[Asia Economy Reporter Jo In-kyung] Lotte Group is abruptly abolishing the Business Unit (BU) organization it has operated for the past four years and transitioning to an industry group (HQ·HeadQuarter) system. Vice Chairman Kang Hee-tae, who has led the Distribution BU for the past two years, is stepping down, and Lee Bong-cheol, head of the Hotel & Service BU, is also leaving.
On the 25th, starting at 9 a.m., Lotte Group will hold board meetings at Lotte Holdings and each affiliate to approve the regular executive personnel appointments and organizational restructuring plan for the next year. The final personnel results are expected to be confirmed and announced around 2 p.m. that day.
Vice Chairman Kang Hee-tae, who serves as head of the Distribution BU and CEO of Lotte Shopping, is resigning taking responsibility for continued poor performance and sluggish online business. A global company executive from outside the group is being considered as the new head of the distribution division. An insider said, "As Kang’s successor, we understand that an external executive personally recruited by Chairman Shin Dong-bin about a year ago will be appointed."
Jung Joon-ho, CEO of Lotte GFR, has been nominated as the new CEO of Lotte Department Store. Jung, originally from Shinsegae, was recruited when Lotte Shopping spun off Lotte GFR in 2018 to strengthen its fashion business. This is the first time an external executive has been appointed as CEO of Lotte Department Store, the group’s core business, reflecting the sense of crisis over continued poor performance.
Lee Bong-cheol, head of the Hotel & Service BU responsible for hotel and duty-free businesses, is also being replaced due to responsibility for the sharp sales decline caused by COVID-19. His successor is also expected to be an external hire rather than an internal promotion.
Along with the personnel changes, Lotte Group decided to change the operation method from four BUs divided into distribution, chemicals, food, and hotel & service to four HQs (distribution, chemicals, food, hotel). Affiliates not included in these HQs, such as Lotte Information & Communication, Lotte Members, and Lotte Rental, will be managed separately.
This is the first time in four years since the 2017 organizational restructuring that Lotte Group is abolishing the BU system. The existing organizational structure was criticized for having too many decision-making steps across affiliates, which lowered business execution capability within the group. Chairman Shin Dong-bin reportedly gave special instructions to improve these issues.
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