E-Malt.com News article: South Korea: Craft beer industry welcomes changes in regulations but there still are many obstacles to overcome

It’s been nine months since South Korea changed its local brewing laws to allow for more competition in its notoriously flavorless beer market, The Wall Street Journal reported on December 26.

Has the relaxing of government regulations had any real impact on Korea’s fledgling craft beer scene?

A quick look around this holiday season suggests the answer is yes, though craft beer operators still have plenty of complaints about slow changes in regulation — and worries about the encroachment of South Korea’s sprawling chaebols.

At the Devil’s Door, a massive new brewpub in Seoul’s Gangnam neighbourhood, patrons queue up for as long as forty-five minutes for a seat at the bar, which offers a wide selection of craft brews in wine glasses.

The 240-seat pub, which sells India pale ales, pale ales and stout beers made on premises, also serves twenty varieties of bottled craft imports, many of which it brings into the country itself.

But there’s reason for worry too among some small craft brewers in the success of the Devil’s Door. The reason: the pub is the creation of Shinsegae, the local department store giant controlled by the Samsung Group’s Lee family.

In spite of Shinsegae’s insistence that it has no plans to distribute craft beers within the country, the entry of the big chaebol (South Korean form of business conglomerate) has worried some smaller players, who fear they could be crowded out of the market.

The arrival of big players in the craft beer industry is a new phenomenon. For decades, South Korea’s beer industry was dominated by two large companies with little incentive to push the envelope.

That was largely because South Korea’s brewing regulations had previously restricted licenses to companies that could produce one million litres per year, effectively barring any players unable to invest the millions of dollars needed to sustain that level of production.

But in 2011, that threshold was lowered to 150,000 litres and in April this year the requirement was slashed again to 50,000 litres, with lower taxes on offer for smaller operations.

Brew pubs, previously forbidden from distributing their ales, were also allowed to sell to other bars.

Despite all these new rule relaxations, local brewers continue to complain about inconsistent policies and other obstacles.

With the industry still in its infancy, for instance, smaller brewers have to import all the necessary equipment, hops, malt, and yeast themselves. And, many brewers are frustrated with what they see as a lack of understanding on the part of local authorities.

“You have to have a really good customs agent,” says Bryan Do, who runs Hand and Malt Brewery, a start-up 22 kilometres northeast of Seoul in Gyeonggi-do. “There’s not enough hops globally, so if Korea rejects a product, it’s hard.”

In part because of this difficulty, Mr. Do has also begun growing his own hops in a village near his brewery.

Distribution is also an issue. Since Korean wholesalers don’t have a cold chain for alcohol distribution, local start-ups have so far had to develop their own logistics networks.

Stephane Michel Turcotte, one of only two certified Cicerones — or beer sommeliers — in the country, has a cold-storage facility for his kegs as well as a fleet of refrigerated trucks.

“We’re self-distributing, doing everything ourselves,” says Mr. Turcotte, who runs Galmegi Brewing in Busan.

Mr. Turcotte says he has even been approached by a large fried-chicken franchise, but he had to turn them down. “We simply don’t have the ability to supply them right now,” says Mr. Turcotte.

That too, could be changing. Craftworks, which helped spearhead the craft beer movement with its namesake pub in Itaewon, Seoul’s foreigner district, is planning to open a new state-of-the-art facility in the spring that will be able to churn out more than four million litres a year, says Dan Vroon, Craftwork’s CEO.

The surging demand, and the steep ramp-up in production capacity, has even had some smaller players starting to dream about overseas markets, thanks in part to the so-called Korean wave’s impact on sales of Korean fried chicken with beer around the region. That goodwill could benefit the craft beer industry too, says Mr. Do.

“The beer will sell,” he says, “because it’s Korean.”


26 December, 2014