Murabel, BTS... Park Yoon-gi's Strategy Worked for Lotte Chilsung Beverage

Yoon-ki Park, CEO of Lotte Chilsung Beverage

[Asia Economy Reporter Seungjin Lee] Lotte Chilsung Beverage is sailing smoothly six months into the leadership of CEO Park Yoon-gi (51). Park, a ‘young CEO’ in his early 50s, is credited with bold management decisions that have paid off. Under Park’s ‘selection and concentration’ management strategy, Lotte Chilsung Beverage recorded an earnings surprise in the first quarter of this year and continues its upward trend into the second quarter.

Profitability-Focused ‘Selection and Concentration’

Upon his appointment in December last year, CEO Park immediately began slimming down Lotte Chilsung Beverage. The management policy is to decisively cut unprofitable businesses while focusing on highly profitable ones to enhance efficiency.

First, the beverage business reduced the number of product items from 500 at the end of 2017 to recently 400. This year, the goal is to further reduce to 370 items. The number of beverage factories will also be cut from six to four. The logistics hubs will be downsized from the current 69 to less than half, at 33 locations.

The liquor business is also being streamlined. Since last year, logistics hubs have been optimized from 21 to 15 locations. The beer ‘Cloud,’ previously produced at the Chungju Plant 1, was transferred to Plant 2. Instead, Plant 1 is being utilized as a craft beer cluster. Meanwhile, changes and innovations continue in highly profitable businesses. A representative example is the expansion of eco-friendly label-free products. Popular products among consumers have been proactively transformed into label-free versions, increasing interest.

In January last year, Lotte Chilsung Beverage introduced 'Icis 8.0 ECO,' the first domestic bottled water brand to remove labels. They also launched the label-free version of their flagship carbonated drink, 'Chilsung Cider ECO' 300ml. Recently, they introduced a new product where the label was removed from the coffee Cantata NB can body and the design was directly printed to enhance recyclability. All of these are Lotte Chilsung Beverage’s star products.

BTS·Jennie... Working on Image Improvement

Lotte Chilsung Beverage is aggressively conducting marketing activities to quickly improve its image. Celebrating the 7th anniversary of ‘Cloud’ this year, the brand revamped its packaging and selected the group BTS as its advertising model to target younger generations. Jennie from the group BLACKPINK was appointed as the model for the soju ‘Cheoeum Cheoreom,’ showing efforts to capture ‘fan loyalty’ for both soju and beer.

Especially after selecting BTS as the model, ‘Cloud’ reportedly saw a surge in sales due to the enthusiastic market response. BTS fans continuously share ‘Cloud’ advertisements on social media (SNS), contributing to image improvement and securing future customers.

The company is also proactive in change. Following the revision of the Liquor Tax Act that allowed contract manufacturing (OEM) of craft beer from 2021, Lotte Chilsung Beverage preemptively transformed Chungju Plant 1 into a craft beer cluster and began sharing factory facilities. This was a choice favoring practicality over pride.

The ‘Gompyo Wheat Beer’ currently produced under contract at Chungju Plant 1 sold out all 3 million units within two weeks, significantly increasing the previously low operating rate of Chungju Plant 1. Additionally, profitability greatly improved through OEM production.

"Focusing on Securing Market Competitiveness"

On a consolidated basis, Lotte Chilsung Beverage recorded an earnings surprise in the first quarter of this year with sales of 538.8 billion KRW and operating profit of 32.3 billion KRW. These figures represent increases of 6.2% and 416.2%, respectively, compared to the same period last year. Net profit also turned positive at 16.4 billion KRW.

The liquor division turned profitable, posting 9.3 billion KRW in operating profit in the first quarter after a loss of 17.6 billion KRW last year. Reducing fixed costs and improving workforce efficiency helped solidify the business. Sales increased by 15.8% to 160.3 billion KRW compared to 138.4 billion KRW in the same period. The beverage division saw a slight decline compared to the previous year, with sales down 1.2% to 347.7 billion KRW. Juice and bottled water sales decreased by 6.2% and 4.3%, respectively.

The overall performance this year is also expected to improve compared to last year. According to financial information provider FnGuide, Lotte Chilsung Beverage is projected to record sales of 2.3655 trillion KRW and operating profit of 146.4 billion KRW this year.

CEO Park stated, “In the beverage division, we plan to focus on securing market competitiveness for zero-calorie carbonated drinks in line with the growth of the delivery market and the trend toward low-sugar preferences. In the liquor division, we will target the summer peak season and focus on expanding market share based on the renewed ‘Cheoeum Cheoreom’ and ‘Cloud’ and ‘Cloud Saeng Draft,’ which feature BTS as the model.”

He added, “This year, outdoor activities and consumption are expected to increase with the anticipation of recovery from COVID-19, and summer temperatures are forecasted to be higher than usual. Along with these positive environmental factors, we will leverage our highly competitive beverage and liquor brands to achieve meaningful performance improvements this year.”