Voluntary Report - public distribution

**Date:** 8/10/2004

**GAIN Report Number:** KS4042

KS4042

**Korea, Republic of**

**Wine**

**Market Brief**

**2004**

**Approved by:**

![](media/image1.wmf)Mr. Marcus E. Lower

Agricultural Trade Office, U.S. Embassy Seoul, Korea

**Prepared by:**

Mr. Sangyong Oh

**Report Highlights:**

Even with the sluggish local economy, wine imports in 2003 surpassed the
record high of the previous year, growing 55.6 percent to reach \$45.8
million. Imports from the U.S. also showed robust growth of 64.6 percent
to an all-time high, \$7.2 million. Changing consumer tastes and alcohol
beverage consuming culture promise double-digit year-on-year growth for
wine imports for many years to come. While the market presents growing
opportunities to U.S. suppliers, the competition from both old and new
world countries is also rising.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Seoul ATO \[KS2\]

\[KS\]

##### Wine Market Brief 2004

**1. Market Prospects**

Summary

Wine imports, both by value and volume, set a new record in 2003,
reaching \$45.8 million dollars and 13.1 million liters, up by 55.6
percent and 18.2 percent respectively from the previous year. Imports
from the U.S. also showed robust growth of 64.6 percent and 75.2 percent
to all-time highs, \$7.2 million and 2.4 million liters. The rapid
growth of wine consumption is mainly fueled by the on-going changes in
the diet and alcohol beverage consuming culture among the general public
that emphasize a "well-being" lifestyle. Annual wine imports are
expected to hit \$100 million figure by 2006, provided that annual
import growth is sustained above 30 percent.

The U.S. remained the second largest exporter of wine to Korea in 2003,
with a 15.7 percent share by value. Although the market share has
dropped significantly from the record high of 24.5 percent in 2001, U.S.
wines are expected to remain one of the top choices of local consumers,
as they are now firmly positioned in the market as products of good
value and unique quality.

France maintained her dominant grip on the market in 2003, with a 49.5
percent market share by value, and remains synonymous with wine for many
local consumers. However, French suppliers have shifted their primary
target to the medium to high-priced segments in recent years, as
indicated by the volume share of French wines in total imports
continuously decreasing to mark only 29.7 percent in the first quarter
of 2004, which is a big drop from 45.1 percent in 2001. Steep
appreciation of the Euro against other currencies over the last two
years has made lower-end to middle class French wines vulnerable to
competition from value-priced products from "new world" countries. In
particular, the rise of Chilean wines, with a surge in market share to
11.1 percent by value in the first quarter of 2004, compared to 6.5
percent in 2003, has been most noticeable, placing them as the third
most sought-after wine in Korea. Signing of free trade agreement between
Korea and Chile in 2003 will further enhance potential demand for
Chilean wines, as the scheduled removal of import tariff over seven-year
period will eventually lower the landing price of Chilean wines in Korea
by 12.5 percent.

After a few years of stagnation during the late 1990's, the Korean wine
market is on a strong rebound, offering growing opportunities for
imported wines at all price and quality levels. As consumers have become
more familiar with wines and more discriminating in their tastes, the
local wine market has become more diversified, generating demand for a
wider variety of products. Consumers are paying more attention to
new-to-market wines and willingly purchase products from more diverse
origins in an effort to expand their experience and knowledge. Korean
consumers' tastes are heavily skewed to red wine due to a series of
press articles and scientific reports about related health benefits.
Currently, red wine has over 70 percent of the market and is expected to
further expand share in the near future, although an increasing number
of consumers are as interested in whites, rose, and sparkling.
Currently, 60 percent of wine consumption is at home, while the other 40
percent takes place in restaurants. It is expected that more wines will
be marketed through retail stores, as hypermarkets and grocery
supermarkets try to expand their wine business. Interestingly, a
significant portion of total annual wine sales occurs as gift sets
during holiday seasons, such as Christmas and lunar-new-year's-day.
Wines are becoming more popular gift items with the current "well-being"
trend and are increasingly replacing gift sets of whiskies. Almost all
wines consumed in Korea are imported. Local production of wine has
almost disappeared as local vine industry lacks competitiveness in
quality and price against imports. Wines currently bottled locally are
mainly imported bulk wines.

