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End of Subsidiary Structure Six Years After Acquisition
Small-Scale Merger Without Capital Increase Set for April 1
Sales Grow, But Profits Shrink
Structural Changes in the Ice Cream Industry
Integration of Organization, Logistics, and

Binggrae has decided to merge with Haetae Ice Cream through absorption, five years after acquiring the company. As the domestic ice cream market has entered a stagnation phase, this move is interpreted as a shift in strategy from expanding market share through economies of scale to restructuring costs and securing a stable cash cow.

According to the food industry on January 16, Binggrae announced through a public disclosure that its board of directors had resolved on January 13 to absorb and merge its wholly owned subsidiary, Haetae Ice Cream. This merger will see Binggrae fully absorb Haetae Ice Cream, focusing on streamlining the corporate structure into a single entity. The merger will be a small-scale absorption, with Binggrae as the surviving company and Haetae Ice Cream as the dissolved company.

A Drastically Changed Ice Cream Market in Five Years

The merger ratio is 1:0, and no new shares will be issued. The company stated that the purpose of the merger is "to reduce unnecessary operating expenses and enhance management efficiency and business competitiveness through integrated organizational operations." The merger date is set for April 1, with the registration scheduled for April 3. As a small-scale merger, it does not require shareholder approval or grant appraisal rights, but if shareholders holding more than 20% of the issued shares object, the process may be halted.

The starting point for this merger lies in the dramatically changed industry environment compared to when the acquisition took place in 2020. When Binggrae acquired Haetae Ice Cream in 2020, the goal was to expand market share and achieve economies of scale by reducing costs. At that time, the company believed that volume growth was possible, with hit products driving sales at convenience stores and large supermarkets.

However, over the past five years, the market has rapidly matured. Declining birth rates and a shrinking population have reduced the traditional ice cream consumer base, while the spread of low-sugar and diet trends has diversified snack consumption. The rise of gelato and premium dessert specialty stores, as well as convenience store dessert products, has also weakened ice cream's once-solid position.

The domestic ice cream retail market has remained stagnant at around 1.4 trillion won for several years. The current market is essentially an oligopoly, dominated by the Binggrae-Haetae Ice Cream alliance and Lotte Wellfood, which was formed by the merger of Lotte Confectionery and Lotte Foods in 2022. Each group holds over 40% market share.

In such a market structure, there is little room or incentive for further market share expansion. Meanwhile, fixed costs such as cold chain logistics, energy, and labor continue to rise structurally each year. As a result, efficient cost management has become a more critical factor in determining performance.

Stabilizing Haetae's Performance and Five Years of Streamlining... "Preparation for Integration Already Complete"

Since being acquired by Binggrae, Haetae Ice Cream achieved sales of 174.9 billion won and an operating profit of 5.6 billion won in 2022, followed by a sharp increase to 199.1 billion won in sales and 15.4 billion won in operating profit in 2023. In 2024, sales reached 199.8 billion won with an operating profit of 12.2 billion won. While sales have plateaued at around 200 billion won, the operating margin has jumped from the 3% range to 6-7%.

This is the result of reducing costs such as labor. In fact, the number of employees at Haetae Ice Cream dropped from around 470 at the time of the 2020 acquisition to 234 currently. Over the past five years, overlapping organizations have been trimmed, and redundant positions in finance, HR, purchasing, and sales management have been gradually eliminated. Last year, the company also worked to improve asset efficiency, including sales equipment and storage facilities.

Through this restructuring, Haetae Ice Cream has established itself as a stable source of cash flow. However, with only the corporate entity remaining, there are limits to further efficiency, making this integration the final step in completing the organizational streamlining process.

Domestic Market Slump and Cost Burdens... Binggrae's Profitability Declines

Binggrae's declining profitability also influenced the decision to merge. By the third quarter of last year, Binggrae's cumulative sales reached 1.1973 trillion won, up 2.2% year-on-year, but operating profit fell 24.1% to 99.2 billion won. This was due to a combination of rising raw material prices and increased labor costs.

Recently, the company even implemented a voluntary retirement program for all employees. While management stated that this was unrelated to the merger, it is viewed as a response to worsening business conditions. The company explained that this was a measure to improve cost efficiency and strengthen competitiveness over the medium to long term.

This highlights the structural issues facing the ice cream industry. In an environment where sales growth does not directly translate into profit growth, expansion strategies without cost management are no longer effective.

Changes in sales channels also indirectly influenced the merger decision. In the past, ice cream was mainly supplied in bulk to large supermarkets. Recently, however, sales have shifted to convenience stores and online channels, increasing the frequency of small-package deliveries. In this market, even with the same sales, delivery and cold chain logistics management become more complex. Since cold chain logistics have a higher proportion of fixed costs than general goods, operating two separate corporations means duplicating logistics hubs, inventory systems, and delivery routes. The merger aims to integrate and streamline these structures.

The Success of Integration Will Be Evident After the Summer Peak Season

Binggrae's decision to merge is not simply about organizational streamlining. The key point is that the stabilization of Haetae Ice Cream's performance, Binggrae's declining profitability, the domestic market slump, and changes in channel structure have all combined to make cost efficiency essential, rather than expansion.

The success of this merger will likely become clear after this summer's peak season. Whether the ratio of selling and administrative expenses is substantially reduced, the proportion of logistics costs decreases, and promotional expenses wasted due to internal competition are eliminated will be reflected in the operating margin.

Hwang Yongshik, Professor of Business Administration at Sejong University, commented, "From a strategic management perspective, since this is essentially a merger between two companies in the same business, there will certainly be synergy effects in terms of cost efficiency and strengthening market dominance through related diversification. Based on this, even in a stagnant market, it could provide an opportunity or stepping stone for further market expansion."