Lotte Chilsung Sees Growth in Beverage and Alcohol Sales in Q3... Profitability Struggles Due to Promotion Costs (Comprehensive)

Q3 Operating Profit 75 Billion KRW... 12.2% Decrease Compared to Same Period Last Year

[Asia Economy Reporter Koo Eun-mo] Lotte Chilsung Beverage continued double-digit external growth in both beverage and liquor sectors in the third quarter of this year. However, profitability faced some challenges due to increased promotional expenses for new liquor products and burdens from raw materials and logistics costs.

Lotte Chilsung Beverage announced on the 3rd that its consolidated operating profit for the third quarter of this year was tentatively estimated at 74.994 billion KRW, down 12.2% compared to the same period last year. During the same period, sales revenue increased by 12.2% year-on-year to 784.256 billion KRW, while net profit decreased by 49.5% to 46.672 billion KRW.

However, cumulative operating profit up to the third quarter of this year maintained growth momentum, rising 21.6% year-on-year to 198.5 billion KRW. Sales revenue during the same period increased by 14.0% to 2.1727 trillion KRW.

By business segment, the beverage sector (on a separate basis) in the third quarter saw sales of 537.4 billion KRW, up 11.3% (54.4 billion KRW) year-on-year, driven by growth in zero-calorie carbonated drinks, new products, and price increases. However, operating profit decreased by 6.5% (4.5 billion KRW) to 64 billion KRW.

The carbonated category products, which are transitioning to a health portfolio by expanding functional labeling products such as Cider and Trevi, led the growth with a 17% (32.9 billion KRW) increase compared to the same period last year. Energy drinks also showed high growth with a 23% increase in sales, boosted by the strong performance of the zero-calorie 'Hot6 The King Zero' launched in May.

The coffee category grew 8% in sales due to strong sales of large-capacity PET coffee, and the bottled water business also grew 3% by expanding supply capacity through the introduction of a new line from Sancheong Beverage and securing new water sources. Exports increased by 39% (7.6 billion KRW) year-on-year as the company strengthened its global business.

The liquor sector (on a separate basis) recorded sales of 192.8 billion KRW, up 11.4% (19.8 billion KRW) year-on-year, while operating profit decreased by 43.2% (5.1 billion KRW) to 6.7 billion KRW.

The soju and cheongju categories saw sales increase by 11.9 billion KRW and 6.3 billion KRW respectively compared to the same period last year, influenced by new products such as 'Byeolbit Cheongha' and 'Cheoeumcheoreom Saero'. On the 26th of last month, Lotte Chilsung Beverage launched 'Baekhwa', a cheongju made from 100% domestically produced rice without added distilled alcohol. Targeting the MZ generation, Baekhwa and future premium distilled spirits will expand the premium portfolio.

Thanks to recent growth in the wine market, the wine category also continued high growth with a 26% (4.5 billion KRW) increase year-on-year. Lotte Chilsung Beverage plans to strengthen its existing wine business such as Majang and secure growth engines for related businesses by considering investments in the Jeju whiskey distillery and new wineries.

Lotte Chilsung Beverage is expected to continue sales growth next year with the performance of the zero series and new products. Jang Ji-hye, a researcher at DS Investment & Securities, forecasted, “In beverages, expansion of portfolios including health functional labeling products and customized health functional foods is expected, and in liquor, differentiated performance growth will appear following the success of Saero.”

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