Although wine consumption has grown remarkably over the past decade
since full-scale market liberalization in 1991, wine is still enjoyed
only by a very small population in urban areas, and comprises less than
2 percent of total alcohol beverage sales in Korea. Although slowly
declining in popularity, beer and Soju, the traditional local hard
liquor, are still the choice of alcohol beverages for most consumers.
All Soju, and most of the beer, sold in Korea are manufactured locally
and are sold at much cheaper prices than imported wines. However,
considering the increasing popularity of wine among young consumers and
opinion leading segment of the population, the wine market in Korea will
likely maintain double-digit annual growth for many years to come.

Opportunities

● Korea, one of the biggest markets in the world for alcohol beverages,
promises huge potential for wine.

● On-going changes in the dietary and alcohol beverage consuming culture
among general consumers increasingly favor western and healthy
alternatives, including wine. Young consumers are leading the expansion
of the wine drinking culture.

● Wine is already firmly positioned in the market with highly publicized
health benefits.

● Basic characteristics of U.S. wines \-- ripe fruit, solid tannin and
alcohol structure, and vintage-free stable quality, along with
competitive prices \-- are well accepted by many local consumers,
especially among the younger set.

● Korean consumers have high affinity to American products and the
English language, due to the huge number of travelers and trade exchange
between the two countries.

● The lack of competition from local product, and no serious
entry-barrier to wine imports.

● Import prices of European wines have increased significantly in recent
years due to the continuous appreciation of the Euro against the Korean
won and the U.S. dollar.

● Wine drinking has not yet achieved a place in the mainstream culture
in Korea. By investing at this early stage of market development, U.S.
suppliers can secure a solid image as a high quality and value product,
at minimal investment.

Challenges

● High relative consumer prices for wine in general, as compared to
other alcohol beverages.

● Lack of wine awareness among the majority of consumers and traders.

● Little understanding about the Korean market among U.S. wine
suppliers.

● Complex labeling and tax requirements.

● Aggressive marketing and pricing supports by export-oriented
competitors.

● The quality and value of U.S. wine has yet to be fully appreciated by
the local wine industry and consumers. Many local wine educators and
opinion leaders still have a firm prejudice that "old world" European
wines are superior to U.S. wines in quality and value.

**2. Tariffs, Taxes and Pricing**

● Consumer prices for wine are quite high. A combination of import duty,
taxes, large distribution costs and mark-ups result in retail wine
prices being two to four times those in the U.S.

● Korea applies a complicated tariff and tax system to imports of
alcoholic beverages. Those applied to wine are:

A. Tariff: 15 percent

B. Liquor Tax: 30 percent

C. Education Tax: 10 percent

● However, wine imports are subject to relatively lower tariff and taxes
compared to other imported alcohol beverages. For example, for beer, the
import duty is 30 percent, liquor tax 100 percent and education tax 30
percent. The whisky import duty is 20 percent, liquor tax 72 percent,
and education tax 30 percent. Korean government plans to adjust the
discrepancies in liquor taxes on different alcohol beverages, making
products with higher alcohol content subject to higher tax. For example,
liquor tax on beer is scheduled to be lowered to 72% by 2007, while
whiskies will be subject to higher tax. However, it is not likely that
the liquor tax on wine will be increased, as Korean government intends
to promote production of local fruit wines.

● Following is an example of the effects of taxes and mark-ups on a \$10
(CIF: Cost, Insurance, Freight) bottle of wine:

A. CIF value: \$ 10.00

B. Tariff (Customs Duty): A x 15% = \$ 1.50

C. Wine Liquor Tax: (A+B) x 30% = \$ 3.45

D. Education Tax: C x 10% = \$ 0.35

E. Subtotal: (A+B+C+D) = \$ 15.30

F. \*Value Added Tax: E x 10% = \$ 1.53

G. \*\*Fees for Customs Clearance, etc.: A x 8% = \$ 0.80

H. Customs cleared cost of wine: (E+F+G) = \$17.63

\* The Value Added Tax is refunded to the importer because the tax is
eventually carried over to the final consumer.

\*\* In addition to the duties and taxes, additional fees of 7-8% of CIF
value will occur for miscellaneous expenses, including customs clearance
fee, warehousing fee, transportation fee, etc. The amount of this
additional cost depends mainly on the kind of inspection the shipment is
subject to. For example, the warehousing fee will increase significantly
in case a detailed inspection is required.

