"Boycott Is the Answer After All"... Namyang Dairy Faces Strong Backlash Trying to Shake Off Stigma, Market Cap Drops 460 Billion Won

Namyang Dairy Products' Bulgari sold at a large supermarket in Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Hwang Sumi] Since the 'dealer power abuse' scandal in 2013, Namyang Dairy Products has been embroiled in various controversies over the years, including the recent excessive 'COVID-19 marketing,' leading to a continuous consumer boycott of Namyang Dairy Products. Amid this, Namyang Dairy Products' stock price has fallen to about one-third of its level over the past eight years, and its market capitalization has decreased by nearly 460 billion KRW.

According to the Korea Exchange on the 18th, as of the 16th, the combined market capitalization of the company's common and preferred shares (Namyang Dairy Products Preferred) was 261.9 billion KRW, down 459 billion KRW (63.67%) from the end of 2012 (720.9 billion KRW).

During this period, Namyang Dairy Products' common stock price dropped 65.3%, from 942,000 KRW (closing price on December 28, 2012) to 326,500 KRW (as of the 16th).

Performance-wise, sales decreased by 30.5%, from 1.365 trillion KRW in 2012 to 948.9 billion KRW last year. Operating profit turned from 63.7 billion KRW profit to a 77.1 billion KRW loss, and net profit fell from 61 billion KRW profit to a 53.5 billion KRW loss during the same period.

In contrast, Namyang Dairy Products' biggest competitor, Maeil Dairies, has shown the opposite trend.

During the same period, Maeil Dairies' market capitalization increased by 43.3%, from 418.8 billion KRW to 600 billion KRW. Including the market capitalization of Maeil Holdings, the holding company spun off from Maeil Dairies in 2017, Maeil Dairies' market cap has grown 1.75 times.

In terms of performance, Maeil Dairies' sales, operating profit, and net profit last year were 1.6461 trillion KRW, 86.5 billion KRW, and 57.7 billion KRW, respectively, representing growth of 36.44%, 225.56%, and 179.72% compared to 2012.

In 2012, Maeil Dairies lagged behind Namyang Dairy Products in sales, operating profit, and net profit but began to significantly surpass it starting last year.

Especially last year, when the COVID-19 pandemic struck hard, Namyang Dairy Products' sales decreased by 7.95%, whereas Maeil Dairies' sales increased by 5.01%, further widening the gap.

Namyang Dairy Products announced on the 13th that its product 'Bulgari' helps suppress COVID-19, and since then, various satirical images have been circulating online.
[Photo by Online Community Capture]

Meanwhile, the boycott of Namyang Dairy Products began in January 2013 after the 'dealer power abuse' controversy erupted over Namyang Dairy Products forcing dealers to purchase goods.

Last year, it was revealed that Chairman Hong Won-sik and others used a PR agency to post defamatory articles about Maeil Dairies, leading to prosecution with indictments recommended, and the controversy continued steadily, sustaining consumer boycotts against Namyang Dairy Products.

In response, Namyang Dairy Products minimized the exposure of its brand on products, which instead sparked consumers' 'hidden Namyang Dairy Products product finding' game, further fueling the boycott.

With its image severely damaged by continuous controversies, Namyang Dairy Products recently launched 'COVID-19 marketing' to try to turn the tide.

On the 13th, Namyang Dairy Products announced at a symposium on 'Development of Antiviral Foods in the COVID-19 Era' that its fermented milk product, Bulgari, was confirmed domestically for the first time to have antiviral effects against COVID-19. Following this, Namyang Dairy Products' stock price surged, and Bulgari sales skyrocketed.

However, the Korea Disease Control and Prevention Agency and experts pointed out that the experimental results announced by Namyang Dairy Products were greatly exaggerated. Additionally, the Ministry of Food and Drug Safety stated, "An urgent on-site investigation confirmed that Namyang Dairy Products actively participated in the research and symposium," and announced plans to file charges against Namyang Dairy Products for violating the Food Labeling and Advertising Act.

In response to these controversies, Namyang Dairy Products officially apologized, stating, "We caused consumer misunderstandings," but consumers reignited the boycott, even raising suspicions of stock price manipulation by Namyang Dairy Products.

On the 18th, various online community boards were flooded with posts such as, "When I first saw the Bulgari article, I thought I should buy it immediately, but the experiment subjects were dogs and monkeys, and the presenter was a Namyang Dairy Products executive. I was considering eating Namyang Dairy Products after years, but I will continue to boycott," "Namyang Dairy Products is not trustworthy," and "I think this is possible only because it's Namyang Dairy Products. They keep creating reasons to boycott."