Sept. 7 (Bloomberg) -- Lee Hi-Sang, a South Korean businessman who owns Napa Valley’s Dana Estates, didn’t take his first sip of wine until he was in his mid-30s. Since then, he’s sought to ensure other Koreans don’t wait that long.
Lee, who built his fortune in the flour-mill industry, took to wine immediately and made it his mission to boost the popularity of Napa vintages in his home country. He began distributing California wine more than a decade ago and purchased Dana Estates in 2005.
“I’d like to change our culture,” Lee, now 64, said during lunch at his winery, whose $275-a-bottle Cabernet has earned a perfect 100-point score from critic Robert Parker. “I thought I would introduce this good drink to Korea.”
That’s no easy task: Most of the alcohol consumed in South Korea is still either beer or soju, a spirit typically distilled from rice. While Lee has increased his wine sales to $28 million in 2008 from less than $500,000 in the 1990s, the economic slump has shuttered wine bars and restaurants in Korea, and prompted consumers to shy away from pricey brands, Lee said. The country also imposes taxes and tariffs that can increase the cost of imported wine by 65 percent.
As the biggest importer of Napa wine into the country, Lee aims to make the product recession-proof by turning it into an everyday part of Korean life. He’s also considering adding more budget wines to his lineup and reaching out to retail stores because consumers are doing more of their dining at home. Another goal: overcoming the perception that French wine is superior, Lee said.
“Koreans are basically very conservative, so they prefer French,” he said. “Napa is a new wine for them.”
Lee discovered wine in 1979. After a day of skiing in Vermont, he washed down some kimchi -- a pickled cabbage dish -- with a glass from Columbia Crest, a Washington State winery.
In the past three decades, he’s led a crusade. Calling himself a “wine evangelist,” Lee trekked across Napa Valley, spending years persuading high-end producers to sell him bottles to bring back to Korea. He’s now the third-largest importer of wine into South Korea, and sells more than a third of Napa wine in the country.
His own winery isn’t a big part of that plan: Dana Estates bottles are only available to customers on its mailing list and a few restaurants and retailers. Still, the reviews earned by its Lotus Vineyard Cabernet Sauvignon have helped raise Lee’s stature in the industry. He’s also gotten other vintners to consider selling in Korea.
Getting on the Radar
“When Mr. Lee approached us, I said, ‘Well, it’s not really on our radar,’” said Tim Mondavi, a former winemaker at Robert Mondavi Winery and founder of the Continuum Estate in Napa. “But they continued to pursue us, and I am absolutely delighted that they have.”
Mondavi just returned from his own four-day trip to Korea, where he left 20 six-packs of wine for sale.
“Mr. Lee has been able to amass a group of very credible high-end wineries here in Napa Valley,” Mondavi said. “That led to our decision to go with him.”
Lee opened his winery in 2009 after restoring a vineyard built in 1883 by German viticulturalist H.W. Helms. Architect Howard Backen, whose clients include Napa producers Bond Estate, Harlan Estate, Paul Hobbs and Ovid, tried to preserve as much of the original stone structure as he could, while making it a modern facility.
The result is a 19,000-square-foot winery that has enough space for tasting rooms, fermenters, storage caves and a circular wine cellar that holds more than a third of Lee’s 15,000-bottle personal collection.
Lee also spent $13 million to build a seven-story wine education center, retail and wholesale store in Seoul, called Podo Plaza. Since opening in 2005, more than 3,000 students have paid $250 to $2,000 for classes on wine.
While the value of U.S. wine exports to South Korea more than tripled to $9.75 million between 1999 and 2009, the country ranks 15th as a market, behind Poland, Sweden and Denmark, according to the San Francisco-based Wine Institute.
Beer and soju accounted for 83 percent of alcohol consumption in South Korea in the first quarter. Based on factory prices, the market was worth 7.5 trillion won ($6.4 billion) in 2008, according to the most recent data from the National Tax Service. That doesn’t reflect the price that consumers pay at retailers, bars and restaurants.
Contrast With China
The recession also took its toll, with the value of U.S. wine imports to South Korea dropping 24 percent last year. That contrasts with other Asian nations, which increased their demand during the slump. China saw a 64 percent gain to $35.6 million, Japan rose 28 percent to $78.5 million, and Hong Kong increased 83 percent to $46.9 million. Worldwide U.S. exports declined 9.5 percent.
Even so, Koreans have come a long way since the early 1990s, said Russell Weis, general manager of Silverado Vineyards in Napa, who has traveled to Korea at least 10 times in the past two decades on behalf of wineries.
“We were just chasing around ex-pats who were stationed there,” Weis said. Now the pool of potential customers is bigger, though still a select group, he said. “It’s a young, affluent, well-traveled, often American-educated Korean.”
Lee, the chairman of Seoul’s Woonsan Group, is accustomed to touting luxury imports: His company runs the country’s exclusive dealer of Ferraris. He also owns the Barn, an American-style steakhouse in Seoul.
What’s a Corkscrew?
Woonsan operates several other businesses, including the country’s largest flour miller; a wine wholesaler, retail store and wine bar; a pet food company; and an organic food chain.
Lee spends most of his time in South Korea, where wine can still be a novelty. During holidays, instead of giving his Korean employees traditional small gifts, he brings them wine. At first, many didn’t know how to open the bottles, having never seen a corkscrew before, he said.
He also gives wine glasses and openers to restaurants, which he hopes will lead to sales of bottles. With more exposure to wine, Koreans may also seek to lower tariffs, making the drink more affordable in the country, Lee said.
Terry Hall, a spokesman for the Napa Valley Vintners association, said a delegation from the group visited South Korea in May. His organization also is meeting with the Korean ambassador to the U.S. about eliminating the 65 percent import surcharge.
Napa wineries aren’t as aggressive in targeting Korea as their French counterparts, making it harder to bolster the reputation of California wines in the country, Lee said.
“Since the economic crisis, French wineries are very busy making visits,” he said. “Napa is very slow to come. I don’t know why.”
Silverado Vineyards, whose wine is sold in 20 countries, just sent its first shipment of wine to South Korea this year, totaling 14 cases, or 168 bottles.
Still, California wines have an edge in the long run, Lee said. “For me, Napa wine is far better than Bordeaux.”
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