"Onnuri Gift Certificates Accepted"... Food Ingredient Marts Become 'Liquor Meccas' Fueled by Tax Subsidies [Why&Next]

The Paradox of Government Funds Subsidizing Luxury Consumption
Onnuri Gift Certificates: Industry Restrictions Exist, but No Limits on Product Categories
Some Large Food Ingredient Marts Monopolize Price Competitiveness Thanks to Government Supp

"World Whiskies All in One Place! Lowest Prices on Various Whiskies! Beware of Sold-Out Items!"

At J Mart, located inside a traditional market in Gwangjin-gu, Seoul, signs at the entrance indicating "Onnuri Gift Certificates Accepted" and advertisements guaranteeing the lowest prices on whisky immediately caught the eye. As the automatic doors at the entrance slid open, customers were first greeted by high-end champagne. The store's central area was dominated by shelves lined with hundreds of varieties of wine, whisky, and other alcoholic beverages.

An office worker from the neighborhood, who said, "I often stop by on my way home from work because the prices are low," purchased three bottles of Scotch whisky on this day: Lagavulin 8 Year Old, Glenfiddich 15 Year Old, and Balvenie 12 Year Old DoubleWood.

A liquor corner in a food ingredient mart in downtown Seoul, known as the "holy land of imported alcoholic beverages" due to discounts on Onnuri gift certificates.

He shared, "The lowest price for Lagavulin 8 Year Old on DailyShot (an online liquor purchase platform) is 75,000 won, but here I can buy it for 62,200 won, plus get an additional 10% discount with Onnuri Gift Certificates. On top of that, there are extra 5% refund events and in-store mileage point promotions, so the total discount is even greater."

'Alcohol Mecca'-Traditional Market Food Ingredient Marts Rise Again

This mart has rapidly scaled up since the COVID-19 pandemic, gaining a reputation as a "whisky mecca."

At the entrance of a food ingredient mart in Seoul, known as the "Mecca of Imported Alcohol" due to discounts on Onnuri gift certificates.

According to NICE Information Service on the 5th, J Mart's sales last year reached 33.96 billion won, a 33.5% increase from the previous year's 25.44 billion won, and a 56.9% increase compared to two years ago (21.65 billion won). Operating profit also surged by 143.9% to 1.29 billion won last year, up from 530 million won the previous year. The overall sales, including alcoholic beverages, have shown remarkable growth. This is attributed to the attractive prices made possible by various discount benefits.

J Mart is not alone. Six food ingredient marts in the Seoul metropolitan area, including M Mart in Ilsan, Goyang, Gyeonggi Province, have emerged as key liquor retailers among enthusiasts. At the center of these food ingredient marts in traditional market alleys gaining the status of "the holy land of imported alcoholic beverages" is the Onnuri Gift Certificate.

The Original Purpose of Supporting Small Businesses Undermined... Distortion of the Liquor Market

Onnuri Gift Certificates are market-exclusive vouchers issued since 2009 by the Ministry of SMEs and Startups and the Korea Small Business Market Promotion Corporation, under the Special Act on the Promotion of Traditional Markets and Shopping Districts (Traditional Market Act), to promote sales in traditional markets and shopping districts and revitalize local economies.

Onnuri Gift Certificates are divided into paper certificates and online certificates (Digital Onnuri). The paper version can be purchased at a 5% discount up to 500,000 won per month, while Digital Onnuri Certificates can be charged and used at a 10% discount, with a maximum holding limit of 1 million won. In practice, using Onnuri Gift Certificates allows customers to buy alcohol at a basic 10% discount. During holidays such as Lunar New Year and Chuseok, the discount rate rises to 15%, and "payback events" that refund about 10-15% of the purchase amount are frequently held.

Onnuri Gift Certificates frequently hold various refund events.

The legal loophole that there are no restrictions on the types of items that can be purchased with Onnuri Gift Certificates has contributed to the rise of these "alcohol meccas," even though the certificates were intended to revitalize traditional markets and local commercial districts. Currently, the Traditional Market Act restricts franchise registration for certain business types, with wholesale and retail liquor businesses being a primary example.

