[Why&Next] Pulmuone Changes CEO After 7 Years... 'Challenges' from the Beginning of the Year

Korea Exchange Issues Advance Notice of Non-Compliant Disclosure Designation
Delayed Disclosure on Subsidiary Merger... Third Incident Already
New CEO Lee Woobong Faces Heavy Burden from the Start

Pulmuone has encountered obstacles since the beginning of the year. After transitioning to a professional management system in 2018 and changing its CEO for the first time in seven years, Pulmuone has faced a series of setbacks, inevitably damaging its corporate image centered on "right food." The newly appointed CEO, Lee Woo-bong, faced a leadership test from his first year in office. Last year, Pulmuone recorded its highest-ever annual sales, surpassing 3 trillion won. Operating profit also jumped by 50%, nearing the milestone of 100 billion won. CEO Lee started his tenure with the challenge of maintaining this growth amid increased global economic volatility while reorganizing the company to improve its corporate image.

According to the Financial Supervisory Service's electronic disclosure system on the 24th, the Korea Exchange recently announced its intention to designate Pulmuone as a non-compliant disclosure corporation. Pulmuone’s subsidiary, Pulmuone Foods, held a board meeting on the 12th and resolved to merge its affiliate, CDS Associates, but disclosed this decision six days late.

Pulmuone Faces Warning of Non-Compliant Disclosure Corporation Designation

The designation of a non-compliant disclosure corporation is a sanction imposed when a listed company fails to fulfill its disclosure obligations properly. Depending on the severity of the violation, penalties such as fines or demerit points may be applied. Accumulated demerit points can lead to measures such as trading suspension, designation as a management item, or a delisting suitability review.

The Korea Exchange will decide on the designation of non-compliant disclosure status after deliberation by the Market Disclosure Committee and determine whether to impose demerit points or fines for disclosure violations.

Pulmuone claims the issue arose from a simple error by the disclosure officer. Over the past year, Pulmuone has accumulated zero demerit points and is not subject to management item designation for disclosure violations.

However, Pulmuone has previously been sanctioned for non-compliant disclosures. The company once announced a no-capital-increase merger of its production subsidiaries, including the Chuncheon plant, J-Dubu plant, Jeil Saengmyeon plant, and Sprout, but reversed the decision about a month later, canceling the merger and resulting in its designation as a non-compliant disclosure corporation. At that time, the Korea Exchange warned that accumulating 15 or more demerit points within a year could lead to management item designation.

In 2020, Pulmuone Foods was fined approximately 34.4 billion won by the Seoul Regional Tax Office and disclosed this more than ten days later, prompting the Korea Exchange to announce a warning of non-compliant disclosure designation. However, due to mitigation, no demerit points were imposed, and the designation did not occur.

Controversy Over Dismissal of Employee Who Reported Workplace Harassment

Last month, it was revealed that the labor authorities deemed Pulmuone’s dismissal of an employee who reported workplace harassment as unfair, sparking controversy. Employee A, who worked at Pulmuone’s Cheongju, Chungbuk facility since 2020, reported in May last year that they were subjected to workplace harassment by their team leader and manager, but the company did not acknowledge the harassment.

Instead, Pulmuone dismissed Employee A two months after the harassment report. The reasons cited for dismissal included false reporting of workplace harassment, coercing other employees to lie during the reporting process, 18 instances of tardiness and neglect of duty over three months, and leaking company information by sending key internal research data to their personal email as a form of threat. Employee A appealed and filed an unfair dismissal relief application with the Chungbuk Regional Labor Relations Commission, which ruled in favor of Employee A, concluding that while attendance issues warranted disciplinary action, dismissal was excessive.

However, Pulmuone argued that the trust relationship was irreparably damaged, justifying the dismissal, and filed for a retrial with the Central Labor Relations Commission. A Pulmuone representative stated, "The employee was frequently mentioned on Blind due to various issues. The dismissal decision reflected not only the workplace harassment issue but also overall circumstances, and there are parts we feel are unfair."