I. Typical Importer Mark-ups (each mark-up calculation is based on
\$16.10, the customs cleared cost (H: \$17.63)) minus the value added
tax (F: \$1.53):

1\. Importer's selling price to discount store: \$20.93 (mark-up 30%)

2\. Importer's selling price to supermarket/liquor store: \$22.54-24.15
(mark-up 40-50%)

3\. Importer's selling price to luxury hotel: \$22.54 (mark-up 40%)

4\. Importer's selling price to wholesaler: \$18.52-20.93 (mark-up
15-30%)

J. Typical Retailer Mark-ups:

1\. Discount store's selling price: \$22.60-25.12 (mark-up 8-20%)

2\. Supermarket & liquor store's selling price: \$29.30-33.81 (mark-up
30-40%)

3\. Luxury hotel restaurant's selling price: \$67.62-112.7 (mark-up
200-400%)

Thus, a \$10 (CIF) bottle wine typically sells for about \$23-25 at
discount stores, \$29-34 at supermarkets and liquor stores, and \$68-113
in hotel restaurants. The cost for advertising and promotions, overhead
expense, payment conditions (i.e. cash versus 60 days credit), and sales
volume cause the big price differences between discount outlets and
liquor stores.

● The Korean government's "Liquor Purchase Debit Card\" regulation was
set in 2001 as a safeguard against black marketing of liquor products.
The regulation requires distributors and trade buyers to exclusively use
a registered debit card bank account when paying suppliers for alcohol
beverages, including wine. The system allows the government to track the
movement of alcohol beverages in the distribution channel.

● The import tariff on wine is calculated based on the CIF value of the
product in Korea, which makes landing prices of higher-end products much
more expensive. Importers argue that the system should be changed to a
volume-based tariff calculation, which is currently used in Japan. Japan
currently charges the same tariff to a volume of imported wine,
regardless of the value of the wine.

**3. Labeling**

● By law, imported wines are required to have a Korean language label.
In most cases, importers attach the Korean label to the bottle manually
in the duty-free area before customs clearance. The Korean language
label should contain the following information:

1\. Name of the product (e.g., Robert Mondavi Cabernet Sauvignon)

2\. Country of origin (e.g., U.S.A)

3\. Type of the product (e.g., Fruit Wine (Red Grape Wine))

4\. Importer's name, address, and phone number

5\. Business license number of the importer

6\. Date of bottling (e.g., Year-Month-Day or Julian Code or Lot Number)

7\. Alcohol percentage and product volume (e.g., 13.5%, 750 ml)

8\. Name and volume of ingredients by percentage

9\. Name of place where the product can be returned or exchanged in case
the product is

damaged or defective.

10\. Instructions for storage

11\. Name of food additives used

12\. Government health warning clause

13\. Government warning clause for juvenile consumers

14\. \*Name of distribution channel through which the product is
destined to be sold (e.g., "Retail Stores Only for Home Use", or
"Restaurants Only")

\* Added October 2002 to prevent black marketing of liquor products by
restaurant traders. Restaurants used to purchase alcohol beverages from
discount stores to hide accurate sales data in an effort to reduce
income tax.

**4. Inspections**

● All imported foods and beverages are subject to Ministry of Health and
Welfare/Food Quarantine inspection. The Korea Food & Drug Administration
(KFDA) under the ministry is responsible for executing all inspections.
There are two kinds of inspections: detailed inspection (chemical
analysis test) and visual inspection (eye/document inspection).

● The first shipment of any new-to-market product is always subject to a
detailed inspection, which under Korean law should take a maximum of 10
working days (but in practice can take much longer). Subsequent
shipments are subject to visual/document inspection, which should take
no longer than 2 calendar days if the product is identical in label,
product name, alcohol percentage, vintage, ingredients, and net volume
as the first shipment. Subsequent shipments may also be subject to
detailed inspections, as local regulation mandates random detailed
inspections on a certain percentage of total shipments imported.
Importers are required to submit front (English label) and back labels
(Korean language label) to food inspection authorities.

● Korean labeling regulation for alcohol percentage has a 0.5 percent
tolerance level for the difference between the labeled and actual
alcohol content, which is much tighter than the U.S. standard of 1.5
percent. U.S. wines labeled under the more forgiving tolerance level may
fail the Korean inspection standard.

● There have been some instances recently in which imported U.S. wines
failed inspections as they tested positive for Sorbic acid, while the
bottle label did not list it as a food additive used.

● Established importers are well aware of all inspection and labeling
requirements and are the best source of up-to-date information on
labeling and inspection.

**5. Market Situation**

● The value of the U.S. dollar has decreased by 3.45 percent since
January 2003 against the Korean Won, making U.S. wines more affordable
to Korean importers. In contrast, the European Euro has gained by 13.65
percent against the Korean Won during the same period. Over the past
year, retail prices of European wines in Korea in general have increased
by more than 10 percent, reflecting the significant appreciation of the
Euro.

