Constraints Are Holding Back the Korean Whisky Boom

The current liquor tax system in South Korea is stifling the growth of local whisky distilleries, according to Bryan Do, founder and Chief Spirits Taster of Three Societies distillery in Namyangju, Gyeonggi Province. In an interview, Do highlighted the challenges posed by outdated regulations and excessive taxation, which he believes undermine the potential for producing exceptional spirits that can compete at a global level.

Critique of the Current Tax System

Established in 2020, Three Societies has a unique setting, perched atop wooded mountains, which Do considers ideal for whisky production. However, he contends that immediate reforms—specifically the revision of the Liquor Tax Act—are urgently needed. “We are burdened by taxes that make our products less competitive,” Do stated, emphasizing that reforms would allow them to lower prices and enhance growth in the local industry.

Under the current law, whiskies are taxed based on their assessed value (an ad valorem tax), creating an uneven playing field. In contrast, imported whiskies are only taxed based on their import price, waiving additional distribution and sales costs. This has led to local brands being disproportionately taxed, ultimately affecting consumer prices.

“We’re slapped with way more tax than imports, which is unfair,” Do said. “This is not just unfair for us. It’s unfair for consumers as well because we cannot provide them with cheaper whiskies.”

With local whiskies facing a higher tax burden, the ad valorem tax system not only restricts affordability but also limits creativity among local distillers, pushing them towards less diverse products. A shift to a per-unit tax system could be transformative; it would not only ease the financial strain but also spur local innovation in taste and quality.

The burgeoning whisky industry in Korea is facing obstacles due to regulatory constraints.

Crafting Local Identity in Whisky

Despite the challenges, Three Societies is making strides in the whisky sector with its flagship brand, Ki-One. Gaining recognition, Ki-One is the first single malt whisky produced in Korea, and it has already earned accolades, including four medals at international spirits competitions between 2022 and 2023. Do believes that the unique climate in Korea—with its temperature variations across the seasons—provides an extraordinary environment for whisky maturation. This climatic distinction allows the whisky to develop complex flavors that rivals even more established imports such as Japanese whiskies.

In terms of flavor, Do draws a compelling analogy, stating, “If Japanese whiskies are like mild miso soup, ours would be like strong soybean paste soup,” showcasing the depth and richness that Ki-One aims to achieve. The distillery has already captured the attention of whisky enthusiasts, with some consumers camping for over thirty-six hours to purchase the first batch of Ki-One.

Three Societies’ Ki-One whisky showcases the spirit of Korea.

Outdated Regulations Need Revisiting

In addition to the tax issues, Do also pointed out certain outdated practices that hinder the industry’s growth. One particularly vexing regulation is the mandate for radio frequency identification (RFID) stickers on bottles, designed as anti-theft measures. Do argues that these stickers are no longer necessary and only add to overall production costs. “Each sticker costs us 800 won ($0.60), and we must sell our products at a higher price as a result. Without RFID, we’re legally banned from selling our products, which is just an outdated restriction that needs revising,” he stated.

Many in the industry agree that these regulations should evolve to reflect the current realities of the market and foster better conditions for growth in a competitive landscape.

The unique artisanal process of crafting Korean whisky is paving the way for future success.

A Bright Future for Korean Whisky

Looking ahead, Do remains optimistic about the future of Korean whisky. While the challenges are significant, he is confident that with the right regulatory adjustments, the country can cultivate a vibrant whisky culture that will not only thrive locally but also gain international visibility. “In due time, we’ll make just as good whiskies, if not better, because our flavor profiles are different—more flavorful and spicier,” he concluded.

The potential for Korean whisky is immense. A shift to a more equitable tax structure, coupled with the elimination of outdated practices, could allow local distillers to innovate and compete effectively on the global stage, ensuring that whisky from Korea is not simply a footnote in the beverage world, but a prominent voice filled with rich flavors and unique profiles.