[Person人] "Hardened Shin Dong-bin" Meets Subsidiary CEOs One-on-One + Accelerates On-Site Management

Shin Dong-bin, Chairman of Lotte Group.

Visiting Lotte Fine Chemical and Aluminum Factories
Marking This Year as the First Year of Turnaround
Actively Urging Preparation for Post-COVID and Creation of New Growth Engines

[Asia Economy Reporter Kim Yuri] Shin Dong-bin, Chairman of Lotte Group, is continuing his aggressive moves this year. In his New Year's address, he quoted social and political activist Angela Davis's phrase, "If you lay down the wall, it becomes a bridge," emphasizing that "instead of despairing at the wall in front of us, we must make this year a time to lay down the wall together and use it as a stepping stone for a leap forward." To turn crisis into opportunity, Chairman Shin is working on improving the structure of the group's core businesses, such as distribution, hotels, and food, which were directly hit by COVID-19 last year, while also focusing on discovering new growth engines.

◆ Frequent Communication with Subsidiary CEOs

Recently, Chairman Shin has been actively engaging in one-on-one meetings with subsidiary CEOs to review current issues at each company. Even CEOs who had previously set and reported business plans at the beginning of the year are now maintaining a regular meeting system, keeping up their vigilance. According to a senior Lotte Group official, Chairman Shin has urged subsidiary CEOs to focus on strategies for a leap forward rather than just numbers. The official said, "(Chairman Shin) did not reprimand CEOs of underperforming subsidiaries but asked them to find problems internally rather than blaming external factors like market conditions or COVID-19," interpreting this as a way to check whether preparations for the post-COVID era are well in place for each subsidiary. It is analyzed that he is conducting a mid-term review of the 'strong execution' and resulting 'synergy creation' emphasized in the New Year's address.

Lotte experienced a painful year last year. After announcing the closure of about 200 offline stores, more than 110 stores shut down operations last year alone. In Lotte Shopping's personnel changes last year, 25 executives retired en masse. The industry evaluates this as reflecting the urgency felt by Lotte. To turn the tide, young leaders in their early 50s were appointed to head Lotte Mart, Lotte Chilsung Beverage, Lotte Food, Lotte Chemical Basic Materials, Lotte GRS, and Lotte Information & Communication, among others.

The fact that the distribution industry is at a major turning point is also a background for active communication. There is a strong sense of crisis that missing the flow of changes in the distribution market even once will make it difficult to recover. Chairman Shin sees great importance in Lotte ON for the group's future and business strategy, and has recruited Na Young-ho, former head of strategic planning at eBay Korea, as the new vice president-level CEO of Lotte ON to encourage a turnaround.

◆ Driving 'On-site Management'

On the 15th, Chairman Shin visited Lotte Fine Chemical's Incheon plant and Lotte Aluminum's Ansan Plant 1 consecutively. Lotte Fine Chemical's Incheon plant is the only domestic production facility for food and pharmaceutical cellulose derivatives, and Chairman Shin's visit was symbolic as the plant recently completed expansion work and is about to start commercial production. He inspected production facilities and exchanged opinions with on-site personnel about the development direction of Lotte Fine Chemical's green materials (high-performance cellulose-based products). The Lotte Aluminum Ansan Plant 1, which Chairman Shin visited next, completed expansion of its cathode foil production line for secondary batteries in September last year. Chairman Shin emphasized, "We must actively invest in high-value specialty materials and battery materials to become a globally competitive company." He also stated that sustainable growth engines must be secured through proactive discovery of new business opportunities in ESG (environmental, social, and governance) factors.

Chairman Shin's on-site management and the messages delivered through it have become noticeably frequent. On the 8th, he visited the Lotte Hi-Mart Mega Store Apgujeong branch in Gangnam-gu, Seoul. Since reopening as an experiential store in March, the Mega Store Apgujeong branch succeeded in attracting customers and achieved sales of 20 billion KRW within three weeks. Chairman Shin's visit was analyzed as a gesture to encourage employees and to set the direction for Lotte Group's offline stores in the future.

On the 27th of last month, he also visited Jamsil Baseball Stadium to watch a Lotte Giants game. This was his first visit to a baseball stadium in six years since September 11, 2015. With Shinsegae Group acquiring SSG Landers this year, creating a rivalry between distribution competitors, and offline distribution channels becoming a hot topic, the industry interpreted his baseball stadium visit as a response to this situation.

◆ "Find Companies That Could Bring Down Lotte"

Chairman Shin is making this year the first year of turnaround for Lotte Group and is actively urging the creation of new growth engines. His consecutive on-site visits are not unrelated to this blueprint. Lotte Fine Chemical plans to expand its business portfolio with green materials and increase sales from about 1.2 trillion KRW last year to 5 trillion KRW by 2030.

Another future growth area that Chairman Shin is interested in is 'Food Tech.' Lotte has established the Lotte Agro-Food Tech Fund worth 15.2 billion KRW to promote a food tech startup nurturing project. The plan is to nurture food tech startups involved in developing alternatives for current food and beverages such as soy meat and future food market development like shared kitchens. Lotte plans to systematically support food tech startups and lead the future food and beverage industry ecosystem through collaborative development with startups beyond large corporations' research and development (R&D).

For several years, Chairman Shin has also been looking for "companies that could bring down Lotte." This reflects his determination to nurture promising companies that surpass investment companies. Recently, Lotte Group's venture capital (CVC), Lotte Accelerator, which recently changed its name to Lotte Ventures, plans to expand connections with startups by establishing promising industry-specific funds. Lotte Ventures was created after Chairman Shin requested the Lotte Future Strategy Research Institute in 2015 to design a startup incubation system similar to the U.S. Y Combinator. Lotte Ventures' startup incubating program 'All Camp' has shown results, with the corporate value of resident startups exceeding 1 trillion KRW over the past five years.