● Korea is one of the biggest markets for alcohol beverages in the
world. Drinking is considered an important part of everyday life and is
often encouraged at social and business occasions. A recent report by
the local liquor industry indicates that prolonged economic recession
has caused a slight change in the drinking pattern of Korean consumers.
In 2003, each Korean consumed 74.4 bottles of beer (0.5 liter bottle),
down by 14.4 percent from 2002; 61.1 bottles of Soju (traditional Korean
hard liquor, 0.36 liter bottle), up 1.0 percent; and 1.21 bottles of
whisky (0.5 liter bottle), down 12.9 percent. Tightened consumer
spending has increased the consumption of Soju, which is the cheapest
liquor for Koreans, sold at around US\$ 0.7 a bottle in retail stores.
Although drinking is decreasing among the elderly, mainly because of
health concerns, the market is getting as many new drinkers from younger
generations and females. However, on-going changes in the dietary and
drinking culture in the society have increased consumption of western
and healthier alternatives, including wine. As of 2003, annual per
capita wine consumption of Koreans is reported at 0.37 liter.

● The rapid increase in the number of retail stores and restaurants
selling wine, coupled with increase in the number of wine importers, is
snowballing. More hypermarkets and grocery supermarkets are adding
designated wine sections to their stores, making wine readily accessible
to everyday shoppers. A typical hypermarket store in urban areas
features as many as 200 wines in the wine section, most of which are
lower-end to middle priced products sold under 30,000 won (W 1,150 /
US\$). Hypermarkets and grocery supermarkets, currently accounting for
about 30 percent of total wine sales in Korea, are expected to increase
their shares further in the future. Another 15 percent of total wine
sales is made at stand-alone independent liquor stores. Liquor shops in
department stores, either operated directly by the department store or
by an independent tenant, account for another 15 percent of total wine
sales. These specialized liquor stores focus on middle to high-end
products, priced around 50,000 won and up. The other 40 percent of total
wine sales are made in food service channel, including restaurants and
bars. The kind of products sold in restaurants varies significantly
depending on the quality of the restaurant. For example, restaurants in
five star hotels mainly serve high-end products. One noticeable trend is
that an increasing number of restaurants serving traditional Korean
foods are serving wine. About 30 percent of total annual wine sales
occur as gift sets during holiday seasons, mainly the Korean harvest
festival (Chusok) in September, Christmas, and the Lunar-new-year in
February. Wines are becoming more popular gift items with the
"well-being" trend and are replacing gift sets of whiskies.

● Importing wine was fully liberalized in 1991. There is no significant
entry barrier to wine imports. Reflecting the rapid growth of the wine
market, the total number of licensed liquor importers has shown a sharp
increase in recent years, reaching about 350 currently. However, only
about 35 actively import wines on a regular basis. Importers are allowed
to supply wines only to wholesalers and retail chain headquarters.
However, some importers also possess a separate
imported-liquor-wholesaling license, which allows them to distribute
wines directly to individual retail stores and restaurants. The
imported-liquor-wholesaling-license was issued only until 1999. Some
importers also operate their own retail liquor stores under a separate
retail business license. The Korean Liquor Act prevents a distributor
from purchasing liquor products from another distributor on the same
distribution level or below (for example, retailers from retailers, or
wholesalers from wholesalers or retailers) for re-sale purpose. The
Korean government abolished a restriction in 2001 that had prevented
local liquor manufacturers from importing liquor products directly. A
few hypermarket and grocery supermarket chains consider importing wines
directly for their stores, but any rapid movement is unlikely as the
current volume of wine business in their stores is not sufficient to
justify the investment. Currently, retail stores in Korea are not
required to have any license to sell liquor products.

● The Korean wine market has seen developments of a variety of new
marketing and educational spin of businesses, including wine schools,
Internet-based wine communities, wine bars, wine journals, and wine
exhibitions, all of which contribute to the expansion of wine consumers.
Internet-based wine communities are now playing an important role in
educating consumers as well as in providing suppliers with promotional
tools. Bestwine.co.kr, winenara.co.kr, and wine21.com are the notable
ones. Wine schools, independent or belonging to colleges, are providing
various classes and tour programs for those with a serious interest in
wine. Bordeaux Wine School, Winenara Wine School, JoongAng University
Wine School, and Seoul Wine School are the prominent names. Wine Review
and Winise are monthly journals that deliver the voices and news of the
local wine industry. Wine trade shows, such as the Seoul Wine Expo, an
annual event organized by the Kyunghyang Daily Newspaper, are another
important marketing tool available for new-to-market suppliers and
products to gain access to leading wine traders and opinion leaders.

