The emergence of COVID-19 in South Korea is having a major impact on certain soft drinks in 2020, with the effects of the country’s efforts to slow the spread of the virus, such as social distancing measures, the closure of businesses and schools resulting in work and study from home policies, and travel restrictions, negatively influencing some categories. Overall, off-trade demand for soft drinks is expected to be positive due to a channel shift away from on-trade; although horeca outlets were permitted to operate, concerns amongst consumers regarding exposure to the virus in public spaces, significantly reduced client footfall.
South Korean authorities avoided lockdowns and instead pursued a strategy of early and aggressive mass testing, isolating anybody infected and tracking their movements to locate other people who had come into contact with them. Within two weeks of its first case, the country was producing more than 100,000 test kits per day and it had tested over 600,000 people by early May.
While COVID-19 had a notable impact on the performance of various soft drinks categories, the impact on industry players was relatively minimal with Lotte Chilsung Beverage Co Ltd retaining its overall leadership due to its wide product portfolio, although it continued to lose ground to its closest competitor Kwang Dong Pharm Co Ltd, with the latter benefiting from its leadership of bottled water, particularly the dominant still format. Sales of major soft drinks companies have a comparably larger share through off-trade; although there have been attempts to increase their presence through on-trade over the review period, COVID-19 has forced players to return to focusing on expanding their penetration through retailers, which is relatively less profitable.
While the pandemic has been reshaping soft drinks in South Korea and consumers’ priorities, e-commerce has significantly benefited by providing safety and convenience to consumers. Unlike many other countries which experienced panic-buying and goods being sold out, South Korea has enjoyed a very stable supply for soft drinks sold online.
By June 2020, on-trade establishments in South Korea were permitted to remain open as the government, worried about the struggling economy, held off stage 3 of its restrictions which prohibit the operation of restaurants and bars. However, restaurants continued to suffer from empty tables and reduced footfall as consumers remained in their homes for fear of being exposed to the virus.
In the short term, more “at-home” products are expected to show a strong performance through e-commerce in South Korea, with larger formats remaining popular to serve an entire family. As worried consumers adapt to the new normal of limited movement and working from home, there is likely to be a shift in purchasing occasions and habits, supporting categories such as RTD coffee, bottled water, and carbonates.
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