E-Malt.com News article: South Korea: Shortage of recycled glass bottles forces brewers to cut production

A shortage of recycled glass bottles has hit South Korea’s Hite-Jinro, Oriental Brewery (OB) and other alcohol companies, forcing them to cut production ahead of the year-end party season, according to industry officials quoted by Korea Times on October 21.

The officials blame the government for its plan to hike bottle deposits in January, which they say has encouraged consumers and retailers to hoard empty glass bottles to receive higher deposits from alcohol companies next year.

Makers of soju, beer and other alcoholic beverages are expected to further slash production in November and December, because of the worsening bottle shortage, when alcohol demand is at its peak.

According to the Korea Alcohol & Liquor Industry Association (KALIA), the average recovery rate of glass bottles at liquor companies stood at 78.9 percent in September, down sharply from 96.8 percent a year earlier.

The association projects that the recycling rate will further decline in the fourth quarter, saying more consumers, junk shops and retailers will hold onto empty bottles until January to get higher deposits from brewers and distillers.

On Sept. 3, the Ministry of Environment unveiled the revised recycling promotion bill, stipulating that the amount of deposits consumers can get for returning empty liquor bottles to retailers will go up, a move aimed at promoting the reuse of bottles.

According to the revision, which will go into effect on Jan. 21, the deposit on a bottle of soju will increase to 100 won from the 40 won paid now, and that of beer to 130 won from 50 won. The 60 won hike is the first since 1993.

In addition, the fees that liquor and beer firms pay to retailers for the handling of empty bottles will go up to 36 won from soju's 16 won and beer's 19 won.

"Liquor companies are being forced to reduce production because of the lack of glass bottles," KALIA official Kim Tae-ho said. "Soju makers have been hit harder than brewers because soju is sold mostly in glass bottles, while significant volumes of beer are sold in aluminum cans and plastic bottles."

It has become increasingly more difficult for Hite-Jinro, OB and Lotte Chilsung Beverage to secure used glass bottles, the official said, adding that they could miss out on the year-end party season in November and December.

"We found that junk shops and wholesalers are hoarding empty soju and beer glass bottles. Unless brewers and distillers get more recycled bottles, they will face a severe production problem," Kim said. "The recycled bottles account for about 85 percent of production, while the remaining 15 percent are produced with new bottles. The problem is that bottle makers are already operating at maximum capacity."

Hite-Jinro, headed by CEO Kim In-kyu; OB, headed by CEO Frederico Freire; and Lotte Chilsung Beverage, headed by CEO Lee Jae-hyuk, all declined to comment about the issue, saying that the KALIA speaks on their behalf.

Citing higher bottle deposits and handling fees, the association says companies have to raise retail prices because it costs more to distribute soju and beer.

It estimates that the wholesale price of soju will likely increase to 1,097 won from the current 1,002 won in January, and that of beer to 1,239 won from 1,129 won,

"We expect that retail prices of soju and beer will increase by up to 7.6 percent and 4.9 percent, respectively," Kim said. "Liquor and beer firms have no choice but to hike wholesale prices in January because they will be paying higher bottle deposits to consumers and higher handling charges to retailers.

The official then said the recycling rate will not likely go up because not many consumers bring empty bottles back to retailers for the deposit.

"Claiming that higher bottle deposits benefit liquor companies is nonsense. The majority of consumers still will not return bottles for 100 won each. The amount is insignificant," he said.

Liquor firms first have to receive approval from the government if they seek to increase the prices of soju and beer. According to the government, soju and beer prices should be managed by the state because the price hikes affect low-income people more severely.


21 October, 2015