Kooksoondang's Operating Profit Halved Last Year... Aiming for Rebound with 'Tequila'

Last Year Sales 74.6 Billion KRW, Operating Profit 4.5 Billion KRW
Down 5.5% and 51.2% YoY
Domestic and Overseas Sales Slump, Decreased Financial Income Impact
Strengthening Alcohol Import Business Including Wine and Tequila

After the COVID-19 pandemic, the home drinking and solo drinking craze combined with the traditional liquor boom helped Kooksoondang sail smoothly, but the company posted somewhat sluggish results last year. As the liquor trend changed after the endemic phase, the upward trend that had continued since 2020 was broken after three years. To recover its performance, the company is actively expanding its business area beyond just manufacturing and distributing traditional liquor to include imported liquors such as wine and tequila to respond to the market.

Kooksoondang 'Kooksoondang Saeng Makgeolli'

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 27th, Kooksoondang's consolidated sales last year amounted to 70.5 billion KRW, down 5.5% from 74.6 billion KRW a year earlier. Operating profit during the same period also decreased by 51.2% to 4.5 billion KRW from 9.1 billion KRW the previous year, breaking the upward trend that had continued since the COVID-19 pandemic in 2020 after three years.

Both domestic sales and overseas exports declined, turning overall performance downward. Domestic sales as of the third quarter last year were 44.6 billion KRW, down 4.2% from 46.6 billion KRW in the same period the previous year. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), the total retail market sales of takju (traditional Korean rice wine) in Korea last year were 575.4 billion KRW, down 4.8% from 604.5 billion KRW a year earlier. Kooksoondang's takju sales, including 'Kooksoondang Saeng Makgeolli,' also shrank by 4.8% to 44.3 billion KRW from 46.5 billion KRW the previous year.

Exports, which had steadily increased, also retreated. All categories, including the representative product 'Baekseju' and other yakju (medicinal liquors), takju, and other liquors, shrank, with export revenue reaching only 9.1 billion KRW by the third quarter last year. This is a 13.3% decrease compared to 10.5 billion KRW in the third quarter of 2022. Traditional Korean liquor exports overall showed a downward trend last year. According to the Korea Customs Service, domestic takju exports last year amounted to 13,983 tons, down 9.2% from the previous year, and export value shrank by 6.3% to 14.69 million USD (approximately 19.5 billion KRW), halting the upward trend that had continued since 2020.

Besides its core business of manufacturing and distributing traditional liquor, losses from financial products also affected the performance decline. Financial income, including interest, dividends, fee income, and gains from the disposal of equity investments in affiliates, had consistently generated additional revenue for Kooksoondang through expanded financial investments. However, Kooksoondang's financial income decreased from 19.6 billion KRW in 2020 to 18.6 billion KRW in 2021 and 7.4 billion KRW in 2022. Last year, financial income reached 6.2 billion KRW by the third quarter, about 30% higher than 4.6 billion KRW in the same period a year earlier, but it remained sluggish compared to previous years.

Kooksoondang's sluggish performance last year is closely related to the changed liquor trends after the endemic phase. During the pandemic, the home drinking and solo drinking culture gained attention, increasing consumer interest in various types of alcoholic beverages, benefiting the traditional liquor industry, including Makgeolli. However, as daily life recovered after the endemic phase, the existing soju market regained its position, and demand shifted toward high-proof premium liquors such as whiskey, causing consumer interest in the relatively smaller traditional liquor industry to wane, and Kooksoondang was no exception.

Additionally, in July last year, the World Health Organization (WHO) classified the artificial sweetener 'Aspartame' as a possible carcinogen, which was a painful blow to the Makgeolli industry, including Kooksoondang. At that time, Makgeolli companies using Aspartame stated that they used only small amounts averaging 0.0025% in some products under legal standards, so there was no problem, but it was insufficient to alleviate consumer concerns.

Kooksoondang's '818 Tequila' Officially Launched Domestically This Month

With the growth momentum built over three years during the pandemic halted, Kooksoondang is seeking new opportunities through portfolio diversification. Earlier, Kooksoondang entered the wine business by acquiring Haitai & Company (formerly Haitai Industry) in 2003. Currently, Kooksoondang imports and sells more than 300 types of wines ranging from low-priced wines in the 10,000 KRW range to premium cult wines priced at around 1 million KRW. Kooksoondang's strategy is to source wines that pair well with Korean cuisine to boost domestic consumer demand. As of the third quarter last year, the wine business accounted for about 12.8% of Kooksoondang's total sales.

Recently, the company expanded into tequila. Starting this month, Kooksoondang officially launched sales of '818 Tequila,' a brand released by the global model Kendall Jenner. The company is also showing aggressive marketing efforts, including a pop-up event at 'The Hyundai Seoul' in Yeongdeungpo-gu, Seoul, until the 7th of next month. A Kooksoondang official said, "As a leading traditional liquor company in Korea with a deep understanding of liquor culture and a history of steadily introducing value wines to the domestic market, this opportunity led us to introduce tequila this time. We will strive to showcase diverse liquor cultures in Korea."