With the government pulling out a tax cut card for low-alcohol drinks such as highballs, attention is on whether it can bring vitality back to a liquor industry that has entered a slump. Expectations are also rising as highballs have taken hold as a "mainstream alcoholic drink," especially among young consumers, with sales growing rapidly.
According to the industry on the 23rd, the Ministry of Economy and Finance announced on the 16th the "2025 tax reform follow-up enforcement decree revision" and said it will temporarily cut the liquor tax by 30% on low-alcohol mixed liquors from Apr. 1 to Dec. 2028. The reduction applies to mixed liquors with an alcohol content of 8.5% or less and nonvolatile solids of 2% or more. Mixed liquors are made by blending distilled spirits with sugar, flavorings and the like, and the components other than water and alcohol in the total volume are called nonvolatile solids.
Highballs sold on the market fall largely into two categories. Some are made by mixing other ingredients with distilled spirits, while others include wine or fruit. Highballs based on distilled spirits are eligible for this tax cut. They have been subject to a high tax rate amounting to 72% of manufacturing cost. The government said that if the liquor tax is lowered by this measure, the education tax and value-added taxes will also fall in succession, allowing consumer prices to drop by about 15% from current levels.
Highballs containing wine or fruit are classified as fruit liquor, not mixed liquor, so they are not eligible for the liquor tax cut. The liquor tax rate for fruit liquor is 30% based on the shipment price.
Recently, alcohol consumption has been declining worldwide. According to the International Wines and Spirits Research (IWSR), global alcohol consumption in 2024 fell 1% from a year earlier. Wine consumption in 2023 plunged 2.6%, hitting the lowest level since 1996.
By contrast, the market for RTDs (ready-to-drink alcoholic drinks and beverages released as finished goods), including highballs, is growing. According to Data Bridge, the global RTD market is growing at an average annual rate of 7.5%. The size of Korea's RTD market also jumped 87.9% from 35.8 billion won in 2022 to 67.3 billion won in 2023, according to Euromonitor. It was tallied to have expanded to 119.4 billion won in 2024.
An industry official said, "As the 'healthy pleasure' trend spreads mainly among young consumers, a drinking culture of not getting drunk and a preference for low-alcohol and nonalcohol options have strengthened."
The liquor industry is watching to see whether this tax easing can reverse the depressed market mood. However, there is also talk that the policy effect may be limited because the reduction applies only to distilled and other liquors, while many products actually distributed in the market are fruit liquors.
First, large liquor companies are not expected to see a significant impact from the liquor tax cut benefits. Hitejinro and Oriental Brewery have no applicable products. Lotte Chilsung Beverage's "Scotch High Lemon" and "Scotch High Ginger Lime" are subject to the liquor tax cut, but their sales share is small.
It is the same for convenience stores. Convenience stores have launched several highballs through IP (intellectual property) collaborations or PB (private brand) products, but most fall under "fruit liquor" and are excluded from the liquor tax cut. In reality, only a few are eligible for the reduction. A convenience store industry official said, "Because manufacturers have to reflect it in the shipment price for it to lead to lower consumer prices, it is difficult for the distribution channel to intervene in price cuts," adding, "In particular, the government limited the benefit to up to 400 kiloliters per company per year in shipments (imports), which is interpreted as an intent to support small and midsize manufacturers."
Recently, small and midsize companies such as craft beer and craft breweries have been releasing highballs to diversify revenue streams, and these companies are expected to benefit. 7bräu has launched an RTD highball series including "Lemon Dipped in Highball" and "Grapefruit Dipped in Highball," while Jeju Beer, as an extension of its partnership with Daehan Flour Mills, unveiled "Gompyo Highball." In addition, Kabrew released "Easy Highball," and Amazing Brewing Company launched "Evan Bourbon Highball."
An industry official said, "The highball trend is continuing, but we have to see how much this tax cut policy will actually translate into lower consumer prices," adding, "The perceived impact will differ depending on how much manufacturers reflect it in their prices."