**6. Import Statistics & Competitors**

Table 1: Korea Annual Wine Imports

  ---------- ---------------- ------------- ---------------- -------------
  Year       Value            Growth %      Volume           Growth %

  1992       \$5,644,000      65.30%        1,900,000        58.30%

  1993       \$5,855,000      3.70%         2,900,000        52.60%

  1994       \$8,104,000      38.40%        3,900,000        34.50%

  1995       \$13,633,000     68.20%        5,700,000        46.20%

  1996       \$16,406,000     20.30%        5,500,000        -3.50%

  1997       \$22,809,000     39.00%        8,800,000        60.00%

  1998       \$6,491,000      -71.50%       2,400,000        -72.70%

  1999       \$15,122,000     133.00%       5,200,000        116.70%

  2000       \$19,802,000     31.00%        7,500,000        44.20%

  2001       \$23,109,000     16.70%        9,400,000        25.30%

  2002       \$29,432,000     27.40%        11,100,000       18.10%

  2003       \$45,783,000     55.56%        13,100,000       18.02%

  2004\*     \$18,795,000     N/A           5,200,000        N/A
  ---------- ---------------- ------------- ---------------- -------------

Source: KOTIS (Korean government import statistics)

Unit: Value is CIF value. Volume is in liter.

\* Up to April 2004

● After experiencing a sudden decline in the late 1990's, due to the
Asian economic breakdown, wine imports have made a robust recovery and
set a record high in 2003, both by value and volume, \$45.8 million and
13.1 million liters. Overall, annual wine imports are expected to hit
\$100 million figure by 2006, provided that annual import growth is
sustained above 30 percent. Although France has maintained its position
as the leading exporter of wine to Korea, French wines are not as
competitive as they used to be in lower-end and value-priced categories.
"New world" countries, including the U.S., Australia, and Chile, which
have become major suppliers of value-priced products, are also expanding
shares in the higher-end, premium segments.

● U.S. wines primarily target the value-oriented market, particularly at
retail, and their competitive price, fresh image with ripe fruit taste,
and stable quality are well accepted by consumers. More than half of the
U.S. wines imported to Korea in 2003 were entry-level products, sold
under 10,000 won in hypermarkets and grocery supermarkets. Currently,
two major Californian suppliers, E&J Gallo and Constellation, are the
driving force behind the scene. The California label series by Doosan
Liquor, the leading local liquor import/distributor, co-packed by the
Ironstone Vineyard in California, have also contributed significantly to
expand the popularity of entry-class U.S. wines.

● High-end products are another category in which U.S. wines are making
steady success in Korea. Many affluent local wine drinkers are well
traveled and are well aware of the world-renowned U.S. brands. The
supply of these sought-after brands often hardly meet the demand and are
sold mainly through high-end restaurants and as holiday gift sets. On
the other hand, U.S. wines in the middle-priced segment face tougher
competition from both old and new-world competitors.

● More export-oriented than U.S. suppliers, competitors tend to invest
significant amount of resources into marketing and price supports in
Korea. Competitors' major marketing tactics include: tasting seminars;
invitation of wine traders and press to overseas wine exhibitions;
hosting cultural events coupled with wine promotion; organizing consumer
trips to wineries; exhibiting at local food shows; supporting local wine
schools with free samples; and working closely with local wine experts
and helping them to get educated in their countries.

Table 2: Wine Import Statistics by Value (Unit: US \$)

  ----------- --------- -------------- -------- -------------- -------- -------------- -------- -------------- --------
  Country     Variety   2001                    2002                    2003                    2004 (up to    
                                                                                                Apr.)          

