'Saero' Boosts Results, but Beverage and Overseas Businesses Take a Hit... Lotte Chilsung Q3 Operating Profit Falls 38%

Third-quarter revenue at KRW 1.0501 trillion, down 2.7%

Lotte Chilsung Beverage said on Nov. 9 that its consolidated revenue for the third quarter of this year was KRW 1.0501 trillion and operating profit was KRW 57 billion, down 2.7% and 37.9%, respectively, from the same period last year. The company said its alcoholic beverage business continued to grow, but its beverage and global business results were hit by ongoing global geopolitical risks, weak domestic consumption, and rising prices for raw and subsidiary materials.

By segment, the beverage division recorded separate revenue of KRW 513.3 billion in the third quarter, down 4.7% from the same period last year. Operating profit fell 47.4% to KRW 29 billion. Revenue in the division had increased year on year through the first and second quarters of this year, but turned downward in the third quarter. Operating profit posted a year-on-year decline in both the second and third quarters of this year.

Lotte Chilsung Beverage said, "Difficult market conditions, including continued weakness in domestic consumption and intensifying competition in the domestic beverage market, persisted, leading to lower sales across all categories, including carbonated drinks, coffee, and sports drinks. In particular, higher costs resulting from sustained increases in raw and subsidiary material prices amid Middle East war-related issues in the first half of this year, along with a contraction in consumer sentiment, led to continued sales declines and a fall in operating profit."

However, beverage exports rose 6.1% from the same period last year, driven by continued growth in overseas demand for products such as Milkis and Let's Be. The company said it expects beverage division sales to grow in the fourth quarter of this year by leveraging its competitive edge in carbonated drinks and zero-sugar products, with offerings such as "Chilsung Cider Rich" and "Pepsi Prebiotic Zero Sugar Yogurt Flavor."

The alcoholic beverage division recorded separate revenue of KRW 198.2 billion and operating profit of KRW 17.2 billion in the third quarter of this year, up 2.5% and 24.1%, respectively, from the same period last year. The company attributed the growth to efforts to strengthen competitiveness by developing new products aligned with consumer trends and refreshing key products.

In particular, sales of ready-to-drink (RTD) alcoholic beverages rose 119.6% as the company stepped up marketing efforts, reorganizing the branding of its fruit-flavored sparkling alcoholic beverages as "Soonhari Jin" early this year and expanding the product lineup from yuzu and sangria to unsweetened green lemon. Soju sales increased 2.2%, supported by the growth of "Cheoeumcheoreom," which was revamped and expanded for its 20th anniversary, and "Saero," which surpassed cumulative sales of 1.3 billion bottles in just over four years since its launch. Sales of rice wine rose 1.9%, with "Sookbok One Cup" leading growth as demand for smaller-volume alcoholic beverages increased.

Lotte Chilsung Beverage's "Captain Q." Photo provided by Lotte Chilsung Beverage.

Lotte Chilsung Beverage said, "We expect this year's sales of 'Soonhari Jin,' which has continued to post explosive growth, to exceed twice last year's full-year sales. 'Captain Q,' relaunched after 11 years, has become popular with consumers and is expected to contribute to alcoholic beverage sales growth in the fourth quarter."

The global division recorded revenue of KRW 380.6 billion in the third quarter, down 0.9% from the same period last year, while operating profit fell 48.1% to KRW 10.7 billion. The third-quarter results of overseas subsidiaries continued to be affected by rising raw material prices amid high oil prices and geopolitical issues, as well as logistics costs. The company said it plans to focus on improving the profitability of its subsidiaries in the fourth quarter and work to broaden its presence in overseas markets and secure future global growth drivers.

Reflecting unfavorable business conditions, including issues in the Middle East, Lotte Chilsung Beverage slightly revised its annual guidance, cutting its revenue target by KRW 20 billion to KRW 4.08 trillion and its operating profit target by KRW 15 billion to KRW 185 billion. These targets represent increases of 2.7% in revenue and 10.7% in operating profit from last year's results.

Lotte Chilsung Beverage is pursuing cost reductions and organizational streamlining in light of these results. In September, it established an "Innovation Task Force (TF)" to improve the competitiveness of its domestic business, identify growth drivers, and improve its profit structure.

After implementing its first-ever voluntary retirement program last year, the company is offering voluntary retirement again this year. The program is open to employees born on or before Dec. 31, 1981, and those with at least 10 years of service. Employees with at least 10 but fewer than 15 years of service will receive 20 months' worth of standard pay, while those with 15 or more years of service will receive 24 months' worth. Standard pay includes base salary, bonuses, and allowances. In addition, the company will provide KRW 10 million in reemployment support and up to KRW 10 million in tuition assistance for each employee's university student child.

A Lotte Chilsung Beverage official said, "Even in a challenging business environment, we will strengthen our fundamental competitiveness, respond flexibly to market changes through rigorous cost efficiency measures and profit-focused management, and solidify the foundation for sustained growth."

This content was produced with the assistance of AI translation services.