November 28, 2024

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Soju products are shown at a local discount store in Seoul. (Yonhap)

The price of spirits used to make soju products went up Tuesday, marking the biggest jump in the last 20 years. The price hike comes for a second consecutive year, increasing burdens on local soju makers.

Korea Ethanol Supplies Co. said Tuesday it has raised the price by 9.8 percent. The price hike will apply to all soju makers as the company is the country's sole distributor of the spirit.

The latest 9.8 percent increase follows an 8 percent raise last year, and it is the highest increase since 2002, when the company shot up the spirit price by 17.64 percent.

The spirit supplier said the increasing price of tapioca, the main ingredient for the soju spirit, as well as surging energy and logistics costs, have propelled the recent increases.

Local soju makers are expected to come under pressure with the soaring costs.

Usually, costs spent on spirits account for 10 percent of local soju products’ factory prices, which fall between 1,100 won ($0.83) and 1,200 won.

“I don’t think soju makers will immediately raise their soju prices, mainly due to the government’s apparent pressure on soju companies,” an official from a soju company told The Korea Herald on condition of anonymity.

“But, it is also true that soju makers will be increasingly burdened with climbing costs for raw materials without raising their soju prices,” the official added.

The source also said that smaller soju makers are expected to have more trouble coping with the increasing costs spent on raw materials, while larger makers like Hite Jinro could make up their losses with other beverage products.

Despite increasing raw materials costs, Hite Jinro’s sales last year increased 13.4 percent on-year to reach an all-time high of 2.5 trillion won, while its operating profit reached 190.6 billion won, also up 9.5 percent.

In terms of the latest price increase of the spirit, Hite Jinro, South Korea's largest soju maker with a market share of about 60 percent, said the company has no plan to raise soju prices yet.

“Although soju companies have announced they will not raise their soju prices under the government’s pressure, expenses have been on the rise. I would not be surprised if the companies decide to announce price hikes by the end of this year or early next year,” another industry source said.

By Shim Woo-hyun (ws@heraldcorp.com)