                        Value          M/S      Value          M/S      Value          M/S      Value          M/S

  France      Red       \$8,252,746    51.2%    \$12,484,065   61.8%    \$18,469,258   53.9%    \$7,183,381    48.2%

              White     \$1,639,161    29.6%    \$2,244,088    31.7%    \$2,991,674    31.1%    \$1,002,972    30.3%

              Sparkle   \$666,950      82.8%    \$1,149,709    82.6%    \$1,090,240    74.4%    \$284,742      71.8%

              Others    \$365,625      56.8%    \$449,691      59.4%    \$133,003      29.2%    \$36,620       18.9%

              Total     \$10,924,482   47.3%    \$16,327,553   55.5%    \$22,684,175   49.5%    \$8,507,715    45.3%

  U.S.        Red       \$4,616,808    28.6%    \$3,072,103    15.2%    \$5,598,414    16.4%    \$2,237,516    15.0%

              White     \$984,071      17.8%    \$1,217,097    17.2%    \$1,550,729    16.1%    \$562,324      17.0%

              Sparkle   \$2,966        0.4%     \$25,557       1.8%     \$3,964        0.3%     \$5,213        1.3%

              Others    \$67,864       10.5%    \$54,600       7.2%     \$39,374       8.7%     \$14,333       7.4%

              Total     \$5,671,709    24.5%    \$4,369,357    14.8%    \$7,192,481    15.7%    \$2,819,386    15.0%

  Italy       Red       \$1,164,779    7.2%     \$1,696,828    8.4%     \$3,213,805    9.4%     \$1,125,651    7.6%

              White     \$371,718      6.7%     \$531,490      7.5%     \$893,807      9.3%     \$299,603      9.1%

              Sparkle   \$39,423       4.9%     \$21,657       1.6%     \$57,345       3.9%     \$19,365       4.9%

              Others    \$22,613       3.5%     \$6,876        0.9%     \$22,527       4.9%     \$48,880       25.2%

              Total     \$1,598,533    6.9%     \$2,256,851    7.7%     \$4,187,484    9.1%     \$1,493,499    7.9%

  Australia   Red       \$594,737      3.7%     \$963,353      4.8%     \$2,396,845    7.0%     \$890,332      6.0%

              White     \$295,305      5.3%     \$451,606      6.4%     \$773,166      8.0%     \$242,007      7.3%

              Sparkle   \$2,314        0.3%     \$4,683        0.3%     \$43,306       3.0%     \$6,566        1.7%

              Others    \$4,403        0.7%     \$12,384       1.6%     \$20,817       4.6%     \$7,821        4.0%

              Total     \$896,759      3.9%     \$1,432,026    4.9%     \$3,234,134    7.1%     \$1,146,726    6.1%

  Chile       Red       \$470,972      2.9%     \$925,627      4.6%     \$2,488,414    7.3%     \$1,895,936    12.7%

              White     \$114,598      2.1%     \$191,161      2.7%     \$369,293      3.8%     \$146,254      4.4%

              Sparkle   \$0            0.0%     \$7,486        0.5%     \$21,709       1.5%     \$14,665       3.7%

              Others    \$66,838       10.4%    \$80,560       10.6%    \$110,699      24.3%    \$33,698       17.4%

              Total     \$652,408      2.8%     \$1,204,834    4.1%     \$2,990,115    6.5%     \$2,090,553    11.1%

  Germany     Red       \$141,095      0.9%     \$106,919      0.5%     \$397,586      1.2%     \$450,628      3.0%

              White     \$1,385,095    25.0%    \$1,288,852    18.2%    \$1,785,764    18.6%    \$678,192      20.5%

              Sparkle   \$11,289       1.4%     \$12,265       0.9%     \$41,743       2.8%     \$0            0.0%

              Others    \$8,324        1.3%     \$8,696        1.1%     \$1,316        0.3%     \$8,617        4.4%

              Total     \$1,545,803    6.7%     \$1,416,732    4.8%     \$2,226,409    4.9%     \$1,137,437    6.1%

  Spain       Red       \$535,571      3.3%     \$701,083      3.5%     \$1,019,810    3.0%     \$652,436      4.4%

              White     \$410,042      7.4%     \$896,556      12.7%    \$848,870      8.8%     \$191,777      5.8%

              Sparkle   \$77,660       9.6%     \$156,032      11.2%    \$189,084      12.9%    \$47,113       11.9%

              Others    \$26,686       4.1%     \$27,126       3.6%     \$52,706       11.6%    \$19,123       9.8%

              Total     \$1,049,959    4.5%     \$1,780,797    6.1%     \$2,110,470    4.6%     \$910,449      4.8%

  Others      Red       \$350,996      2.2%     \$250,073      1.2%     \$655,759      1.9%     \$460,023      3.1%

              White     \$331,302      6.0%     \$262,493      3.7%     \$409,112      4.3%     \$185,894      5.6%

              Sparkle   \$4,807        0.6%     \$13,963       1.0%     \$18,140       1.2%     \$18,771       4.7%

