CEO Song Hyun-seok Accelerates Business Efficiency
Streamlines Inefficient Operations Including Sale of 'Jeju Soju' to OB Beer
Strengthens 'Wine & More' as a Lifestyle Brand
Shinsegae L&B, which had been struggling to find its footing between distribution and manufacturing, is ending its wandering by focusing on its core business. It has decided to streamline unprofitable soju and whiskey manufacturing businesses, such as selling the troublesome Jeju Soju to OB Beer, and strengthen the distribution competitiveness of imported liquor centered on wine.
"End of Wandering" Exiting Soju and Whiskey, Focusing on Wine
According to the liquor industry on the 23rd, Shinsegae L&B closed four 'Wine & More' specialty liquor stores (Dasan Branch, Gijang Branch, Dongtan Karim Branch, Bucheon Branch) this year and plans to close two more stores within the year. Following the spread of the 'home drinking' culture after the COVID-19 pandemic, demand for wine and whiskey increased, prompting Shinsegae L&B to rapidly expand the number of Wine & More stores. However, as wine's popularity waned since last year, it became inevitable to close underperforming stores. Consequently, three stores (Incheon Dohwa Branch, Seoul National University Entrance Branch, Hanam Branch) were closed last year, and with six more stores closing this year, the number of Wine & More stores, which had increased to 51 in 2022, will decrease to 42.
Since the appointment of CEO Song Hyun-seok in September last year, Shinsegae L&B has been aggressively streamlining unprofitable businesses such as manufacturing and focusing on enhancing competitiveness in its core business of wine import and distribution. In last year's regular executive personnel reshuffle, Shinsegae Group appointed Song Hyun-seok, CEO of Shinsegae Food, as the concurrent CEO of Shinsegae L&B, responsible for the group's liquor business. This was to guide the company, which had been struggling to find its path between liquor import and manufacturing, contrary to its goal of becoming a comprehensive liquor company.
Under CEO Song's leadership, Shinsegae L&B is accelerating the streamlining of unprofitable businesses beyond just closing Wine & More stores. The whiskey business, which had been fervently pursued with the goal of K-whiskey?signing a distillery purchase contract with the Scottish distillery company 'Forsyths' and filing trademarks such as 'Jeju Whiskey'?was halted by disbanding the dedicated 'W Business' team. Additionally, in February, the company decided to discontinue the sparkling beer 'Let's' about two years after its launch.
The recent sale of Jeju Soju to OB Beer marks a milestone in the company's structural reform. Jeju Soju, acquired by E-Mart in 2016, had been struggling with deficits and was merged into Shinsegae L&B in 2021 under the pretext of business efficiency. However, it failed to turn around and was effectively put up for sale after being spun off in June. The sale was reportedly finalized through a private deal directly conducted by CEO Song, who served as Vice President of Marketing at OB Beer for about eight years from 2010.
Focus on Performance... Strengthening Wine & More as a Lifestyle Brand
With a clear direction to strengthen core business competitiveness through selection and concentration, there are expectations that structural reform will lead to improved performance. Last year, Shinsegae L&B's sales dropped 12.5% year-on-year to 180.6 billion KRW as the COVID-19 special demand ended, and operating profit plummeted 93.8% to 700 million KRW.
However, this year is seen as laying the groundwork for performance improvement following the sale of Jeju Soju. Despite the sluggish liquor market including wine last year, the wholesale division responsible for liquor distribution posted sales of 179.5 billion KRW and operating profit of 2.8 billion KRW, fulfilling its role. However, the manufacturing division, which included Jeju Soju, recorded an operating loss of 2.1 billion KRW, more than 30% worse than the previous year, dragging down overall performance.
Shinsegae L&B is also expected to accelerate efforts to expand the role of Wine & More, which was previously a specialty liquor store, into a lifestyle brand encompassing the entire liquor business, including wine. Last month, it became the first in the industry to introduce 100% recyclable and biodegradable eco-friendly pulp packaging, and plans to launch 'Wine & More Beauty' cosmetics made from wine ingredients within the year. Additionally, it plans to launch a curated liquor shopping platform and introduce a membership program.
A Shinsegae L&B official said, "Imported liquor consumption, which was mainly focused on wine and whiskey, is diversifying into tequila, rum, Chinese baijiu, and others, changing the market from competition among wines to competition among various liquor types." He added, "In response, we plan to strengthen marketing of key wine brands and introduce a curated platform and membership system to provide personalized wine recommendations and discount benefits based on purchase history data."
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