Lotte Chilsung Beverage, Lotte Confectionery, Lotte Foods, etc. See 'Soaring' Performance
Results of Several Years of Structural Improvement, Q1 Operating Profit Up 76.4%
[Asia Economy Reporter Lim Hye-seon] Despite COVID-19, the turnaround of the three major food and beverage companies under Lotte Group, whose performance had stalled last year, has begun. It is evaluated that the ZBB project (Zero-Based Budgeting, budgeting from zero every year) led by Lee Young-gu, head of the Food Business Unit (BU), which has been ongoing for several years, has paid off.
Lotte Food and Beverage Trio's Operating Profit Soars
According to the food and beverage industry and securities industry on the 22nd, the operating profit of Lotte Chilsung Beverage, Lotte Confectionery, and Lotte Foods in the first quarter of this year is estimated to have increased by 76.4% year-on-year to 60.6 billion KRW. Sales are expected to increase by 3.0% to 1.4182 trillion KRW.
Lotte Chilsung's sales and operating profit are expected to reach 520.9 billion KRW and 23.4 billion KRW, respectively, up 2.66% and 271.32% compared to the same period last year. The strong performance was driven by the success of Cloud Saengdraft and increased wine sales, and beverage sales reduced the decline due to new product launches such as Zero Cider and Zero Pepsi, as well as the expansion of the delivery market.
Lotte Confectionery's first-quarter sales and operating profit are estimated at 517.5 billion KRW and 26.3 billion KRW, respectively, up 3.13% and 42.93%. Despite the off-season, ice cream sales increased domestically and in India, improving both scale and profitability. Lotte Foods is expected to post first-quarter sales of 423 billion KRW, up 2.27%, and operating profit of 11 billion KRW, growing 11.11%.
Better in the Second Half
The turnaround of the three Lotte Group food and beverage companies is thanks to the structural improvement efforts led by Lee Young-gu, head of the Food BU, over several years. Rather than simply cutting costs, all businesses and activities are reviewed and budgets are set annually based on a 'zero' standard, reducing unnecessary expenses and increasing efficiency.
Lotte Liquor's soju brand, Cheoeum Cheoreom, once saw its market share fall to 13%, but it has now recovered to 15%. In the struggling beer business, aggressive marketing is being conducted using BTS for the Cloud Saengdraft model. This year, the goal is to raise market shares of soju and beer to 17% and 7%, respectively. Beer OEM production will also begin in the second quarter. The securities industry expects Lotte Chilsung to achieve its highest-ever operating profit this year.
Lotte Confectionery is focusing on overseas business. It has expanded into Kazakhstan, Pakistan, India, Russia, Belgium, and Myanmar. Although the countries of overseas expansion are mainly emerging markets heavily impacted by COVID-19, each holds the number one local brand, so the normalization speed is expected to be rapid.
Lotte Foods is expanding its home meal replacement (HMR) business based on its know-how in producing convenience store ready meals. It invested 93 billion KRW to expand the Gimcheon factory, which manufactures ham and sausages, and set up HMR production facilities. Initially, frozen products such as dumplings and fried foods will be produced. The ongoing renewal of the HMR brand Chef'd is also planned to be completed within the first half of the year.
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