[Asia Economy Reporter Seungjin Lee] Lotte Chilsung Beverage succeeded in a rebound in the first quarter, driven by the strong performance of its alcoholic beverage business. The growth of Lotte Chilsung Beverage's flagship beer Cloud and the increased wine sales due to COVID-19 had a significant impact.
On the 29th, Lotte Chilsung Beverage announced that its operating profit last year recorded 32.3 billion KRW, a 416.2% increase compared to the same period the previous year. During the same period, sales increased by 6.2% to 538.8 billion KRW. Net profit turned positive at 16.4 billion KRW.
Beer and Wine Advance... Soju Slightly Declines Amid Prolonged COVID-19
The alcoholic beverage sector showed remarkable growth by business division. Total sales of the alcoholic beverage business in the first quarter recorded 138.4 billion KRW, a 15.8% increase compared to the same period last year. Operating profit turned positive at 9.3 billion KRW. In particular, beer and wine played a key role.
Beer sales in the first quarter increased by 67.1% year-on-year to 20.6 billion KRW. The rise in 'home drinking' consumers due to COVID-19 led to increased demand for beer. Last year, the launch of Cloud Draft expanded the lineup with premium beer Cloud and regular beer Cloud Draft. Wine sales also rose by 67.3% year-on-year in the first quarter, reaching 22.1 billion KRW, supported by the increase in home drinking.
Soju sales, which account for more than one-third of total alcoholic beverage sales, slightly declined. First-quarter soju sales were 55.6 billion KRW, down 0.7% compared to the same period last year. This was due to restrictions on dining out and company dinners amid the prolonged COVID-19 pandemic.
Overseas businesses in the U.S., China, and Japan are also progressing smoothly. Total overseas sales in the first quarter were 19.9 billion KRW, with Japan accounting for 14 billion KRW. Overseas business operating profit was 1.7 billion KRW.
Lotte Chilsung Beverage plans to renew the PET bottle product of Chum Churum in June for the first time and consolidate the Gangneung and Cheongju factories into the Gangneung factory to enhance both competitiveness and profitability. Next month, it will also expand the low-alcohol market with 7-degree 'Strong' canned beer and 4.5-degree regular canned beer.
Reduced Workplace and School Meals... Beverage Business Slumps
Beverage business sales in the first quarter were 347.7 billion KRW, down 1.2% year-on-year. Operating profit during the same period was 22.3 billion KRW, a 10.9% decrease compared to the previous year.
By product category, juice sales were sluggish. Juice sales in the first quarter decreased by 6.2% year-on-year to 39.6 billion KRW. This decline is attributed to the reduction of workplace and school meal services due to COVID-19, which also impacted juice sales. Bottled water sales also fell by 4.3% compared to last year, recording 35.3 billion KRW in sales, affected by the cancellation of outdoor group events due to COVID-19.
On the other hand, sales of sparkling water and energy drinks increased by 19.6% and 18.6% respectively year-on-year in the first quarter. Sparkling water recorded sales of 16.3 billion KRW, and energy drinks 9.4 billion KRW. Carbonated beverage sales, which hold the largest share in the beverage business, slightly increased by 0.8% to 154.2 billion KRW compared to last year.
By sales channel, sales at dealerships/franchise stores and restaurants declined, while online channel sales such as open markets and the company's own 'Chilsung Mall' grew by 68.3%.
As part of expanding ESG (Environmental, Social, and Governance) management, Lotte Chilsung Beverage will expand its label-free product lineup. After launching the first label-free bottled water in June last year, the company plans to release label-free sparkling water and cola products in May and June, following cider and coffee.
Additionally, the company plans to expand its regular delivery service, which was mainly focused on bottled water, to include sparkling water, tea, and coffee. It will also reorganize the bottled water delivery system, switching from parcel delivery to entrusted delivery by individual business operators to improve service quality. Furthermore, Lotte Chilsung Beverage, which launched Jeongseong Fermented Juice and Kombucha, plans to release functional health foods in the second half of this year.
Meanwhile, Lotte Chilsung Beverage forecasts that its total sales this year will increase by 5.9% year-on-year to 2.289 trillion KRW, and operating profit will rise by 7.6% year-on-year to 175 billion KRW.
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