Same Alcohol Content at 16.5%
Price Difference of 2,000 Won per Box
[Asia Economy Reporter Lim Hye-sun] Should the price of Chamisul be lowered, or should the price of Jinro Is Back be raised?
HiteJinro has lowered the alcohol content of Chamisul Fresh by 0.4 degrees, making it the same 16.5 degrees as Jinro Is Back. Lowering the alcohol content reduces the cost price. Therefore, HiteJinro is reportedly struggling with whether to lower the price of Chamisul Fresh, which has a wholesale price 2,000 won higher per box, or to raise the price of Jinro Is Back.
Cost Reduction Effect of 2 Billion Won Annually
According to the liquor industry on the 27th, the wholesale price of Chamisul Fresh (1 box) is 46,700 won. Lotte Chilsung Beverage's Chum Churum wholesale price is 46,200 won, and Jinro Is Back's wholesale price is 44,700 won. The wholesale price of Chamisul Fresh is 4.4% (2,000 won) higher than Jinro Is Back.
According to experts, when liquor companies lower the alcohol content, the amount of ethanol used decreases, reducing the manufacturing cost of the product, and the shipment volume also increases, resulting in higher sales and profits. Soju is made by mixing ethanol with water, and lowering the alcohol content reduces the cost of ethanol. According to the industry, if the soju alcohol content decreases by 0.1 degree, the ethanol cost can be saved by 0.6 won. In the case of Chamisul Fresh, lowering it by 0.4 degrees saves 2.4 won per bottle in ethanol cost. It may seem insignificant, but considering last year's sales volume of Chamisul Fresh, it can reduce costs by more than 2 billion won annually.
Price Increase of Jinro Is Back Likely
Some voices suggest that HiteJinro has decided to set the price policy for Chamisul Fresh and Jinro Is Back equally and is weighing the timing of price adjustments. HiteJinro is reportedly deliberating between raising the price of Jinro Is Back and lowering the price of Chamisul Fresh.
If the price of Jinro Is Back is raised, HiteJinro's profits will increase. The average monthly sales volume of Jinro Is Back is about 1 million boxes. This would generate an additional profit of 2 billion won per month and 24 billion won annually. This is why maintaining the current price of Chamisul Fresh while raising the price of Jinro Is Back is the likely option.
Considering HiteJinro's position, the price increase plan for Jinro Is Back seems probable. HiteJinro recorded an operating profit of 42.6 billion won on a consolidated basis in the second quarter of this year, a 21.2% decrease compared to the same period last year. Sales also decreased by 2.8% to 565.5 billion won. Especially, sales to businesses were hit hard. The securities industry forecasts a slow recovery until the third quarter.
Reconsidering Due to Social Distancing Impact
The problem is the backlash from self-employed business owners. As social distancing has prolonged and difficulties continue, if the wholesale price of soju rises, the profits of self-employed business owners will decrease accordingly. The selling price of soju at establishments is the same at 4,000 won per bottle. The lower the wholesale price, the higher the profit margin for establishments. Mr. Kim, who runs a pub in Gangnam, said, "There are talks that HiteJinro will raise the price of Chamisul Fresh," adding, "With social distancing measures tightening, debts are increasing, and if the wholesale price of soju also rises, it will be hard to endure."
A liquor wholesale industry official said, "HiteJinro said it would raise the price of Jinro Is Back, but due to the extension of social distancing, it is reconsidering from scratch."
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