plan to develop new brands and products, and
retail them via the sales network of the Korean company.

![](media/image2.wmf)

![](media/image3.wmf)

Source: Korea Natural Mineral Water Association

> **Table 8. Mineral Water: The sales of the first half year 2005**
>
> **Unit: \$Million**

+---------------+-------------------+-------+---------------+---------+
| **M           | **Brand**         | **Sa  | **Percent     | **M     |
| anufacturer** |                   | les** | Change**      | arket** |
|               |                   |       |               |         |
|               |                   |       | **(Y-to-Y)**  | **      |
|               |                   |       |               | Share** |
+---------------+-------------------+-------+---------------+---------+
| Nongshim      | Jeju Samdasu      | 33    | 10.0%         | 19%     |
+---------------+-------------------+-------+---------------+---------+
| Dongwon F&B   | Dongwon Saemmul   | 25    | 20.0%         | 13%     |
+---------------+-------------------+-------+---------------+---------+
| Lotte         | ICIS              | 22    | 22.2%         | 6%      |
| Chilsung      |                   |       |               |         |
+---------------+-------------------+-------+---------------+---------+
| Jinro         | Jinro Seoksu      | 20    | 10.0%         | 16%     |
+---------------+-------------------+-------+---------------+---------+

> Source: Internet Food News Briefing and ATO Industry Sources

In June 29, 2005 it was reported that Uleung Mineral Company discovered

deep-sea water which people can drink with abundance of mineral,
nutriments, nearby Uleung Island in Korea. The representative of this
company expects that this sale volume of deep-sea water would reach at
\$ 1000 millions by 2010.

**Imports of Mineral Natural Water from USA**

##### Unit: \$Thousand

![](media/image4.wmf)

In 2004, market share of United States in Korea was only about two
percent.

d\. Sports Beverage:

In 1999, the sports beverage market was approximately valued at \$190
million; however sales in the following year decreased by ten percent
due to the lack of demand. In 2001, Cheil-Jedang (or CJ) took over as
the marketing organization for Gatorade from Lotte Chilsung Beverage
Company. CJ was able to somewhat reverse this declining trend and in
2002, there was a dramatic increase in the sales of sports beverages by
twenty percent. The 2002 World Cup games being held in Korea likely
contributed to their success. In 2004, sales were \$210 million.
Industry analysts expect the market for sports beverages will remain
stable for the next several years.

The majority of consumers for sports beverages are the youth generation
(15-23 years old). They are early adopters. They want to be
differentiated from other age groups, so they quickly absorb new trends
and fashions, have relatively low brand loyalty and are interested in
sub brands that specifically target them. Therefore, product
diversification and marketing will be important to capture the attention
of this generation.

e\. Canned Coffee:

In 1985, the Dongsuh Foods Company introduced canned coffee to the
Korean market. Canned coffee is premade and premixed with sugar and
cream. It is often sold through vending machines, which has been a
popular means of selling coffee. Koreans mostly drink instant coffee and
don't have the capability of making fresh coffee at home.

In 1991, several international brands, such as Maxwell House, Letsbe,
and Nescafe, have been introduced. From 1997, Letsbe, produced by Lotte
Chilsung Beverage Company, has been the brand leader with fifty percent
of market share in the canned coffee market.

The canned coffee market has become very diversified in recent years
including a variety of flavors, quality and packaging. Korea does not
grow coffee; all products are imported as instant or extracts. Korea
mainly imports coffee from Vietnam, Honduras, Columbia and Brazil. For
premium-canned coffee, Korea imports coffee beans and manufactures the
products locally.

f\. Near Water:

In Korea, near water is the term used when fruit juice and aroma have
been added to pure water.

In April of 1999, Namyang Dairy Product Co., Ltd put 'Near Water'
flavored with three percent fruit concentrate on a debut. Lotte Chilsung
Beverage Company marketed 'Refreshing Water 2%'and Haitai Beverage
Company launched 'Dream of water', all of which started a wave of these
types of products in the market. 'Refreshing Water 2%' is the main brand
in the near water market with over ninety percent market share. There
are two-product lines for 'Refreshing Water 2%', peach flavored and
grape flavored. The peach concentrate comes from California and the
grape concentrate is imported from Spain.

