Aftermath of Purmil Incident Continues... Distributors 'Bewildered' and Dairy Industry Also Expresses Concern

"Strong Backlash from Purmil Employees over 'Business Closure'
Legal Action Under Review...Protests Planned in Front of Headquarters
Distribution Companies Also Bewildered...Potential for Consecutive Compensation Lawsuits
Dairy Industry: 'Not Someone Else's Problem, Crisis Becoming Reality'"

[Asia Economy Reporter Song Seung-yoon] The dairy company Purmil's decision to cease operations from the 30th of next month has caused ongoing waves of impact throughout the distribution industry.

According to industry sources on the 20th, Purmil decided to end its business on the 30th of next month and sent emails notifying about the business closure and layoffs to over 400 employees on the 17th. The company cited continuous deficits over several years, compounded by the COVID-19 pandemic leading to decreased sales and growing accumulated losses, with no viable solution found to overcome these challenges. Previously, LG Household & Health Care had attempted to acquire Purmil but the deal ultimately fell through. Purmil's operating losses increased annually, from 11.3 billion KRW in 2020 to 12.4 billion KRW last year, while sales declined each year.

The sudden decision by management sparked strong backlash from employees. The Purmil labor union issued a statement on the 18th saying, "All deficits stem from the owner's managerial incompetence, yet the company is shifting responsibility onto all employees and conducting illegal layoffs," adding, "This is a murderous act driving employees' families to ruin and death." The union reportedly sent a certified letter demanding the withdrawal of the business closure decision and is considering legal action. Additionally, plans are underway to hold protests soon in front of the Seoul headquarters together with dairy farmers supplying raw milk and truck drivers transporting Purmil products.

The union claims the layoffs are unfair, arguing that the company violated the Labor Standards Act, which requires notification and sincere consultation at least 50 days prior to dismissal. However, opinions differ regarding Purmil's legal responsibility. Whether the layoffs are deemed unfair depends on how diligently the company took measures to prevent the decision before finalizing it and whether the decision was due to urgent business necessity. On the other hand, some view that since the layoffs result from business closure, it is unlikely to be recognized as unfair dismissal. Separately, the Ministry of Employment and Labor plans to investigate whether the notification of layoffs to all Purmil employees was appropriate in terms of procedure and requirements.

Distribution companies that had supply contracts for private brand (PB) products with Purmil are equally perplexed. Although contracts with major retailers such as Homeplus, E-Mart, CU, and E-Mart24 remain valid until the end of December, they received no prior notice regarding the business closure. They now face the urgent task of finding alternative manufacturers. Dealerships handling Purmil products are also expected to suffer losses. The same applies to dairy farmers. Those supplying raw milk to Purmil suddenly lost their delivery destination overnight. Some analysts suggest that these parties, including institutional catering companies and the military with remaining contracts with Purmil, may seek damages.

The dairy industry is watching the situation with concern. The ongoing low birthrate trend has led to steadily decreasing demand, making this incident feel close to home. According to the Dairy Promotion Board, per capita consumption of white milk peaked at 31.5 kg in 1997 but dropped by 4.9 kg to 26.6 kg last year after more than 20 years. Price competitiveness also lags behind imported dairy products. For these reasons, efforts to explore alternative markets such as health functional foods have been actively underway for several years.

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