The Korea Consumer Organization Council (The Council) refuted the position of Oriental Brewery(OB), which cited the sharp increase in the price of raw material malt as a factor in the beer product prices.

The Council stated on the 23rd that OB is threatening the cost of dining out by raising prices excessively, adding to the burden on consumers.

The Council announced that the price of domestic beer, a raw material for beer, fell 4.7% from the previous year, from an average of KRW 1,036.80 per 1 kg in 2021 to an average of KRW 988.22 in 2022. As for hops, another raw material, an analysis of data from the Korea International Trade Association showed that the average unit price in 2022 decreased by 7.0% compared to the average in 2021.

The Council said, "As a result of reviewing OB's price increase, there was no validity to the claim about cost pressure, and the company's operating profit and sales were excellent, so the price increase did not appear to be justified."

Accordingly, an official at OB explained, "Domestic beer relies on imports for more than 90% of raw materials, and the Council mentioned the price of domestic beer barley in the data. During the same period, the international price of malt soared by more than 48%.".

An official from the Council said in a phone call with Korea Duty-Free News the previous day, "The prices of raw materials malt and hops are falling. We presented the data because we believed that talking about a price increase based on malt alone was not feasible," and added, "The cost of sales ratio also decreased by 1 compared to the previous year. "We have confirmed that it has fallen by ~2%. We think it is inappropriate and unreasonable for OB to raise prices due to the increase in raw materials," 

He added, "If OB raises its prices, other companies will naturally follow suit, so we decided to write a statement in this regard."

An official from Lotte Chilsung Beverage told Korea Duty-Free News, "There are currently no plans to increase prices." A Hite Jinro official also said, "As of now, no decision has been made regarding the price increase."

In response to the Council's claim, an OB official said, "The cost ratio was slightly lowered because sales, which had fallen during the COVID-19 period, increased afterward. Since we imported malt, we raised the price in consideration of the exchange rate and logistics costs due to the rise in oil prices." 

He also said, "The price was raised during the off-season after the peak season," and "OB understands the burden on consumers, but the company also raised prices due to various factors."

Meanwhile, Lotte Chilsung Beverage is considering developing new products using domestic raw materials such as malt, hops, and yeast. There was a rumor recently circulating in the industry that a new Cloud beer made with 100% domestic raw materials would be introduced, but this turned out to be untrue.

If Lotte Chilsung Beverage succeeds in developing beer using domestic raw materials, it is expected to have a repercussion in the domestic liquor industry. The issue of the surge in the price of imported malt, which OB Beer cited as a factor in the price increase, may no longer be persuasive. 

OB broke up with Doosan Group by being sold to Interbrew Corporate of Belgium following Doosan Group's restructuring in 2006.

The current CEO of OB is Belgian Ben Verhaert. He took on the Korean name 'Bae Ha-Jun' and began business activities in Korea.

It is a marketing strategy to create more familiarity with local consumers as it sells the national beer 'Cass', the number one brand in the Korean beer market.

Looking at the Board of Directors and registered executives of OB Beer, which claims to be 'Korea's only beer specialty company' (no business such as soju), not a single one is of Korean nationality. It is a 'multinational foreign company.' The nickname "Korean Home-grown Beer Company" has faded into history.

The Korean version of this article is down below.

▷한국소비자단체협의회 "맥아 상승했다고 오비맥주 가격 인상? 다른 원재료는 가격 떨어져…불합리해"

By_BK Min, KDFN kdf@kdfnews.com