Near water products are very popular for consumers interested in
something more than plain water. Consumption of these types of beverages
is high. Consumers are always looking for something new, which provides
an excellent opportunity for imported products. Even now the market
share of 'Refreshing water 2%' is dropping as consumers switch to new
products. .

g\. Others:

Korean Traditional Drinks:

Korean Traditional Drinks: Traditional Korean drinks include a sweet
fermented rice drink called "Shikkye", a date drink, a fruit punch made
with honey, dried persimmons, pine nuts and cinnamon, and a grain drink.
In 1993, the Birak Company was instrumental in making this drink
popular. However, most traditional drinks do not last long. In 2004,
sales of traditional drinks were valued at \$100 million.

Functional Beverages: Since the 1990's, functional supplements have been
added to beverages, including fibers, collagen, onion, pine needles,
Kitosan, Aloe, vitamins and so on. A 'collagen beverage' product
produced by Lotte Chilsung Beverage Company launched in 2005 received a
lot of interest from consumers. The collagen ingredients are pork skins
and fish bones among other things. These ingredients are currently being
imported from Japan. Drinks with aloe puree, imported from the United
States, are also very popular.

With health concerns at the forefront, the functional drink industry is
growing. The sales of functional drinks reached \$110 million in 2001,
\$130 million in 2002 and \$160 million in 2004. This market is
characterized by a fast changing product life cycle.

> 3\. Company Profiles:
>
> The following table lists the major beverage companies in Korea. U.S.
> exporters interested in a more specific list of companies can contact
> that Agricultural Trade Office directly.

###### Table 9: Major Korean Beverage Companies by Sales Volume: 2003

Unit: \$Million

+--------+-------------------------+---------------+------------------+
| R      | Enterprises             | Sales         | Market Share     |
| anking |                         |               |                  |
+--------+-------------------------+---------------+------------------+
| 1      | Lotte Chilsung          | 806           | 25%              |
|        |                         |               |                  |
|        | Beverage Co.,Ltd        |               |                  |
+--------+-------------------------+---------------+------------------+
| 2      | Coca-Cola Korea         | 439           | 14%              |
|        |                         |               |                  |
|        | Bottling Co.,Ltd        |               |                  |
+--------+-------------------------+---------------+------------------+
| 3      | Haitai Beverage Co.,Ltd | 369           | 12%              |
+--------+-------------------------+---------------+------------------+
| 4      | Donga-Otsuka Co.,LtD    | 171           | 5%               |
+--------+-------------------------+---------------+------------------+
| 5      | Woongjin Foods Co.,Ltd  | 129           | 4%               |
+--------+-------------------------+---------------+------------------+
| 6      | Coca-Cola Korea Co.,Ltd | 87            | 3%               |
+--------+-------------------------+---------------+------------------+
| 7      | Maeil Dairy Industry    | 86            | 2.68%            |
|        |                         |               |                  |
|        | Co.,Ltd                 |               |                  |
+--------+-------------------------+---------------+------------------+
| 8      | Chung's Food Co.,Ltd    | 85            | 2.66%            |
+--------+-------------------------+---------------+------------------+
| 9      | Sahmyook Foods          | 48            | 1.5%             |
+--------+-------------------------+---------------+------------------+
| 10     | Korea Yakult Co.,Ltd    | 39            | 1%               |
+--------+-------------------------+---------------+------------------+

Source: Food Distribution Annual 2005 by Food Journal

> **Section 3. Costs and Prices**

The following table details retail prices for the major types of
non-alcoholic beverages. These prices were obtained from a nearby
convenience store.

**Table 10. Current Prices of Non-Alcoholic Beverages in Convenience
Store in Korea: 2005**

(\$1 US Dollar = 1,042.80 Korea Won)

