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Business

Lotte beer taking South Korean market by storm

Lotte plans to ramp up production 12-fold by 2017.

SEOUL -- Lotte Chilsung Beverage has quickly carved out a niche in the beer market here through a 100% malt product with a rich taste and creamy foam, unlike the flat offerings of rivals Oriental Brewery and Hite-Jinro.

     Lotte sold 27 million cans' worth of its Kloud beer in the first 100 days after the April 22 debut. The new beer now accounts for about 16% of beers sold at large supermarkets -- a rare success for a new product.

     The company uses a German brewing method, where no water is added to the 100%-malt mix after fermentation. "It has a different, good taste, just like German beer," an office worker in Seoul said.

     At 2,150 won ($2.05) a can, Kloud is slightly more expensive than other domestic products, such as Oriental Brewery's Cass. But the company's strategy is to market the product as a cheaper alternative to pricey imported beers, rather than a better option over cheap domestic ones.

     Although only brews containing more than two-thirds malt can be marketed as beer in Japan, South Korean regulations are much less stringent. Most major beers here are low-malt brews, and the watered-down taste had been shredded by critics. The Economist once wrote, "[beer] brewing remains just about the only useful activity at which North Korea beats the South."

     South Korean consumers are increasingly enjoying beer, wine and other nontraditional types of alcohol, which has led to a spike in the popularity of foreign beers. The country imported 94.6 million liters in 2013, up 31% from the previous year and five times the volume of a decade ago.

     Some say Koreans are less particular about the taste of their beer, since many mix the brews with Korean soju and other liquors. But even the so-called "bomb drinks" taste better with better beer, a Lotte source insists. The combination of Kloud with a widely popular brand of soju has become a signature drink of its own.

     Lotte currently can only brew 50,000kl of Kloud a year. It plans to expand production to 100,000kl in 2015. It will finish building its second brewery in 2017, which will boost its capacity to 600,000kl per year. By then, the company is expected to have seized about 30% of the market.

     Brewing beer had been a long-time dream of Chairman Shin Dong-bin. Lotte plans to start selling Kloud at liquor stores in the greater Los Angeles area in October, and hopes to eventually market the product throughout the U.S.

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