Lotte Wellfood Without Sugar... Profits Have Become Sweeter

Last Year’s Sales Exceeded 4 Trillion Won... Operating Profit Up 66%
Health and Wellness Business Led by 'Zero' Successfully Settles
Accelerating Overseas Expansion Based on Indian Market

Marking its third year since the establishment of the integrated corporation of Lotte Confectionery and Lotte Foods, Lotte Wellfood is strengthening merger synergies through efficiency improvements such as the integration of production facilities and is preparing to leap forward as a global comprehensive food company by expanding production bases in overseas markets.

Lotte Wellfood, 10 Types of the 'ZERO' Series

Sugar-Free Brand ‘ZERO’... Driving Profitability Improvement

According to financial information provider FnGuide on the 30th, Lotte Wellfood's sales last year were estimated at 4.1208 trillion KRW, a 28.6% increase compared to the previous year (3.2033 trillion KRW). Operating profit during the same period is expected to record 186.7 billion KRW, up 66.1%.

In its first full year operating under the name Lotte Wellfood last year, the company reportedly maintained solid growth both domestically and internationally. The domestic business led profitability improvement with increased sales in dried fruits including snacks and major product lines, while the ice cream products, a common business area of Lotte Confectionery and Lotte Foods, also contributed by enhancing efficiency through production line integration.

At the core of this is the company’s new growth engine, ‘Health & Wellness.’ Health & Wellness refers to product lines that reduce ingredients like sugar and sodium while enhancing health components such as protein and using organic and plant-based raw materials. Since launching the sugar-free brand 'ZERO' in September 2022, Lotte Wellfood aggressively expanded its lineup last year by introducing new products not only in dried fruits and ice cream but also sausages.

The market responded positively to the new product offensive. Sales of ZERO increased by 61% year-on-year as of the third quarter of last year, leading the growth of the Health & Wellness business. The share of the Health & Wellness category, which accounted for 6.9% of total sales in 2022, rose to about 8.0% by the third quarter of last year and is expected to reach approximately 8.9% by the end of last year. With ZERO successfully landing in the market, the company raised its 2027 sales share target for Health & Wellness to 16-25%, more than double the current level.

The overseas business is also continuing high growth, centered on India. Lotte Wellfood currently operates 20 factories in 7 countries, with India being the first country it entered in 2004 and a key market operating two corporations for dried fruits and ice cream. Lotte India, the dried fruits corporation in India, derives 70-80% of its sales from Choco Pie, with two production lines operating at over 100% capacity. Due to clear demand growth, an additional production line was added at the Chennai factory in southern India in October last year. Strong sales in India and Kazakhstan contributed to overseas sales reaching 597.8 billion KRW by the third quarter of last year, a 5.2% increase year-on-year, while operating profit rose 40.6% to 42.8 billion KRW.

New Factory Completion in India in April... Leading Overseas Market Growth

In its third year post-merger, Lotte Wellfood plans to focus more on overseas business by expanding production bases in key overseas regions this year. In particular, it will strengthen market dominance and pursue continuous growth by expanding production facilities in the Indian market. Following the expansion of the third Choco Pie line at the Chennai factory at the end of last year, which increased annual production capacity by about 1.5 times, the ice cream corporation Havmoa plans to complete a new factory in Pune in April, adding 16 new ice cream lines to the existing 40 lines.

Through this, Lotte Wellfood expects to resolve supply shortages during peak seasons and establish itself as a nationwide player in the high-potential Indian market. Eunji Kang, a researcher at Korea Investment & Securities, said, “Considering the stabilization period of the factory equipment, the Pune ice cream factory can achieve more than 10% sales growth compared to 2023,” and added, “Since investments in the Indian ice cream factory will continue over five years, there is ample room for future growth.”

Along with strengthening local business through overseas subsidiaries, exports are also expanding, mainly to the Americas. Last week, Lotte Wellfood announced that it would sell ZERO and Crispy Roll at Costco in Mexico and Pepero at Costco in Canada. Last year, Lotte Wellfood focused on expanding brand awareness by conducting outdoor advertisements featuring NewJeans as the model in New York, LA, and other locations timed with Pepero Day. Following existing major retail channels like Walmart, entering Costco stores with 40 locations in Mexico and 108 in Canada will further increase export proportions.

Lotte Wellfood 'Zero' Jelly Displayed at Costco Mexico

The domestic business is also expected to expand merger synergies through improvements in the sales structure. Since the launch of the merged corporation in July 2022, Lotte Wellfood has been improving the sales structure and integrating manufacturing and logistics facilities, focusing on the ice cream business. In ice cream, profitability improvements have been seen through reducing inefficient product types, reorganizing sales teams, and consolidating logistics centers. Notably, last month, as part of the ice cream production integration, the company announced an investment of 222 billion KRW to expand the Cheonan ice cream factory, aiming to make it Lotte Wellfood’s largest ice cream production base. The dried fruits business also showed profitability improvements by reducing product types by more than 200 and normalizing sales prices.

Taehyun Kim, a researcher at IBK Investment & Securities, predicted, “By consolidating three bakery factories into two by the first half of this year, and by consolidating four ice cream factories into two and two meat processing factories into one by next year, fixed cost reduction effects will be achieved.” Additionally, the expanding sales share of high-margin Health & Wellness products is expected to contribute to profitability improvements. Health & Wellness products reportedly have a gross profit margin about 20-25% higher than regular domestic products.