+---------+---------+------------+-------+----------+-----------------+
| Non-Al  | Brand   | Ma         | A     | #######  | Raw             |
| coholic |         | nufacturer | mount | ## Price |                 |
|         |         |            |       |          | Materials       |
| Drinks  |         |            |       |          |                 |
|         |         |            |       |          | Imported        |
+---------+---------+------------+-------+----------+-----------------+
| Car     | C       | Lotte      | 250mL | 450 won  |                 |
| bonates | hilsung | Chilsung   |       |          |                 |
|         |         |            |       |          |                 |
|         | Cider   |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Co      | Coca-Cola  | 250mL | 300 won  |                 |
|         | ke-Cola |            |       |          |                 |
|         |         | Korea      |       |          |                 |
|         |         | Bottling   |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
| Juices  | Cold    | Lotte      | 240mL | 750 won  | Orange          |
|         | Orange  | Chilsung   |       |          | Concentrates    |
| Based   |         |            |       |          |                 |
| on      |         |            |       |          | 59% from        |
|         |         |            |       |          | Brazil,         |
| Fruits  |         |            |       |          |                 |
| and     |         |            |       |          | 41% from United |
|         |         |            |       |          | States          |
| Veg     |         |            |       |          |                 |
| etables |         |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Cold    | Lotte      | 240mL | 750 won  | Grape           |
|         |         | Chilsung   |       |          |                 |
|         | Grape   |            |       |          | Concentrates    |
|         |         |            |       |          |                 |
|         |         |            |       |          | 86.6% from      |
|         |         |            |       |          | Spain,          |
|         |         |            |       |          |                 |
|         |         |            |       |          | 11.16% from     |
|         |         |            |       |          | United States,  |
|         |         |            |       |          |                 |
|         |         |            |       |          | 2.23% from      |
|         |         |            |       |          | Italy           |
+---------+---------+------------+-------+----------+-----------------+
|         | Cold    | Lotte      | 240mL | 750 won  | Tomato Paste    |
|         |         | Chilsung   |       |          | from China      |
|         | Tomato  |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Minu    | Coca-Cola  | 350mL | 1,500won | Orange          |
|         | te-Maid |            |       |          |                 |
|         |         | Korea      |       |          | Concentrates    |
|         |         | Bottling   |       |          |                 |
|         |         |            |       |          | 100% from       |
|         |         |            |       |          | Brazil          |
+---------+---------+------------+-------+----------+-----------------+
| N       | W       | Lotte      | 500mL | 300 won  |                 |
| atural, | iselect | Chilsung   |       |          |                 |
|         |         |            |       |          |                 |
| Mineral |         |            |       |          |                 |
|         |         |            |       |          |                 |
| Water   |         |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Soonsoo | Coca-Cola  | 500mL | 350 won  |                 |
|         | 100     |            |       |          |                 |
|         |         | Korea      |       |          |                 |
|         |         | Bottling   |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Evian   | Lotte      | 500mL | 900 won  | End product     |
|         |         | Chilsung   |       |          |                 |
|         |         |            |       |          | from France     |
+---------+---------+------------+-------+----------+-----------------+
|         | Volvic  | Lotte      | 500mL | 900 won  | End product     |
|         |         | Chilsung   |       |          |                 |
|         |         |            |       |          | from France     |
+---------+---------+------------+-------+----------+-----------------+
| Sports  | G       | Lotte      | 250mL | 700 won  |                 |
|         | atorade | Chilsung   |       |          |                 |
| Be      |         |            |       |          |                 |
| verages |         |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Pocari  | Do         | 250mL | 750 won  |                 |
|         |         | nga-Otsuka |       |          |                 |
|         | Sweat   |            |       |          |                 |
|         |         | Co.,Ltd    |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
| Ready   | Maxwell | Dongsuh    | 175mL | 500 won  | Coffee bean     |
|         |         | Foods      |       |          | imported from   |
| To      | House   |            |       |          |                 |
|         |         |            |       |          | Vietnam,        |
| Drink   |         |            |       |          | Honduras,       |
| Coffee  |         |            |       |          |                 |
|         |         |            |       |          | Columbia and    |
|         |         |            |       |          |                 |
|         |         |            |       |          | Brazil          |
+---------+---------+------------+-------+----------+-----------------+
|         | Nescafe | Nestle     | 175mL | 500 won  |                 |
|         |         | Korea      |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Letsbe  | Lotte      | 175mL | 300 won  |                 |
|         |         | Chilsung   |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Aloe    | Haitai     | 180mL | 450 won  | Aloe 12% from   |
|         |         |            |       |          | United States,  |
|         | Morning |            |       |          | 8% from         |
|         |         |            |       |          | Thailand        |
+---------+---------+------------+-------+----------+-----------------+
|         | Ja      | Lotte      | 238mL | 520 won  |                 |
|         | nchigib |            |       |          |                 |
|         |         |            |       |          |                 |
|         | Rice    |            |       |          |                 |
|         | punch   |            |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Vitamin | Kwangdong  | 100mL | 500 won  |                 |
|         |         |            |       |          |                 |
|         | 500     | Pharm      |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Fiber   | Do         | 100mL | 500 won  |                 |
|         | mini    | nga-Otsuka |       |          |                 |
+---------+---------+------------+-------+----------+-----------------+
|         | Pine    | Lotte      | 240mL | 600 won  | Pine bud        |
|         | bud     | Chilsung   |       |          |                 |
|         |         |            |       |          | Concentrates    |
|         | B       |            |       |          | 50% from        |
|         | everage |            |       |          | Switzerland     |
+---------+---------+------------+-------+----------+-----------------+
| Near    | Ref     | Lotte      | 240mL | 450 won  | Peach imported  |
| Water   | reshing | Chilsung   |       |          |                 |
|         | water   |            |       |          | from United     |
|         | 2%      |            |       |          | States          |
+---------+---------+------------+-------+----------+-----------------+

