South Korea’s craft liquor market is poised for significant expansion following the government’s decision to allow small distilleries to produce soju and whiskey. Until now, small-scale liquor manufacturing licenses were limited to fermented alcoholic beverages such as beer, makgeolli, and fruit wines.
The policy shift, announced on Feb. 12 during an economic ministers’ meeting, will extend small-scale liquor manufacturing licenses to include distilled liquors such as soju and whiskey. The move is expected to broaden the availability of craft soju and whiskey, mirroring the rise of craft beer, which has become widely accessible at convenience stores and supermarkets.
According to government data, South Korea’s liquor industry was valued at approximately 10 trillion won ($6.8 billion) in 2023. Distilled soju accounted for just 133 billion won ($91.4 million), or about 1% of the total market, while diluted soju—a widely consumed variant made by mixing ethanol with water—recorded 3.99 trillion won ($3 billion) in shipments. The dominance of diluted soju stems from a 1965 policy banning the use of rice in alcohol production under the Grain Management Act, which spurred the transition away from traditional distilled soju.
Previously, small distilleries were unable to secure manufacturing licenses for soju and whiskey due to stringent facility requirements. A general liquor manufacturing license required fermentation tanks with a minimum capacity of 5,000 liters, effectively barring smaller producers from entry. Under the revised regulations, licenses will now be available to distilleries with tank capacities between 1,000 and 5,000 liters, lowering the threshold for small-scale production. “This effectively paves the way for locally crafted soju and whiskey,” a retail industry official said.
Industry analysts expect the policy change to diversify consumer choices, much like the surge in craft beer following the government’s introduction of small-scale beer manufacturing licenses in 2002. Convenience store chain CU, for instance, now offers 200 beer varieties, including 49 from small breweries.
“The lower entry barrier doesn’t guarantee an immediate boom, but with the right marketing—emphasizing flavor and storytelling—craft soju and whiskey could gain traction,” a convenience store industry official said. “Major retailers and consumers looking for new products are likely to take notice.”
The government is also taking steps to expand the traditional liquor sector. Tax benefits for traditional liquor producers will be extended to those manufacturing up to 1,000 kiloliters annually, doubling the previous limit of 500 kiloliters. Additionally, producers making between 200 and 400 kiloliters will receive a 30% liquor tax reduction, complementing the existing 50% tax cut for those producing up to 200 kiloliters.
Regulations governing regional specialty liquors will also be relaxed. Previously, products had to source all three key ingredients locally to qualify as regional specialties. Under the revised rules, a product will now be recognized as a regional specialty as long as a significant portion of its main ingredient is locally sourced. For example, a producer of rose-infused makgeolli previously had to use locally sourced rice, nuruk (fermentation starter), and roses. Under the new policy, they can now use local rice while sourcing roses from another region. “Our goal is to develop the traditional liquor industry into a premium sector,” the government said. “We will expand domestic sales channels while supporting efforts to enter overseas markets.”
