[News Inside Companies] Purmil, Maker of Ghana Choco Milk, Fades into History's Backdrop

Dairy processing company Purmil is unable to bear consecutive losses and will close its doors next month. / Source: Purmil Facebook page

Purmil, a dairy manufacturer with 45 years of experience, will close its doors next month. About 370 employees have also been notified of layoffs. This is the aftermath of being unable to bear operating losses and the consecutive failures of sale deals with major food companies. What happened to Purmil, a member of the Lotte conglomerate family and the producer of familiar products such as "Geomeunkong Milk" and "Bifidus"?

Purmil traces its origins to Lotte Ham and Lotte Milk under the Lotte Group, established in April 1978. In 2007, Shin Junho, the late founder Shin Kyuk-ho’s younger brother and chairman of Lotte Group, separated the shares and acquired the dairy division, Lotte Milk, from Lotte Group. The company changed its name to Purmil in 2009.

Purmil established a strong presence in the processed milk market with cost-effective products. Its flagship products include fermented milk Bifidus (launched in 1995), Geomeunkong Milk (black soybean milk with added black soybeans, 2003), and Ghana Choco Milk (2005), which were popular even during the Lotte Milk era. The white milk product "Homeplus Milk," priced lower than competitors’ products, also received positive consumer reviews. Based on this solid product lineup, Purmil achieved annual sales of 300 billion KRW in 2012.

What shook Purmil was the so-called "reconstituted milk scandal" in 2016. Reconstituted milk is a blended milk made by mixing cheap powdered milk with raw milk, costing only a quarter of the price of regular raw milk. At that time, it was revealed that some processed milk companies, including Purmil, had been using reconstituted milk as a raw material to reduce costs, sparking controversy. Purmil stopped using reconstituted milk to prevent the controversy from escalating, but damage to the company’s image was inevitable.

Meanwhile, in 2018, Chairman Shin Junho stepped down from the front lines of management, and his successor, Shin Donghwan, from the second generation, took office. Coincidentally, Purmil’s business performance began to decline from this point onward.

Starting with the Honwonyu controversy in 2016, Prumil, which had been unstable, began to reach its limits as it recorded consecutive operating losses from the late 2010s.
Graph=Asia Economy DB

Until 2017, Purmil consistently maintained profits, recording an operating profit of 1.5 billion KRW, but after posting an operating loss of 1.5 billion KRW in 2018, losses increased to 8.8 billion KRW in 2019, 11.3 billion KRW in 2020, and 12.3 billion KRW last year. According to last year’s business report, Purmil’s total capital was only 14.3 billion KRW. If a similar loss is recorded this year, the company could face complete capital erosion, making it difficult to avoid bankruptcy even if all assets are liquidated.

Amid this situation, it was reported that in May, CEO Shin attempted to sell Purmil and entered negotiations with LG Household & Health Care. However, on September 5, four months later, LG Household & Health Care withdrew its acquisition intention, causing the sale attempt to fail. It is also reported that Purmil tried to negotiate with SPC Samlip Group, but the deal did not materialize.

Ultimately, on the 17th, Purmil sent an email to all employees announcing, "Due to internal company circumstances, the business will be terminated as of the 30th of next month." The message added, "Due to the COVID-19 pandemic and other factors, sales have declined and losses have accumulated. We have sought extraordinary measures such as providing collateral on company assets. Facing a situation with no visible results so far, we have no choice but to terminate the business."

The factories located in Jeonju and Daegu will continue operations until the end of next month and are scheduled to stop production lines on November 30. Layoff notices have also been given to approximately 370 employees.

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