[Asia Economy Reporter Moon Hyewon] LG Household & Health Care has extended its Coca-Cola contract, which was previously renewed every 5 years, to 10 years this year.
According to the distribution industry on the 13th, LG Household & Health Care recently renewed this contract with the U.S. Coca-Cola headquarters.
It is an unusual move by the U.S. Coca-Cola headquarters, which typically renews contracts every 5 years, to double the contract period like this, according to the distribution industry. It is known that the U.S. headquarters doubled the contract period from the previous term in exchange for a promise to increase Coca-Cola sales in Korea.
LG Household & Health Care is the largest shareholder holding 90% of Coca-Cola Beverage's shares. LG Household & Health Care signed a concentrate sales contract with Coca-Cola Beverage (then Korea Coca-Cola Bottling) in 2007.
LG Household & Health Care, which has continued its beverage business not only with cola but also coffee, carbonated, ion, energy drinks, and juices, plans to introduce Fairlife, a premium U.S. milk brand acquired by Coca-Cola, to Korea next year. By selling milk, which it has not sold before, through Fairlife, the company aims to complete its beverage business portfolio.
LG Household & Health Care's focus on the beverage business is interpreted as a response to the contraction of Chinese cosmetics sales, which it had heavily relied on until now.
In the first half of this year, beverage sales including Coca-Cola reached 859.1 billion KRW, a 12% increase compared to the same period last year. During the same period, the proportion of beverages in total sales increased from 19% to 25%.
On the other hand, the proportion of cosmetics sales steadily decreased from 61.7% in 2019 to 56.8% in 2020 and 54.8% last year.
A distribution industry official said, "Concerns over sluggish Chinese cosmetics sales likely led to the expansion of the beverage business."
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