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South Koreans Boycott Japanese Brands As Diplomatic Row Intensifies

Published on Jul 19 2019 8:39 AM in Supply Chain tagged: Japan / South Korea / Trade

South Koreans Boycott Japanese Brands As Diplomatic Row Intensifies

As soon as supermarket manager Cho Min-hyuk got to work the day after Tokyo imposed curbs on exports to South Korea, he pulled all Japanese products off the shelves.

It was Cho's way of taking a stand against Japan in a quickly worsening political and economic dispute between the two east Asian neighbours.

Such anger has prompted a widespread boycott of Japanese products and services, from beer to clothes and travel, disrupting businesses in what was already the worst economic climate for South Korea in a decade.

Cho, who manages a 1,500 square metre Purunemart supermarket in Seoul, is taking the hit voluntarily. Over 200 other supermarkets and grocery stores are doing the same, according to Korea Mart Association, a trade group representing them.

"Japan putting pressure on South Korea through export curbs, showing no regret over its past wrongdoings, is completely unacceptable," said Cho, adding the 10-15% drop in sales he is already facing won't change his mind.

'Inadequate Management'

Diplomatic tensions intensified since a South Korean court last year ordered Japanese companies to compensate Koreans who were forced to work for Japanese occupiers during World War Two. On July 4, in apparent retaliation, Japan restricted exports of high-tech materials to South Korea, but denied the move was related to the compensation issue.

Tokyo cited "inadequate management" of sensitive exports, with Japanese media reporting some items ended up in North Korea. Seoul has refuted that.

Seoul has resisted taking any countermeasures, saying it would raise the dispute with the World Trade Organisation. But Koreans are taking matters into their own hands, with beer apparently an easy target.

The country's top two convenience stores CU and GS25, run by BGF Retail and GS Retail, told Reuters sales of Japanese beer plunged 21.5% and 24.2%, respectively, in the first two weeks of July from the previous two-week period. E-Mart reported a 24.6% fall.

Hongcheon Culture Foundation, a beer festival organiser, told Reuters it cancelled an order of 1.2 tonnes of Kirin beer even as at last year's edition the Japanese brand accounted for a tenth of revenues.

Beer Exports

South Korea buys 61% of Japan's beer exports, spending 7.9 billion yen ($73.13 million) in 2018. Asahi Super Dry is the most popular imported brand, with sales tripling in the past five years, according to Euromonitor.

An Asahi spokesman said the company was monitoring developments but declined to comment on the impact.

Japan's Fast Retailing fashion brand Uniqlo, which sells clothes worth around 140 billion yen - 6.6% of its revenue - in 186 Korean stores, is also feeling the anger.

"There is a certain impact on sales," chief financial officer Takeshi Okazaki, told reporters last week, without elaborating.

Caught In The Web

Economists say the tech export curbs could shave 0.4 percentage point off South Korea's gross domestic product this year. The boycott - if it proves to be more than just a brief burst of nationalistic fervour - could marginally add to that, unless consumers spend on something else.

For now, emotions are running high. Marvel fan Jang Bum-jin, 34, said he threw away all his Japanese pens and is not going to watch the latest Spiderman movie, which is distributed by Sony Pictures - a U.S.-based company owned by Japan's Sony Corp .

"I love Spiderman, but I am fighting my desire to watch it," he said.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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