Opinion: Soju’s unique incarnation in the Australian market

An industry insider has contacted The Shout, to share their thoughts on Soju’s place in the Australian market and a possible regulatory blind spot, that might just be too tempting for some – they have asked to remain anonymous.

The Sweet (and Sour) Soju Story

Australia’s alcoholic beverage market is no stranger to innovation and competition, but the recent influx of Soju has raised more than a few eyebrows. Soju, the traditional Korean spirit known for its versatility and smooth taste, is making waves Down Under. However, the story isn’t just about a new player on the field, it’s about a tempting blind spot in our regulatory enforcement that might be turning the “spirit” of competition into a literal spirituous rort.

Local Producers: The Regulated

Australian manufacturers, from boutique gin distillers in Tassie to the sprawling vineyards of the Barossa, operate under strict regulations. Every drop of alcohol produced is meticulously scrutinised, labelled, categorised, and taxed accordingly. This ensures not only the safety and quality of our beloved beverages but also a steady revenue stream for the Commonwealth. These regulations are the backbone of our industry, fostering consumer safety, fair competition and maintaining high standards.

But what happens when the rules aren’t applied equally across the board?

Imported Soju: Wine or Vodka?

Enter Soju. Flavoured Soju variants are sweeping the world. In the United States, imported Korean Soju can be found labelled as a low-alcohol vodka due to its typically lower alcohol content and the American classification rules. However, when very similar bottles, from the same manufacturers, turn up on our side of the Pacific, they seem to land on Australian shelves declared as wine; thus, avoiding the higher duties levied on spirits over here.

This isn’t just a mislabelling issue—it’s a full-blown identity crisis. If Soju were a character, it would be Dr Jekyll, seamlessly switching between identities depending on the situation. There don’t appear to be any other markets in the world where Soju is described as wine. Certainly not in Korea, where the producers go to great lengths to stress the purity of both the water and the spirit that they blend together when crafting their Soju.

Somebody has to pay!

This classification loophole has significant implications. For one, it means that Soju is taxed at a much lower rate than it would otherwise be in our market. This results in a lighter burden on importers and a correspondingly heavier burden on domestic producers. The impact on the Commonwealth’s tax take is substantial. At current import volumes, this might come to hundreds of million dollars per year. This shortfall undermines tax revenue and leaves the local tax base to make up the deficit. It’s a bit like inviting a new friend to a barbecue, only to watch them power through the steaks while telling you they turned up for the salad.

Local producers, governed by stringent domestic regulations, are finding themselves in trouble at an alarming rate. We have all seen the recent wave of insolvencies, large and small, that have been sweeping the industry. And for every insolvency there are many more companies tightening their belts, laying off staff, cutting back advertising, and curtailing their future growth plans. Compounding this, they are fighting a lopsided battle against an opponent that isn’t playing by the same rules, and regulators unable, or unwilling, to take action. The result is a distorted market where domestic suppliers struggle to compete on price, stifling innovation and growth in the domestic industry.

Interestingly, while the Australian Border Force is reluctantly willing to confirm to industry sources that, “yes” they do see this as a problem, and “yes” they are looking into it and expect to “undertake some enforcement operations shortly”. The only visible action has come from the measurement regulators, who recently stepped in and cleared shelves across the country. This following the discovery that one leading brand of Soju, labelled with a volume of 375 mL actually contained just 355mL.

While the title of the National Measurement Institute might engender a mental image of stuffy, wide bottomed bureaucrats, this is clearly not the case.

Now that the nation’s retailers have restocked, it is an open question as to how much care they have taken, or ought to have taken, in ensuring that the product on their shelves is what it claims to be. With Soju being one of the fastest growing categories in the last few years, clearly there is plenty of incentive to look the other way…

Level Playing Field?

It’s time for our regulators, particularly the Australian Border Force, to take a closer look at this issue. The solution isn’t to demonise Soju—far from it. Soju is a delightful addition to our diverse beverage market. Instead, the focus should be on ensuring fair play. Rigorous scrutiny of imported products, from regulators and retailers alike, is needed to ensure accurate labelling, and appropriate taxation, as crucial steps to maintaining a level playing field.

The Bottom Line

The story of Soju in Australia isn’t just about a popular Korean spirit finding a new market. It’s about fairness in regulation, and the future of our local industry. As professionals in the beverages sector, we must advocate for robust regulatory enforcement that is able to respond to new challenges in a timely manner. The strict supervision and enforcement experienced by domestic producers must be supported by equally vigilant policing of our borders.

So, here’s to Soju—may it continue to thrive in Australia! But may it do so under the same rules that govern all our beloved beverages. Let’s ensure our industry remains innovative, vibrant, and cheeky in a good way.