Lotte Chilsung Shouts 'Value Up'... Countdown to Beverage Industry's First 4 Trillion Won Club

Despite Beverage Slump in Q3, Liquor Sales Drive Continued Growth
Over 4 Trillion Won in Sight One Year After Surpassing 3 Trillion Won in Sales... Overseas Subsidiaries Support
Value-Up Disclosure: Targeting 5.5 Trillion Won in Sales by 2028

Lotte Chilsung Beverage, which has set a goal of achieving sales of 5.5 trillion KRW by 2028, has entered the final countdown to join the 4 trillion KRW sales club for the first time in the domestic beverage industry. Although its core beverage business slowed somewhat in the third quarter, with strong performances from 'Saero' and 'Crush' and support from overseas subsidiaries, the first target of surpassing 4 trillion KRW in sales is coming into clear view.

According to financial information provider FnGuide on the 28th, Lotte Chilsung Beverage's sales in the third quarter of this year are estimated to have increased by 34.7% compared to the same period last year, reaching 1.1187 trillion KRW, and operating profit is expected to have risen by 4.6% to 88.2 billion KRW. Continuing the growth trend from the first half, Lotte Chilsung's annual sales estimate is also expected to exceed 4 trillion KRW, reaching 4.1264 trillion KRW, a 28.0% increase from last year.

Lotte Chilsung's third-quarter performance appears to have been driven by its alcoholic beverage business. The monthly sales of the zero-sugar soju 'Saero,' which were about 11 billion KRW in the third quarter of last year, improved to around 12 to 13 billion KRW, and the monthly sales of the beer 'Crush,' which was about 5 billion KRW immediately after its launch last year, have expanded to about 7 billion KRW. The strong performance of Crush seems to have largely offset the sales gap caused by the discontinuation of 'Cloud Saeng Draft.' Additionally, sales of the steady seller cheongju (refined rice wine) 'Baekhwaseubok' during the Chuseok holiday period were reportedly favorable.

As the dining-out market continues to stagnate, the intensity of competition within the alcoholic beverage market has somewhat eased, and the positive trend in the alcoholic beverage sector is expected to continue for the time being. Eunji Kang, a researcher at Korea Investment & Securities, said, "Major competitors have recently continued to improve profitability through cost reduction," adding, "Lotte Chilsung is efficiently securing market share in local soju markets through pop-up events rather than large-scale promotional campaigns, and it is gradually increasing beer sales while avoiding excessive price competition, which is positive."

While the alcoholic beverage business is showing relatively good results, the beverage business, which accounts for more than 70% of sales, is expected to perform poorly despite the summer peak season. Lotte Chilsung raised the prices of major products such as Chilsung Cider in June, but sales growth was limited in July due to frequent rain and other weather factors. In addition, domestic consumption has generally contracted, and secondary business conditions such as competitors' expanded promotions are also interpreted as factors affecting poor sales.

Despite disappointing profitability in the third quarter, the plan to expand the company's scale, set as this year's goal, appears to be progressing smoothly. The role of Philippine Pepsi (PCPPI), the second-largest beverage company in the Philippines, which was incorporated as a subsidiary from the fourth quarter of last year, is decisive; PCPPI recorded sales of 527.1 billion KRW in the first half of the year. In addition to Philippine Pepsi, the Myanmar subsidiary (Lotte MGS) is also supporting growth by expanding production capacity through facility expansion, increasing first-half sales by 11.9% year-on-year to 31 billion KRW.

Meanwhile, on the 16th, Lotte Chilsung disclosed its future goals and growth strategy through a 'Corporate Value Enhancement (Value-Up)' announcement. As Lotte Chilsung was included in the Korea Exchange's 'Korea Value-Up' stocks, it proactively presented shareholder-friendly policies, expressing its ambition to achieve both quantitative growth and qualitative improvement. Through this, Lotte Chilsung promised to increase sales by more than 70% to expand into the 5 trillion KRW range by 2028 and to reduce its debt ratio to 100%.