Damage to 'Right Food' Image... Heavy Burden on CEO Lee Woo-bong

Celebrating its 41st anniversary this year, Pulmuone started with organic foods and grew by promoting "right food." The founder, Nam Seung-woo, did not pass management rights to his children and stepped down from frontline management after introducing a professional management system in 2018. The first phase of professional management was led by former CEO Lee Hyo-yul, a member of Pulmuone’s first recruitment class. Lee, who stepped down to become chairman of the board, focused on expanding the company’s scale, culminating in last year’s achievement of 3 trillion won in sales.

In December last year, Pulmuone entered its second phase of professional management with the promotion of CEO Lee Woo-bong. Born in 1962, CEO Lee joined Pulmuone in 1988 as part of the fourth recruitment class and rose to CEO after 36 years, a true "Pulmuone man." He has built experience across various departments including finance and accounting, purchasing, sales, and strategic planning.

From his first year in office, CEO Lee faced the challenge of reorganizing the company amid adverse events that could lower corporate value. He immediately began restructuring to strengthen corporate social responsibility (CSR). Last month, Pulmuone established a Management Support Office responsible for overall management including finance, public relations, investor relations (IR), and ESG (environment, social, governance). In 2018, Kim Jong-heon, who joined as CFO, was appointed head of management planning.

China and Japan Aim for Profitability This Year

CEO Lee also monitors overseas business divisions through weekly executive meetings. At his inauguration on the 2nd of last month, he pledged, "I will do my utmost to establish Pulmuone as a truly global sustainable food company and a sustainable dietary lifestyle company."

Pulmuone has overseas subsidiaries in the United States, Japan, and China. With the popularity of K-food, the U.S. subsidiary is expected to turn a profit for the first time in 29 years since its entry. The tofu business acquired in 2016, VitaSoy, has maintained the number one market share in the U.S. tofu market for ten years. Last year, the U.S. subsidiary’s sales exceeded 400 billion won, accounting for 70% of Pulmuone’s total overseas sales. To meet growing tofu demand, Pulmuone is expanding production capacity at its tofu factory in Ayer, Massachusetts, on the U.S. East Coast, aiming to produce 14 million units per month starting in the second half of this year.

Japan and China, with high growth potential, are also priorities for the new CEO. He has set a goal for both subsidiaries to achieve profitability this year. The Japanese subsidiary was established in 2014 when Pulmuone acquired Asahi Foods’ tofu business. The tofu bar sold by the Japanese subsidiary has become a popular healthy snack in convenience stores, selling 80 million units within four years of launch. With 10g of protein per bar providing satiety and a firm, chewy texture, it is popular among men aged 30 to 50 as a healthy snack. The tofu bar is currently sold in about 30,000 stores across Japan’s three major convenience store chains: Seven-Eleven, FamilyMart, and Lawson, with daily sales of approximately 70,000 units.

To meet tofu bar demand, the Japanese subsidiary expanded production facilities at the Kyoda factory in northern Saitama Prefecture, currently producing over 2 million units monthly. Pulmuone will launch a new high-quality tofu product, "Master Tofu," next month. Master Tofu uses the "on coagulation" method, which adds seawater to hot soy milk to coagulate, enhancing the umami flavor of soybeans. The product features a rich soybean flavor and a soft texture.

In China, refrigerated pasta is popular, selling over 40 million units annually. The Chinese subsidiary, opened in 2010, recorded a 9.2% increase in cumulative sales through the third quarter of last year compared to the previous year. Pasta sales grew by 18%, driving overall growth. Since the second half of last year, Pulmuone has been the first domestic food company to export frozen gimbap, selling "Korean-style tuna gimbap" through China’s Sam’s Club distribution channel, targeting annual exports of about 620,000 packs. CEO Lee plans to focus on on-site management by personally visiting domestic and overseas factories starting in the first half of this year.