'Zero·Saero' Performed Well but... Lotte Chilsung Q2 Operating Profit Down 7.2% YoY (Comprehensive)

Connected 기준 59.2 billion KRW
Weak sales of main beers and wines in the home market
Impact of raw material cost burden, etc.

Lotte Chilsung Beverage stood out in the carbonated drinks and soju sectors thanks to the 'Zero Sugar' craze, but struggled in the wine and beer businesses, resulting in a disappointing performance in the second quarter of this year.

Lotte Chilsung Beverage Cheoeum Cheoreom New Release
[Photo by Lotte Chilsung Beverage]

Lotte Chilsung Beverage announced on the 2nd that its consolidated operating profit for the second quarter of this year was preliminarily estimated at 59.2 billion KRW, down 7.2% compared to the same period last year. Sales increased by 4.5% to 796.2 billion KRW, while net profit fell 20.4% to 33 billion KRW.

Specifically, beverage segment sales rose 3.7% year-on-year to 537.9 billion KRW, and operating profit increased 6.4% to 47.8 billion KRW. Energy drink sales surged 28.2% compared to the same period last year as demand grew not only for enhancing concentration but also for replenishing energy during exercise and outdoor activities. Sports drink sales also increased by 19.9% due to the rise in sports and outdoor activities following the transition to an endemic (periodic infectious disease outbreaks). Additionally, products like Chilsung Cider Blue Lime and Milkis Zero, which were promptly introduced to respond to the zero sugar market, received positive feedback, leading to a 5.6% increase in the carbonated category sales. Tea beverage sales grew by 10.9%.

Lotte Chilsung Beverage stated that it plans to expand sales channels for zero sugar products and strengthen marketing efforts in the second half of the year to continuously respond to the growing zero trend. It also added that it is planning to launch a caffeine-free Pepsi Cola, focusing on the expanding decaffeinated market. In response to the vegan trend and the high growth of the alternative milk market, plant-based milk products will also be introduced. Furthermore, through the consolidated inclusion of its Philippine subsidiary (PCPPI), in which it currently holds a 73.6% stake (starting from the fourth quarter), the company plans to expand the proportion of its overseas business.

In the alcoholic beverages segment, second-quarter sales reached 198.2 billion KRW, up 5.1% year-on-year, but operating profit plunged 75.8% to 2.3 billion KRW. The company explained that this was largely due to a 20.6% and 16.8% decrease in beer and wine sales, respectively, as the easing of social distancing measures led to a higher sales proportion in the home market. Additionally, ongoing burdens from raw material costs such as ethanol and malt, as well as business expenses, caused operating profit to decline. On the other hand, the soju category sales increased 27.7%, driven by the sales growth of 'Cheoeumcheoreom Saero,' launched in the third quarter of last year. The cheongju category, including 'Byeolbit Cheongha' introduced in the second quarter of last year, also saw a 17% sales increase.

Lotte Chilsung Beverage announced plans to launch a new beer product with a cool and refreshing concept, different from the existing Cloud Original and Cloud Saeng Draft, in the fourth quarter, and to respond in the second half of the year by releasing new products such as highball varieties. It also added that the construction of the Jeju distillery, aimed at securing future growth engines, will begin in the fourth quarter, with production scheduled to start in the third quarter of 2025.

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