Alcoholic beverage stocks gain on looming price hikes for soju, beer

[Photo by Lee Chung-woo]

Shares of alcoholic beverage companies rose early Monday on news that the price of soju and beer, the two most popular alcoholic drinks in Korea, will rise further this year.

Jeju Beer Co. shares gained 14.66 percent at 10:30 am on the Kosdaq market.

According to government data, the average price of alcoholic beverages increased by 5.7 percent last year. Soju prices rose by 7.6 percent and beer by 5.5 percent. But their prices are expected to rise again this year because of higher liquor tax as well as raw material and logistics costs.

According to sources on Sunday, tax on beer products will increase by 30.5 won per liter starting in April to 885.7 won, which is bigger than the 20.8 won per liter rise last year.

An increase in beer tax usually leads to an increase in the factory price of alcoholic beverages.

As for soju, the cost burden is putting pressure on the factory price hike.

Soju is made by mixing ethanol with water and sweetener. The Korea Ethanol Supplies Co., the monopoly distributor of ethanol from 10 ethanol makers in Korea, raised its price by 7.8 percent last year, the first price hike in 10 years.

However, many ethanol makers suffered a blow to their business last year due to higher prices of tapioca, the raw material of ethanol, and mounting energy costs.

Among ethanol manufacturers, Jinro Fermentation Co. and MH Ethanol Co. recently announced that their operating profit last year contracted by 66.6 percent and 6.0 percent, respectively, suggesting that ethanol prices are likely to rise again this year.

The price of soju bottles from bottle makers recently increased by more than 20 percent to 220 won per bottle from 180 won.