As a result of the government's relaxation of production and distribution regulations for small- to medium-sized beer producers, it has been found that the number of beer manufacturers has increased by 2.5 times and the number of beer brands has increased by four times over the past five years. With the expansion of consumer choices for beer, the effect has been measured to be a reduction of 825 won per can (500 mℓ) compared to a scenario where all craft beers withdrew from the market.
The Fair Trade Commission announced the results of its 'analysis of the effects of regulatory improvements that restrict competition' on the 21st. This analysis quantitatively assesses the effects observed in the market due to the government's regulatory improvements, focusing on the 'beer market' and the 'duty-free market.'
The domestic beer market began to undergo regulatory improvements starting in 2016, following negative reviews that 'domestic beer is inferior to North Korea's Daedong River beer' and the increasing share of imported beer in the domestic market.
Regulations on facilities for fermentation and storage that limited the production volume of small beer producers have been relaxed, allowing small producers to sell in retail stores such as convenience stores and large supermarkets, and expanding the distribution channels available for small and medium-sized beer producers. Additionally, the liquor tax system was changed from 'ad valorem tax' based on the ex-factory price to 'specific tax' based on production volume, and the command system for liquor pricing by the National Tax Service head was abolished.
The Fair Trade Commission concluded that a series of regulatory improvements has resulted in the expansion of craft beer distribution post-2020. From 2019 to 2023, the number of domestic beer manufacturers increased from 33 to 81, more than doubling, while the market share of craft beer (based on sales) rose from 0.2% in 2019 to 2.8% in 2022, before decreasing to 1.7% the following year. The total number of beer brands increased from 81 to 318, quadrupling.
As competition among craft breweries intensified and liquor tax regulations eased, there were also stabilizing effects on prices. For instance, the launch price of A beer in the first quarter of 2019 was 3,524 won, but in 2020 it dropped to 2,767 won. However, in 2023, it slightly rose to 2,854 won.
It has also been measured that there are significant consumer welfare effects compared to a scenario where a specific beer manufacturer dominates the market. If we assume that all domestic craft breweries are acquired by the number one market share company, the price of craft beer would have increased by 3.59% per mℓ based on the analysis from two years ago. The Fair Trade Commission noted, 'This supports the inference that the reduction in canned beer prices has become possible due to increased competition among suppliers.'
When assuming that all domestic craft beers exited the market, an analysis of 'consumer welfare' (the value of utility that must be compensated to consumers to maintain the pre-exit level of consumer welfare) calculated that there would be an effect of reduced prices by 825 won in 2023. This consumer welfare was measured to increase yearly from 135 won in 2019, indicating that 'the effects associated with increased market diversity were substantial each year,' according to the Fair Trade Commission.
The Fair Trade Commission also analyzed the effects brought by improvements in regulations regarding liquor sales in duty-free shops. In 2012, the Fair Trade Commission recommended abolishing the monopoly rights of Hotel Lotte for liquor sales in the Incheon Airport departure duty-free shop, and starting in 2015, selected multiple firms such as Hotel Lotte, Hotel Shilla, Gyeongbokgung, SME, and City Plus Duty-Free.
As a result, there were a total of 38 price increases for major liquor products before the regulatory improvements (2012-2014), but this number decreased to 18 after the improvements (2016-2018). During the same period, the average price increase rate also fell from 9.4% to 3.8%. There was also a doubling of promotional events and an expansion of consumer choice in liquor.
The Fair Trade Commission stated, 'This analysis of the effects of regulatory improvements is the first case to empirically examine the effects observed in the market after the improvements of competition-restricting regulations that the Fair Trade Commission has pursued. It is significant because actual sales data were obtained to quantitatively derive the effects of the improvements,' and added, 'We will continue to work closely with relevant departments to ensure that the improvements produce actual effects.'