              Others    \$81,911       12.7%    \$116,924      15.4%    \$74,670       16.4%    \$25,108       12.9%

              Total     \$769,016      3.3%     \$643,453      2.2%     \$1,157,681    2.5%     \$689,796      3.7%

  Grand Total Red       \$16,127,704   69.8%    \$20,200,051   68.6%    \$34,239,891   74.8%    \$14,895,903   79.3%

              White     \$5,531,292    23.9%    \$7,083,343    24.1%    \$9,622,415    21.0%    \$3,309,023    17.6%

              Sparkle   \$805,409      305%     \$1,391,352    4.7%     \$1,465,531    3.2%     \$396,435      2.1%

              Others    \$644,264      208%     \$756,857      2.6%     \$455,112      1.0%     \$194,200      1.0%

              Total     \$23,108,669   100.0%   \$29,431,603   100.0%   \$45,782,949   100.0%   \$18,795,561   100.0%
  ----------- --------- -------------- -------- -------------- -------- -------------- -------- -------------- --------

Source: KOTIS (Korean government import statistics)

Table 3: Wine Import Statistics by Volume (Unit: Liter)

  ----------- --------- ----------- -------- ------------ -------- ------------ -------- ----------- --------
  Country     Variety   2001                 2002                  2003                  2004 (up to 
                                                                                         Apr.)       

                        Volume      M/S      Volume       M/S      Volume       M/S      Volume      M/S

  France      Red       2,369,399   49.1%    3,167,417    52.0%    3,483,333    40.6%    1,248,003   33.4%

              White     747,947     22.9%    753,308      16.7%    754,828      18.0%    268,312     20.6%

              Sparkle   136,273     70.5%    216,181      73.3%    118,245      53.7%    27,187      37.0%

              Others    978,508     89.7%    89,961       43.9%    43,317       36.1%    4,602       4.8%

              Total     4,232,127   45.1%    4,226,867    38.1%    4,399,723    33.5%    1,548,104   29.7%

  U.S.        Red       784,001     16.2%    955,090      15.7%    1,844,914    21.5%    793,095     21.2%

              White     301,573     9.2%     401,039      8.9%     566,263      13.5%    204,065     15.6%

              Sparkle   1,134       0.6%     4,296        1.5%     1,566        0.7%     1,011       1.4%

              Others    17,169      1.6%     18,502       9.0%     2,906        2.4%     460         0.5%

              Total     1,103,877   11.8%    1,378,927    12.4%    2,415,649    18.4%    998,631     19.2%

  Italy       Red       407,855     8.4%     459,884      7.6%     691,493      8.1%     203,101     5.4%

              White     206,369     6.3%     270,126      6.0%     325,381      7.8%     95,130      7.3%

              Sparkle   14,759      7.6%     4,898        1.7%     10,096       4.6%     4,117       5.6%

              Others    10,227      0.9%     1,687        0.8%     597          0.5%     67,114      70.2%

              Total     639,210     6.8%     736,595      6.6%     1,027,567    7.8%     369,462     7.1%

  Australia   Red       189,590     3.9%     264,624      4.3%     594,666      6.9%     215,138     5.8%

              White     153,497     4.7%     219,507      4.9%     273,419      6.5%     87,803      6.7%

              Sparkle   648         0.3%     1,055        0.4%     15,077       6.8%     1,368       1.9%

              Others    895         0.1%     2,652        1.3%     3,839        3.2%     950         1.0%

              Total     344,630     3.7%     487,838      4.4%     887,001      6.8%     305,259     5.9%

  Chile       Red       102,072     2.1%     229,622      3.8%     682,631      7.9%     610,995     16.3%

              White     28,475      0.9%     48,633       1.1%     111,386      2.7%     89,682      6.9%

              Sparkle   0           0.0%     1,184        0.4%     3,428        1.6%     24,300      33.1%

              Others    30,513      2.8%     22,780       11.1%    24,697       20.6%    6,798       7.1%

              Total     161,060     1.7%     302,219      2.7%     822,142      6.3%     731,775     14.0%

  Germany     Red       49,245      1.0%     52,855       0.9%     146,401      1.7%     83,920      2.2%

              White     838,778     25.7%    705,172      15.6%    800,004      19.1%    226,512     17.4%

              Sparkle   3,120       1.6%     2,731        0.9%     17,057       7.7%     0           0.0%

              Others    545         0.0%     3,288        1.6%     125          0.1%     1,427       1.5%

              Total     891,688     9.5%     764,046      6.9%     963,587      7.3%     311,859     6.0%

