Overall wine imports continued showing robust growth through 2007 (69.7 percent) and the first half of 2008 (29.6 percent). The rapid growth of wine consumption in Korea is mainly fueled by on-going “well-being” lifestyle trend among the general public which emphasizes healthier diet.

The growth of imports from the United States fell sharply from 34.2 percent in 2007 down to 1 percent in the first half of 2008 largely due to downsizing of in-market inventory stock by large American suppliers. Stagnant import growth from the United States is likely to continue through the second half of 2008 due to rising competition and slowing of the Korean economy. In particular, the rapid weakening of the Korean won against the U.S. dollar caused by the world-wide financial turmoil since October 2008 is expected to keep importers conservative with respect to new purchase decisions.

Although the amount of U.S. wine exports to Korea continue to grow along with the expansion of the overall market, the share of the market held by American wine in Korea has declined continuously over the years due to the strong rise of competitors. Chile has surpassed the United States in wine exports to Korea since 2005 backed by its free trade agreement signed with Korea in 2004. Italy jumped to the third largest wine supplier to Korea, elbowing the United States down to the number four slot, with a stunning 118 percent growth in 2007. Among the top seven wine exporting countries to Korea, the United States was the slowest growing supplier through 2007 and the first half of 2008. Nevertheless, American wine is expected to remain one of the top choices of local wine drinkers, as it is firmly positioned in the market with good value and unique quality. The close politic al and economic ties between South Korea and the United States have also contributed heavily to the popularity of American brands and products to local consumers. Furthermore the free trade agreement concluded between South Korea and the United States offers serious opportunity for American wine to recover market share in Korea.

Since the Asian economic crisis of the late 1990's, the Korean wine market has rebounded quickly, offering growing opportunities for imported wines over a full spectrum of price and quality levels. As consumers become more familiar with wine and more discriminating in their tastes, the wine market is also becoming more diversified with a wider variety of products offered. Serious consumers are paying more attention to new-to-market wines and are willingly purchasing products from more diverse origins in an effort to expand their experience and knowledge.

American wine primarily targets the value-oriented segment of the market. In particular, entry-class products from the United States retailing below KRW 10,000 (roughly $10) a bottle have established a dominant presence in the segment due to the aggressive marketing efforts of two long-established American suppliers, E&J Gallo and Constellation Brands.

The“California label series” co-bottled by Ironstone Vineyard California and Doosan Corporation, a leading local liquor importer/distributor, has also contributed significantly to the expansion of entry-class American wine. Interestingly, Concord grape based "Kosher" American wine, particularly the Mogen David Winery brand under the Wine Group, has also grasped a significant share in this segment as novice wine consumers have found the sweet, grapy taste familiar and easy drinking.

The premium segment of the market for products above KRW 80,000 (roughly $80) a bottle is another area in which American wine has enjoyed steady success in Korea. Many affluent local wine drinkers are well traveled and informed of established premium American wine brands. Products targeting this segment are marketed as luxury goods. However the number of bottles allocated to the Korean market by these premium suppliers is in general very limited. At the same time, many premium American wines are currently not available in Korea not only because of limited production but also because of suppliers’ focus on U.S. domestic sales and/or other foreign markets.

On the other hand, American wines that target the mid-level price segment of the market between KRW 10,000 to 80,000 a bottle are facing tougher competition from both old and new world competitors. This is the segment that holds the key for building brand-loyal consumers and long-term financial success. Unfortunately, American wine has not been as successful in this segment, particularly in retaining those consumers who started their first wine experience with entry-class American wine and later traded up to mid-level products.

Many of these trading-up consumers have found their way to Chilean, Italian, Australian and French wine for wider selections and stronger brand recognition. In addition, competitors have outsold American wine in the gift-set market which constitutes a large portion of the yearly sales of the mid-level price segment. Although it is notable that a few large volume American suppliers in the lower part of the mid-level price segment between KRW 10,000 to 40,000 have created a significant number of brand-loyal followers (stand-outs include Robert Mondavi, Kendall Jackson, Beringer and Chateau St. Michelle), American wine in this segment currently offers narrower selections and weaker brand power than competitors.

Local Production

Wine production in Korea is expected to remain negligible as it lacks competitiveness in price and quality against imports. High land price and unfavorable weather condition are the major impediments preventing any meaningful commercial local wine industry from evolving. Small amounts of locally grown table grapes are currently used to bottle souvenir purpose wines or low-end products to be blended with imported bulk wine. Currently, there is no Vitis. vinifera grape variety commercially cultivated in Korea.

Instead of maintaining local vineyards, major Korean liquor companies have switched to either co-bottling in foreign wineries or importing bulk wines for local blending/bottling. Doosan Corporation Liquor BG , Jinro and Gooksoondang L&B (formerly Haitai & Company) are leading players currently operating local bottling and/or co-bottling in foreign wineries. A total of 5 million liters of bulkpackaged wines (those shipped in two liter containers or larger) were imported in 2007, most of which were reportedly for local blending/bottling. It is notable that the amount of bulk wine imports is evenly divided between red and white wine as a large portion of the imported bulk white wine is used for blending ‘Japanese apricot wine’ and other types of white fruit wines in Korea. Spain remains the leading suppliers of bulk red and white wine to Korea.

There are some fruit wines produced in Korea from locally grown wild raspberries (Bok-boonja). The production of Bok-boon-ja wine is on a rapid increase due to regulatory and financial support by the local government. However, these local fruit wines present no direct competition to imported wines. Rather they have helped the general public develop a taste for the table wine. In addition, the local fruit wine industry offers a growing opportunity to bulk fruit wine imports.