Statistics Korea: "Unusually Long Promotion Period"
Number of Hof Pubs in May Down 8.3% Year-on-Year
The prices of alcoholic beverages sold at bars and restaurants have increased. This marks the first rise in soju prices in 10 months and beer prices in 7 months.
According to Statistics Korea on July 8, the consumer price index for soju served at restaurants rose by 0.1% last month compared to a year earlier. This reversed a nine-month decline that had continued since September of last year, when the index had dropped by 0.6%. Similarly, the price index for beer served at restaurants increased by 0.5% last month, rebounding for the first time in seven months since December of last year, when it had fallen by 0.4%.
The retail price of soju had been declining for 16 consecutive months, but rose by 0.2% in May and by another 0.1% last month. The retail price of beer increased by 3.1% last month, marking the highest monthly rise in eight months since October of last year, when it had increased by 4.3%.
The prices of soju and beer served at restaurants had shown an unusually prolonged downward trend. The price of soju at restaurants had increased for 19 years and 1 month straight, from August 2005 (0.1%) to August of last year (0.6%). Beer served at restaurants had seen uninterrupted price increases for 25 years, from December 1999 (1.3%) to November of last year (0.9%).
Recently, the decline in soju and beer prices appears to have resulted from the restaurant industry responding to severe sluggish consumer demand. Business owners adopted "bait strategies" such as offering free or discounted alcohol to attract customers, which led to a drop in the price index. The recent rebound in alcohol prices is interpreted as a sign that these bait strategies have ended.
An official from Statistics Korea analyzed, "Businesses often offer discounts on alcohol as part of sales promotions, and while such events usually last one to two months, this time the period seems to have been quite long."
Some analysts attribute the end of restaurant alcohol discounts to expectations that consumer sentiment will improve with the launch of the new government. The Bank of Korea's Composite Consumer Sentiment Index (CCSI) had plunged below 100 last December due to the 12·3 Emergency Martial Law, but then improved for three consecutive months, reaching 93.8 in April, 101.8 in May, and 108.7 in June.
Some speculate that the restoration of prices may also be due to self-employed business owners being unable to sustain alcohol discount promotions and subsequently closing their businesses. According to the National Tax Service's Tax Statistics Portal (TASIS), the number of "hof" pubs in May was 21,891, a decrease of 1,982 establishments or 8.3% compared to a year earlier.
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