Hite Jinro Reports Operating Profit of 174.6 Billion KRW Last Year, Down 12% from Previous Year
OB Beer Posts Operating Profit of 262 Billion KRW, Staying Above 200 Billion KRW for Second Year
Impact of Eased Social Distancing This Year... Recovery Centered on Entertainment Channels
Average Price Increase of 7.7% on Own Beers Like Terra and Cass
Market Recovery Outlook Fuels Intensified Market Share Competition
[Asia Economy Reporter Eunmo Koo] As the long-lasting COVID-19 pandemic caused a slump in the commercial (entertainment) market, which was the main pillar of existing sales, HiteJinro and OB Beer faced difficulties again last year. However, with price increases and the easing of quarantine policies this year, there are voices expecting a recovery in the entertainment market, suggesting a possible rebound.
According to the Financial Supervisory Service's electronic disclosure system on the 11th, HiteJinro posted operating profit and sales of 174.1 billion KRW and 2.2029 trillion KRW last year, down 12.2% and 2.4% respectively from the previous year, resulting in disappointing performance. In particular, sales in the beer division shrank by 10.1% from 811.9 billion KRW in 2020 to 730.1 billion KRW last year.
OB Beer also recorded an operating profit of 262 billion KRW last year, down 11.0% from the previous year. During the same period, sales also decreased slightly by 0.62% to 1.3445 trillion KRW. OB Beer's operating profit peaked at 515.4 billion KRW in 2018 and has been declining annually, remaining in the 200 billion KRW range for two consecutive years since 2020.
This poor performance is due to the entertainment market being depressed by the COVID-19 pandemic, which has continued for three years. The liquor market had a large sales share from entertainment markets such as general restaurants and pubs. However, with the prolonged pandemic, social distancing and operating hour restrictions reduced the share of entertainment sales, which had been as high as 60%, down to about 30%, directly impacting the liquor industry's performance.
The liquor industry notes that although the share of home drinking market sales has expanded due to the increase in 'home drinking' consumers, it is difficult to recover previous performance levels without a recovery in the entertainment market. An industry insider explained, "The ratio between entertainment and home use, which was about 60:40, has reversed since COVID-19," adding, "Even if the home market expands, it is insufficient to fully compensate for the gap left by the entertainment market." Additionally, the surge in prices of various raw materials and supplies due to global supply chain disruptions after COVID-19 also affected the poor performance.
However, this year, thanks to price increases and the government's easing of quarantine policies, a recovery centered on entertainment channels is expected. Earlier, HiteJinro and OB Beer raised the ex-factory prices of their beer products such as Terra and Cass by an average of 7.7%. Recently, social gathering limits were relaxed to a maximum of 10 people, and operating hours for multi-use facilities were extended until midnight, easing social distancing measures.
Jihye Jang, a researcher at DS Investment & Securities, predicted, "The domestic liquor market, which had declined over the past two years, will rebound this year centered on dining out and entertainment channels due to the easing of social distancing," and added, "The share of entertainment channels, which was about 30% last year, is expected to recover to around 40% this year."
As the liquor market is expected to recover, competition to increase market share is heating up again. HiteJinro is engaging in aggressive marketing by leveraging collaborations such as the bottle opener ‘Spooner,’ inspired by a spoon, and ‘Pringles,’ while OB Beer is targeting the home market and younger consumers by launching the wheat beer ‘Cass White,’ which will go on sale starting this month.
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