Coupang-CJ CheilJedang Supply Negotiations Stalled for 5 Months
Profit Sacrifice Difficult Amid Management Uncertainty
CJ Forms Successive Partnerships with E-commerce... Seen as 'Market Expansion' Effort
The so-called 'Hetbahn War' between Coupang and CJ CheilJedang, which has been ongoing since the end of last year over delivery prices and margin rates, is turning into a war of attrition. Although it was seen as an annual conflict between distributors and manufacturers over pricing control, negotiations between the two sides have extended beyond the expected timeframe.
Conflict Continues for 5 Months... Finding a Compromise Is Not Easy
According to industry sources on the 17th, Coupang and CJ CheilJedang have yet to reach a clear agreement five months after the order suspension incident in November last year. The two companies continue to negotiate the unit price of CJ CheilJedang products supplied to Coupang, but differences remain difficult to bridge. The conflict began in mid-November last year over delivery prices and margin rates. Eventually, Coupang stopped ordering popular CJ CheilJedang products including Hetbahn, Bibigo dumplings, and kimchi. Even now, during ongoing negotiations, it remains difficult to purchase CJ CheilJedang’s flagship products like Hetbahn through Coupang’s Rocket Delivery service.
CJ CheilJedang claims that Coupang demanded excessive margin rates, which they refused, but Coupang unilaterally stopped placing orders afterward. On the other hand, Coupang argues that the measure was taken because CJ CheilJedang failed to deliver the promised order volumes before contract renewal. During this process, the conflict between the two sides also took the form of a public relations battle. Previously, Lotte Mart also experienced an order suspension incident due to disagreements over delivery prices. (Asia Economy, December 27, 2022, '[Exclusive] "Delivery Price Conflict" Lotte Also Suspends Transactions with CJ CheilJedang Following Coupang' article) Negotiations between Lotte Mart and CJ CheilJedang were amicably resolved in about a month, but Coupang and CJ CheilJedang have yet to reach a consensus.
The ongoing stalemate is partly due to increased cost burdens from rising raw material prices and logistics expenses since last year. Both sides are in a position where they cannot afford to sacrifice profitability amid worsening internal and external business environments. Recently, the government has actively intervened to curb price hikes, making it difficult to raise prices for profitability improvement. Initially, it was widely expected that the longer the dispute dragged on, the more losses both sides would incur, leading them to narrow their differences and reach a compromise soon. However, due to differing goals and the background of the order suspension, the conflict is unlikely to be easily resolved.
E-commerce Gains Windfall... A New Path for CJ?
Meanwhile, as the tension between Coupang and CJ CheilJedang continues, other e-commerce companies like Naver Shopping and Kurly have enjoyed windfall benefits. Naver Shopping has featured CJ CheilJedang’s Hetbahn as a flagship product in its 'Naver Arrival Guarantee' service. This service analyzes various data such as order information, logistics inventory, and courier delivery to guarantee delivery dates with high accuracy. As of the previous day, CJ CheilJedang’s Hetbahn (210g) 24-pack and 36-pack ranked 3rd and 5th respectively among the best products with real-time arrival guarantees on Naver.
Kurly recently signed a Joint Business Plan (JBP) agreement with CJ CheilJedang for a strategic partnership. The two companies will jointly develop differentiated food products including fresh foods, processed foods, and home meal replacements (HMR). Kurly’s product planners (MDs) will participate from the product planning stage of CJ CheilJedang’s products, with plans to launch Kurly-exclusive products within the year.
Some view these moves as efforts to find alternative channels to replace Coupang. Amid the ongoing conflict, CJ CheilJedang is actively expanding its online sales channels by increasing contact points with Coupang’s competitors. However, CJ CheilJedang cautions against overinterpretation, stating that "collaborations with other platforms would have proceeded as planned even without this situation." Coupang is also refraining from comments beyond stating that negotiations are still ongoing.
An industry insider said, "For Coupang, the number one e-commerce company, and CJ CheilJedang, the top food company, this has become a battle neither can easily back down from," adding, "However, since both remain essential trading partners to each other, the situation is unlikely to escalate to extremes."
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