South Korean boycott could spread to Japanese luxury cars

VIDEO: REUTERS
South Korean merchants step on boxes bearing logos of Japanese products during a rally to declare a boycott of Japanese goods in Seoul, South Korea, on July 5, 2019.
South Korean merchants step on boxes bearing logos of Japanese products during a rally to declare a boycott of Japanese goods in Seoul, South Korea, on July 5, 2019.PHOTO: REUTERS

SEOUL (BLOOMBERG) - Public backlash in South Korea against Japanese products has dented some sales of beer and tour packages, and analysts say the boycott could spread to luxury cars and retailers as a trade spat between the two countries shows no sign of abating.

Sales of Japanese beer at South Korea's convenience store chain CU have dropped 40 per cent this month compared with June, JoongAng Ilbo newspaper said, citing unidentified industry sources.

If the report is true, Asahi Group Holdings Ltd., which is the most popular foreign beer in Korea, may lose about 30 billion won (S$35 million) to 50 billion won revenue this year in South Korea, said Park Sang-Jun, an analyst at Kiwoom Securities Co. in Seoul. Japanese beer makers have a market share of about 6 per cent in South Korea, he said.

While Fast Retailing Co. doesn't have a large exposure to Korea through its Uniqlo stores, the clothing chain may see a decline in annual sales growth, said Na Eun-Chae, an analyst at Korea Investment & Securities. Some traders are betting that some low-end domestic apparel makers such as Shinsung Tongsang Co. will benefit, she said.

Japanese luxury cars may also take a hit, said Kwon Soon-Woo, an analyst at SK Securities. Toyota Motor Corp. and Honda Motor Co. have a combined market share of about 19 per cent of the foreign car market in South Korea, according to data from Korea Automobile Importers & Distributors Association.

On the flip side, anti-Japan sentiment is already hurting some South Korean travel companies. Hana Tour Service Inc., a travel agency, saw sales of tour programmes to Japan fall 30 per cent in the second week of July compared with a year earlier, according to spokeswoman Song Won-Sun. Shares of Hana Tour fell 13 per cent in July, while low-cost carrier Jejuair Co. plunged 19 per cent.

Japanese travel Tomoichiro Kubota, an analyst at Matsui Securities in Tokyo, said that while the impact on Japanese exporters of consumer goods appears to be limited, "there is a possibility of greater overall impact," should relations between the two nations deteriorate.

Asahi also fell on the news it is paying US$11.3 billion to buy Anheuser-Busch InBev NV's Australian operations, in a deal that some analysts said was pricey. Fast Retailing fell 0.1 per cent, while Toyota lost 0.3 per cent and Honda declined 0.4 per cent.

Japanese consumer stocks were also under pressure on expectations Prime Minister Shinzo Abe will push ahead with a plan to raise the sales tax in October after his coalition secured a simple majority at Sunday's upper house election.