  Spain       Red       671,491     13.9%    845,809      13.9%    989,879      11.5%    497,805     13.3%

              White     796,799     24.4%    1,982,314    43.9%    1,223,735    29.2%    297,559     22.8%

              Sparkle   33,396      17.3%    58,167       19.7%    52,368       23.8%    15,195      20.7%

              Others    12,073      1.1%     37,736       18.4%    12,267       10.2%    6,864       7.2%

              Total     1,513,759   16.1%    2,924,026    26.3%    2,278,249    17.4%    817,423     15.7%

  Others      Red       255,726     5.3%     112,152      1.8%     154,809      1.8%     84,991      2.3%

              White     187,898     5.8%     131,936      2.9%     139,904      3.3%     36,186      2.8%

              Sparkle   3,923       2.0%     6,443        2.2%     2,562        1.2%     213         0.3%

              Others    41,275      3.8%     28,226       13.8%    32,357       26.9%    7,421       7.8%

              Total     488,822     5.2%     278,757      2.5%     329,632      2.5%     128,811     2.5%

  Grand Total Red       4,829,379   51.5%    6,087,453    54.8%    8,588,126    65.4%    3,737,048   71.7%

              White     3,261,336   34.8%    4,512,035    40.7%    4,194,920    32.0%    1,305,249   25.0%

              Sparkle   193,253     2.1%     294,955      2.7%     220,399      1.7%     73,391      1.4%

              Others    1,091,205   11.6%    204,832      1.8%     120,105      0.9%     95,636      1.8%

              Total     9,375,173   100.0%   11,099,275   100.0%   13,123,550   100.0%   5,211,324   100.0%
  ----------- --------- ----------- -------- ------------ -------- ------------ -------- ----------- --------

Source: KOTIS (Korean government import statistics)

**7. Local Production**

● Korean wine grape production is expected to remain negligible as it
lacks competitiveness in price and quality against imports. High land
price and unfavorable weather condition are the major impediments that
have prevented any meaningful commercial local wine industry from
evolving. Very small amount of locally grown wine grapes are currently
used to bottle local souvenir wines or low-end products mixed with
imported bulk wine. Instead of maintaining local vineyards, major Korean
liquor companies have switched to either co-packed wines in the
exporting countries or importing bulk wines for local bottling. Doosan
Liquor Business Co., Ltd., Lotte Chilsung Co., Ltd., and Jinro Co., Ltd.
are the major firms currently operating wine business with their own
brands.

**8. Importers List and Contact Information**

● Please contact ATO Seoul directly for questions, importers list, and
information on market promotion opportunities.

U.S. Agricultural Trade Office

American Embassy Seoul, Unit #15550-ATO, APO AP 96205-5550

Tel: 82-2-397-4188

Fax: 82-2-720-7921

E-mail: Atoseoul@usda.gov

Internet: www.atoseoul.com

● The best method for new-to-market exporters to enter the Korean market
is to first find a solid importer, agent or distributor for their
product. Currently, the retail industry does very little direct
importing, although this may change in the future. The US Agricultural
Trade Office in Seoul sponsors an annual trade-only food show, Food and
Hotel Korea (FHK), which provides opportunities for U.S. suppliers to
meet the Korean trade. FHK2005 will take place March 16-18, 2005 at the
COEX Exhibition Hall in Seoul, Korea. For more information about FHK,
please contact Mr. Sangyong Oh via email: Sangyong.oh@usda.gov.

● The United States Department of Agriculture's Foreign Agricultural
Service (USDA/FAS) offers information and services that can be
beneficial to both new and experienced exporters. For example, the U.S.
Suppliers Service is a searchable database of over 5,000 U.S. exporters
and their products, which is used by USDA/FAS to help facilitate
connecting potential buyers with U.S. suppliers. This database is used
by more than 85 USDA FAS Overseas offices, such as the ATO in Seoul,
Korea to help export agents, trading companies, importers and foreign
market buyers locate U.S. suppliers. It is also used to recruit U.S.
exporters to participate in market development activities sponsored by
USDA and federal export programs.

You can register online for this service at
[http://www.fas.usda.gov/agexport/exporter.html]{.underline}

For more information, please contact: AgConnections Team

AgExport Services Division, Foreign Agricultural Service, Washington, DC

Phone: 202-690-4172

Fax: 202-205-2963

E-mail: <joyce.estep@fas.usda.gov>

Website: www.fas.usda.gov/agx/agx.html