A visitor wearing traditional Korean costume tastes a sample of makgeolli, a Korean fermented rice alcoholic beverage, on the first day of the Korea Makgeolli Expo at aT Center in southern Seoul, May 10. Newsis

Makgeolli, a traditional Korean fermented rice alcoholic beverage brewed from nuruk (a fermentation starter), has a unique milky and sweet-sour flavor that Koreans have enjoyed for over a thousand years.

This popular traditional Korean beverage, which has seen declines in both domestic sales and exports, is at a crossroads for new changes as the government is pushing to amend tax laws to allow a wider variety of makgeolli brewers to enter the market.

In July, the Ministry of Economy and Finance announced this year's tax reform, including amendments that allow the addition of artificial flavors and colorings to makgeolli, potentially broadening its appeal both domestically and internationally.

With the global popularity of K-culture, makgeolli has recently made its name in the global alcohol market, with increased exports to the United States, Japan, Southeast Asia and Europe.

Moreover, the COVID-19 pandemic saw a rise in solo drinking, which contributed to a growing belief in the health benefits of fermented beverages like makgeolli, further driving up export volumes.

However, major domestic makgeolli companies have recently shown declining performances. For Kooksoondang Brewery, sales fell 5.5 percent year-on-year to 70.5 billion won ($52.5 million) in 2023, while operating profit plunged 51.2 percent from the previous year to 4.5 billion won.

Prominent makgeolli breweries like Seoul Jangsu and Jipyeong Brewery also experienced respective year-on-year declines in operating profit of 10.4 percent and 40 percent in 2023.

A customer chooses makgeolli or Korean fermented rice alcoholic beverages at a supermarket in Seoul, Oct. 4, 2023. Newsis

Makgeolli companies are also facing export difficulties. According to data from the Korea Customs Service, the export volume of takju — which is a broad term for raw, cloudy Korean rice wine that includes makgeolli — peaked at 15,396 tons in 2022 but fell by 9.2 percent to 13,982 tons in 2023.

The export amount also decreased by 6.3 percent to $24 million, contrasting with the export surge of soju, a Korean distilled liquor, which recorded $101 million during the same period.

Industry experts have stated that since the COVID-19 pandemic, makgeolli makers have adapted well to changing trends, but they are now facing decreased demand.

"Since the COVID-19 pandemic, Korean restaurants in overseas countries have struggled to operate, leading to a decrease in makgeolli exports. Additionally, the whisky boom has reduced the popularity of makgeolli," an official from the local liquor industry stated on condition of anonymity.

In this situation, the government's tax law amendments are expected to provide a new breakthrough. Previously, if artificial flavors or colorings were added to makgeolli, it was classified as "other alcoholic beverages," subject to higher tax rates, and the use of the name "makgeolli" was restricted. However, this amendment allows for the legal production of various flavors of makgeolli, such as banana, chocolate and strawberry.

The tax imposed on these beverages with different flavors and colors could also be dramatically reduced. If the amendment is implemented, the tax amount on these drinks with a price tag of 1,000 won for 750 milliliters will decrease from 246 won to 33 won, a reduction of over 80 percent.

The Korean Makgeolli Association, a lobby group representing the interests of domestic makgeolli manufacturers, welcomed this measure, saying it enables a more diverse range of makgeolli to become competitively priced in both the domestic and overseas markets.

"Currently, makgeolli brands with added flavors or colorings, classified as other alcoholic beverages, cannot be labeled as makgeolli and thus are not recognized as such in the market," said Nam Do-hee, secretary general of the association.

The secretary general noted that this legislative amendment is expected to be particularly beneficial for exports.

"Exporting makgeolli is very challenging. It is difficult to explore overseas markets. Exporting makgeolli to the Chinese market had been stalled, but it started to pick up in the latter half of last year. The Japanese market is stagnant or declining, making it hard for new makgeolli products to enter," he said.

"The difficulty in exporting makgeolli stems from the fact that most producers are small-scale businesses. There are about 820 companies registered under the Ministry of Food and Drug Safety, with 70 percent to 80 percent being businesses with fewer than five employees. For these companies, overcoming price pressures to succeed in exports is not easy."

In this Joseon-era painting "A Tavern," by Kim Hong-do (1745-1806), people are gathered in a jumak or tavern drinking takju, a broad term for Korean fermented rice alcohol that includes makgeolli, showing the alcoholic beverage has been traditionally consumed by many Koreans for a long time. Courtesy of National Museum of Korea

Concerns over dilution of tradition

However, not everyone in the industry supports these changes.

Some makgeolli makers argue that if alcoholic beverages containing flavorings and colorings can be classified as makgeolli, it could dilute its traditional identity that many brewing companies seek to maintain.

Representing these concerns, Rep. Lim Ho-sun of the Democratic Party of Korea pointed out that such legislative amendments might only benefit certain companies.

"The government should reconsider the tax law amendments that expand the use of additives in takju," the lawmaker said during a budget review meeting at the National Assembly in Seoul, Sept. 3.

In response, Finance Minister Choi Sang-mok answered, "The government plans to listen to the opinions of relevant departments and the industry and review the matter once again."

Experts anticipate that this move could actually contribute to the globalization of makgeolli, viewing the amendment as an opportunity to broaden the industry's scope. Similar to the success stories of Korean cuisine, more overseas customers will become interested in traditional Korean alcohol through the diversification of makgeolli, they added.

"The time is ripe for exporting Korean alcohol, as interest in it is growing overseas. To promote makgeolli more widely in international markets, domestic makgeolli makers should be allowed to create a variety of flavored makgeolli products through this legislative amendment," the local liquor industry insider said.

Employees of Nakchun, traditional Korean alcohol brewer, hold a banner to commemorate the company's first export of its Jijangsu makgeolli to the United States at the company's headquarters in Donghae, Gangwon Province, Aug. 14. Courtesy of Nakchun

Hopeful overseas markets

Although makgeolli exports have recently declined, the drink's global appeal remains strong due to the spread of K-culture, and makgeolli makers are exploring new markets for growth through exports.

However, companies aiming for international markets face a significant hurdle: makgeolli's short shelf life, which complicates export efforts. To address this, most makgeolli for export is sterilized to extend its shelf life by killing the yeast and enzymes, but this process often results in a less flavorful drink, lacking the distinctive taste of fresh, naturally carbonated makgeolli.

Despite these challenges, some companies are finding success. Nakchun, a makgeolli manufacturer based in Donghae, Gangwon Province, known for its makgeolli brand Jijangsu, exported 11,200 bottles of makgeolli to the U.S. for the first time last month.

Jijangsu makgeolli won the grand prize in the takju category at the Korea Wine & Spirits Awards in 2022. Until recently, it has primarily been exported to Asian countries such as Hong Kong, Vietnam and Indonesia, with this being its first entry into the U.S. market.

"We decided to export our makgeolli to the U.S. to seek opportunities in a larger market. We hope more overseas consumers will come to love makgeolli," an official of the makgeolli brewery said.