Source: Survey in Lotte Department Store by ATO Seoul

Table 11. TARIFFS

+----------------+-------------------------------------------+---------+
| HS Code        | Description                               | Tariff  |
+----------------+-------------------------------------------+---------+
| 2009100000     | Orange Juice                              | 50%     |
+----------------+-------------------------------------------+---------+
| 2009200000     | Grapefruit juice                          | 50%     |
+----------------+-------------------------------------------+---------+
| 2009300000     | Juice of any other single citrus fruit    | 50%     |
+----------------+-------------------------------------------+---------+
| 2009400000     | Pineapple juice                           | 50%     |
+----------------+-------------------------------------------+---------+
| 2009500000     | Tomato juice                              | 30%     |
+----------------+-------------------------------------------+---------+
| 2009600000     | Grape juice (including grape must)        | 45%     |
+----------------+-------------------------------------------+---------+
| 2009700000     | Apple juice                               | 45%     |
+----------------+-------------------------------------------+---------+
| 2009800000     | Juice of any other single fruit or        | 50%     |
|                | vegetable                                 |         |
+----------------+-------------------------------------------+---------+
| 2009900000     | Mixtures of juices                        | 50%     |
+----------------+-------------------------------------------+---------+
| 2101100000     | Extracts, essences and concentrates, of   | 8%      |
|                | coffee                                    |         |
+----------------+-------------------------------------------+---------+
| 2201000000     | Mineral Waters[^6]                        | 8%      |
+----------------+-------------------------------------------+---------+
| 2202000000     | Mineral Waters,                           | 8%      |
|                |                                           |         |
|                | Flavored[^7]                              |         |
+----------------+-------------------------------------------+---------+
| 2202902000     | Beverage of fruit juice                   | 26.2%   |
+----------------+-------------------------------------------+---------+

Source: Tariff Schedules of Korea 2005 by Korea Customs & Trade
Institute

Korea Custom Service charges a tariff on raw materials rather than on
the form of imports.

# Section 4. Market Access

Modern retail outlets, such as hypermarkets, convenience stores and
online supermarkets are revolutionizing distribution channels.
Currently, the greater buying power of the beverage distribution
industry is controlling the market as half of all sales still come from
traditional outlets, such as wet markets and mom and pop stores. Heavy
competition has meant fewer profits. However, as more products are sold
through modern retail outlets, the manufacturing industry is able to
deal directly with the retail industry, eliminating the distributor and
additional mark ups.

**Labeling Requirements:**

Imported beverages are required by law to have a Korean language label.
Korean language stickers may be applied in lieu of a Korean language
label. The sticker should not be easily removable and shouldn't cover
the original labeling. The principal display panel must contain the
product name, product type and content information. If this is not
feasible, such information shall be provided in a Korean language
sticker using a 12-point or larger font pitch size. The Korean language
label should contain the following information.

1\. Product Name: The product name should be identical to the product
name declared to the licensing/inspection authority.

2.  Product type: This is mandatory for specially designated products,
    such as non-alcoholic beverages.

3.  Manufacturing company of origin and address.

4.  Manufactured date-month, and year: This is not mandatory for
    beverages since it is required to have the shelf life (expiration
    date) listed on the label.

5.  Importer's name and address, and the address where products may be
    returned or exchanged in the event of defects.

