In the End, Is So-Maek the Only Trustworthy Choice?... HiteJinro and Lotte Chilsung Revive Q3 with So-Maek

HiteJinro Sees 62% Operating Profit Increase with Soju and Beer Growth
Lotte Chilsung Finds Relief in Soju and Beer Amid Wine and Cheongju Slump

As the domestic consumption slump continues amid the economic recession, the difficulties in the alcoholic beverage market are deepening, while soju and beer are fighting hard to support the performance of liquor companies.

HiteJinro is participating in the Gangnam Station Chemistreet Festival and conducting a Terra Light promotion.

HiteJinro announced on the 13th through a public disclosure that its operating profit for the third quarter of this year was tentatively estimated at 70.2 billion KRW, up 61.5% compared to the same period last year. Sales during the same period increased by 4.8% to 685.7 billion KRW, and net profit also rose 100.9% to 43.8 billion KRW.

Despite the downturn in the liquor market, both soju and beer achieved stable results. Looking at each category, third-quarter sales in the soju segment reached 377 billion KRW, up 5.4% year-on-year, and operating profit increased by 53.4% to 48.1 billion KRW. Although domestic shipment volume growth was limited, improvements in demand for certain products such as 'Jinro Gold' and the effects of price increases contributed to improved profitability. In addition to diluted soju like 'Chamisul,' distilled soju 'Ilpum Jinro' also supported growth, with sales increasing by more than 20% year-on-year through October.

The beer segment also led performance improvement with the strong showing of the new product 'Terra Light,' launched in July. Third-quarter beer sales rose 4.3% year-on-year to 245.7 billion KRW, and operating profit surged 409.2% to 21.1 billion KRW. Terra Light, introduced to reflect the growing preference for low-calorie alcoholic beverages, quickly established itself in the market by surpassing 10 million bottles sold within two weeks of launch. According to HiteJinro, since the launch of Terra Light, the shipment volume of 500mL bottles for on-premise beer consumption has increased by 15.2% compared to the previous three months, driving the overall beer business.

A HiteJinro official stated, "We were able to improve operating profit this year by continuously optimizing marketing expenses. Despite the shrinking overall liquor market size, we have led positive actual sales through new product launches and a multi-brand product strategy, resulting in sales growth for three consecutive quarters."

Advertising image of Lotte Chilsung Beverage's 'Saero'.

Lotte Chilsung Beverage also shows a picture where soju and beer support the liquor business amid a sluggish market environment. Lotte Chilsung reported consolidated sales of 1.065 trillion KRW for the third quarter this year, up 28.3% from the same period last year, but operating profit decreased by 6.6% to 78.7 billion KRW, falling short of market expectations. In particular, the sluggish liquor business, where competition intensified due to the slowdown in domestic consumption, was noticeable. Third-quarter liquor business sales increased only 1.5% year-on-year to 204.2 billion KRW (compared to 201.1 billion KRW in the same period last year), while operating profit dropped 30.7% (43 billion KRW) to 9.7 billion KRW.

By category, sales of cheongju (clear rice wine) represented by 'Baekhwaseubok' decreased 7.2% year-on-year to 25.1 billion KRW, and wine sales also fell 10.9% to 17.6 billion KRW. Although relatively smaller in scale, the spirits segment including whiskey saw a decline of 19.3%. Additionally, increased advertising and promotional expenses due to expanded marketing during the summer peak season also negatively impacted profitability.

However, the main products, soju and beer, fought hard to support the results. Sales of the zero-sugar soju 'Saero,' which were about 11 billion KRW in the third quarter last year, are estimated to have increased to about 40 billion KRW, helping Lotte Chilsung's soju sales reach 87.8 billion KRW in the third quarter, up 4.6% year-on-year. Beer also showed a smooth landing with 'Crush,' recording sales of 23.5 billion KRW, a 16.0% increase compared to the same period last year. On a cumulative basis for the third quarter, soju sales reached 271.2 billion KRW and beer sales 67.8 billion KRW, up 6.5% and 12.9% respectively from last year.

Lee Kyung-shin, a researcher at iM Securities, explained, "Despite the worsening liquor market, the growth potential remained prominent compared to peers due to the effect of the new soju product (Saero Apricot), and in beer, growth was valid considering the shift of brand focus to new products and the effect of the peak season." However, since Lotte Chilsung mentioned limitations on the medium- to long-term growth of its domestic beverage and liquor business in this earnings announcement and previous corporate value enhancement disclosures, it is expected to strengthen its growth strategy focusing on overseas markets going forward.