However, there are no specific regulations limiting the items themselves. As a result, as long as a business registers as a franchisee under a non-restricted category, customers can purchase any product, including high-end liquor, at discounted prices using the certificates. Food ingredient marts that handle Onnuri Gift Certificates and have increased liquor sales typically register as "wholesale/retail food and general merchandise stores" and actively sell high-priced alcoholic beverages.

Onnuri Gift Certificates Expanded to Cigarettes and Obesity Drugs

This loophole business practice is criticized for deviating significantly from the original intent of the system by subsidizing luxury goods like expensive liquor with government funds. However, in September of last year, the government further relaxed industry restrictions to revitalize the program. Notably, wholesale and brokerage of tobacco products, as well as healthcare (hospitals, clinics, dental clinics, and Korean medicine clinics), were removed from the list of restricted industries.

As a result, the certificates are now being used to purchase cigarettes and obesity treatment injections such as Wegovy, drawing criticism that they have become a tool for subsidizing cigarette purchases-which places a significant burden on the national health insurance budget-and for supporting weight loss treatments.

With a few businesses reaping enormous profits through loophole operations that deviate from the system's original intent, industry insiders point out that the liquor market order is being distorted. Some food ingredient marts are leveraging tax-based price competitiveness and aggressively expanding, while nearby liquor retailers-who are restricted from registering as franchisees-are losing their price competitiveness and having their livelihoods threatened. Although the original intent of the certificates was to support small businesses, the current situation is that the system's loopholes are actually increasing the burden on small business owners in restricted industries.

In fact, most liquor retailers operating near food ingredient marts report facing the same difficulties. Within a 3km radius of J Mart alone, there are 13 liquor retailers in operation, and if the six major food ingredient marts are included, the number of stores rises to 77. One business owner said, "We sell the same products, but just because they are located within a traditional market, they are monopolizing benefits that are hard to accept," adding, "It feels like a kind of reverse discrimination." He also emphasized, "A 10% price difference is by no means insignificant."

An industry insider also commented, "The current system essentially supports some merchants in making excessive profits by selling products at distorted prices," explaining, "As their business expands nationwide, it is causing widespread damage not only to nearby small businesses but also to small-scale liquor retailers across the country."

Government Restricts Onnuri Gift Certificate Use to Stores with Less Than 3 Billion Won in Annual Sales

Yonhap News Agency

As criticism mounted that some large businesses within traditional markets were unfairly benefiting due to the lack of an upper sales limit for franchisees, the government announced an improvement plan last September to limit Onnuri Gift Certificate franchise eligibility to small businesses with annual sales of 3 billion won or less. The government stated that by restricting the use of the certificates to stores with annual sales of 3 billion won or less, about 10,000 stores-0.5% of the approximately 200,000 franchisees nationwide-would be affected. This would also naturally restrict industries handling high-priced luxury goods and specialty foods. This measure is currently pending in the National Assembly, sponsored by Assemblyman Lee Jaegwan.

However, there are doubts about the effectiveness of the government's stricter franchise criteria among local businesses. Some large food ingredient marts are already circumventing these regulations by "splitting" their business premises to reduce the store size to within 3,000 square meters. An industry insider stated, "Stores at the center of the problem are likely to maintain franchise status by separating into different corporate entities," and suggested, "The sales limit may need to be lowered even further."

There is also skepticism about the practicality of restricting specific items. With franchisees selling a wide range of products, it is not easy to limit payment methods for particular items. For example, when customers buy both liquor and general groceries at a food ingredient mart, it is virtually impossible to require separate payment for only the liquor without using Onnuri Gift Certificates.

An official from the Ministry of SMEs and Startups said, "Whether franchisees sell liquor or obesity treatment drugs in their stores ultimately depends on the franchisee's duty of care," adding, "It is difficult to monitor and restrict usage by item in real time." However, the official noted that there are ongoing discussions about reviewing which industries should be restricted or allowed to register as franchisees.