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South Korea: Diageo, Heineken slash Korean workforces
Brewery news

The Korean units of multinational liquor companies like Diageo are slashing their workforces due to the downturn in a whiskey market that saw a brief rebound during the pandemic, the Korea JoongAng Daily reported on February 22.

Diageo Korea, Korea's leading whiskey importer, is currently rolling out a voluntary retirement program as part of a downsizing effort. The program targets employees with more than 10 years of service. Diageo Korea is offering participants severance pay equivalent to eight to 36 months' salary.

While Diageo Korea frames this initiative as a voluntary measure to support employees in making suitable career choices, industry observers perceive it as a response to declining whiskey demand and performance concerns.

Korea's whiskey imports totaled 2,032 tons last month, according to data from the Korea Customs Service, marking a 27.5 percent on-year decrease. Import value also plummeted from $278 million last January to $18.4 million this January.

Experts suggest that the whiskey trend, which surged during the Covid-19 pandemic, has now plateaued. Still, that surge represents a phase of whiskey becoming more mainstream, with consumers diversifying their preferences across various whiskey varieties.

Amid the Covid-19 pandemic, whiskey experienced a surge in popularity in Korea from late 2022 to 2023. This is attributed to the pandemic's unique circumstances [fueled by increased home time due to social distancing measures] that have been disproportionately high compared to pre-pandemic trends, said an official from a liquor association who spoke on condition of anonymity.

Consumers who initially favored specific brands and countries are now turning their attention to whiskeys from diverse origins and more affordable price ranges, signaling a widening accessibility, the official added.

Another expert highlighted the impact of normalized overseas travel on whiskey's popularity.

Younger demographics, restricted from international travel during Covid-19, are increasingly sourcing whiskey from abroad, particularly for premium products, leading to a decline in domestic consumption, said Myung Wook, liquor culture columnist and professor of the Barista and Sommelier department at Sejong Cyber University. Import statistics from the customs service do not include liquor bought directly from overseas or duty-free sales.

Beer imports, meanwhile, fell 28.3 percent from 19,924 tons to 14,295 tons during the same period, accompanied by a decrease in import value from $231.8 million to $13.6 million.

Heineken Korea, the Korean importer of the Dutch beer, has announced restructuring plans in response to shifting market dynamics. The company intends to trim its workforce of some 150 employees by 3 to 4 percent this year.

We are proactively responding to the rapidly changing business environment and shifts in liquor consumer patterns from 2022 to 2023 to enhance the organization's competitiveness, said Heineken Korea, with the shift believed to be influenced by the robust growth of Japanese beer, notably Asahi draft beer cans.

BK Korea, the country's distributor of Tsingtao beer, implemented a voluntary retirement program last November, following a decrease in domestic popularity following the Chinese beer pee-gate incident.

The waning popularity of top imported beers like Heineken and Tsingtao are attributed to a decrease in import volumes, said Prof. Myung.

An industry expert further explained that Imported beers are facing substitution in convenience stores and in homes, with alternatives like highballs offering similar price points but trendier appeal.

23 February, 2024
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