6.  Importers' business license number

7.  Seller's name, address and phone number

8.  Shelf life

9.  Weight of product.

10. Ingredient(s) or raw material(s) and a percent content of the
    ingredient(s): The name of the major ingredient must be included on
    the label as well as the names of at least the next four principle
    ingredients. These should be listed with the highest percentage
    first followed by the others. Artificially added purified water
    doesn't count as one of the five major ingredients.

11. Nutrients: Only special nutritional foods, health supplementary
    foods, products wishing to carry nutritional labels and products
    wishing to carry a nutrients emphasis mark are subject to
    nutritional labeling.

12. Other items designated by the detailed labeling standards for food
    et al.: This includes cautions and standards for use or preservation
    (e.g., drained weight for canned products, radiation-processed
    products, etc)

13. Country of origin labeling is required on food products.

14. Packaging material

Shelf Life of bottled drinking water

In Korea, the shelf life of bottled drinking water should be within six
months from the date of manufacturing in accordance with "Notice of
Standards and Specification for Drinking Water and its Labeling
Standards".

However, importers of drinking water can file a request with the
Ministry of Environment (MOE) for the extension of shelf life of bottled
water, whose shelf life is approaching. The request should be made
before the six-month shelf life expires. Even for products that have
been detained at port due to a short shelf life, importers can request
the extension. If the extension is granted, then importers will be able
to clear the products from customs.

Importers can contact the division below for details. There are several
documents and samples that importers are required to submit to MOE for
review. Once the importer submits these documents and samples to MOE,
MOE will have the National Environment Institute test the samples to see
if they are in compliance with Korean standards and specifications.

Documents include:

1\. A test certificate issued by an accredited inspection organization

2\. A document that provides a manufacturing date of products

3\. A document verifying that products have been completed sealed

4\. Manufacturing process

5\. A document that provides a storage condition of products

6\. A copy of drinking water import and sales business permit

7\. Five liter of sample water

[Soil and Groundwater Management Division]{.underline}

[Ministry of Environment]{.underline}

Phone: +82-2-2110-6765 or 6769

Fax: +82-2-507-6282

*Section 5. KEY CONTACTS and FURTHER INFORMATION*

**U.S. Agricultural Trade Office**

**Korean mailing Address:** Rm.303, Leema Bldg, 146-1, Susong-dong,
Chongro-ku, Seoul 110-755, Korea

**U.S. Mailing Address:** U.S. Embassy Seoul, Unit 15550-ATO, APO, AP
96205-5550

**Telephone:** (011-82-2) 397-4188

**Fax:** (011 82-2) 720-7921

**E-mail:** <atoseoul@usda.gov>

**Website:** [www.atoseoul.com](http://www.atoseoul.com/)

***Appendix***

**Table 12: Imports for Bases of Non-Alcoholic Beverages from USA**

Unit: \$Thousand

+-------------+-----+-----+-----+-----+-----+--------+-------------+
| Description | 2   | 2   | 2   | 2   | 2   | 20     | 2004        |
|             | 000 | 001 | 002 | 003 | 004 | 05[^8] |             |
|             |     |     |     |     |     |        | Market      |
|             |     |     |     |     |     |        | Share       |
+-------------+-----+-----+-----+-----+-----+--------+-------------+
| Bases for   | 780 | 976 | 651 | 955 | 979 | 872    | 6.13%       |
|             |     |     |     |     |     |        |             |
| N           |     |     |     |     |     |        |             |
| onalcoholic |     |     |     |     |     |        |             |
|             |     |     |     |     |     |        |             |
| Beverages   |     |     |     |     |     |        |             |
+-------------+-----+-----+-----+-----+-----+--------+-------------+

Source: Korea Trade Statistics by Korea International Trade Association

[^1]: Powdered Mixes, canned juice (not frozen), or jelly drinks

[^2]: Estimate

[^3]: Dairy based, or barley

[^4]: Estimate

[^5]: Water, including mineral water and aerated water, containing added
    sugar or other sweetening matter or flavored, and other
    non-alcoholic beverages

[^6]: Waters, including natural or artificial mineral waters and aerated
    waters, not containing added sugar or other sweetening matter nor
    flavored

[^7]: Water, including mineral water and aerated water, containing added
    sugar or other sweetening matter or flavored, and other
    non-alcoholic beverages

[^8]: Estimate