99-Year-Old HiteJinro's Growing Pains... Expanding Overseas

Domestic Soju Market Slump Leads to Profit Decline
Plans to Establish First Overseas Production Plant in Vietnam
Accelerating Global Soju Market Expansion through Localization

HiteJinro is accelerating its overseas business by unveiling plans to build its first overseas production plant ahead of its 100th anniversary next year. As the domestic soju business clearly shows growth limitations due to declining consumption and cost burdens, strengthening local market penetration through localization has become an unavoidable task. Through overseas production of soju, HiteJinro is expected to enhance cost competitiveness and strengthen penetration in the home channel, not only to offset sluggish domestic market performance but also to accelerate the 'globalization of soju.'

HiteJinro Export Soju Products

Market Contraction and Rising Alcohol Prices... Domestic Soju Business Staggering

According to financial information firm FnGuide on the 23rd, HiteJinro's sales in the third quarter of this year are estimated to increase by 1.9% to 669.6 billion KRW compared to the same period last year. Operating profit for the same period is expected to decrease by 47.8% to 29.8 billion KRW.

Recently, HiteJinro has been experiencing profit sluggishness due to rising manufacturing costs and increased marketing expenses for the new beer product 'Kelly,' launched in the first half of this year. In the beer business, although the advertising and sales promotion costs for Kelly remain burdensome, marketing expenses are expected to gradually decrease after peaking in the third quarter, and aggressive marketing has rapidly increased brand awareness, leading to a favorable sales growth trend.

On the other hand, the soju business is facing inevitable profitability decline due to an overall contraction of the domestic market, intensified competition leading to decreased sales volume, and rising prices of ethanol, the raw material for soju. Earlier, Korea Alcohol & Liquor Sales Corporation raised ethanol prices by an unprecedented average of 9.8% in April, and bottle manufacturers increased the price of empty bottles by about 22%, from 180 KRW to 220 KRW, starting in February.

Despite the profitability challenges caused by the ethanol price hike, raising prices is not an easy option. The soju industry typically raises prices one to two months after ethanol price increases, but this year, the government has requested cooperation to stabilize prices, leading to a postponement of price hikes. It is reported that HiteJinro faces an additional cost burden of about 7 billion KRW per quarter due to the ethanol price increase.

First Overseas Factory in Vietnam... "Globalization of Soju"

As the domestic market stagnates and its limitations become clear, HiteJinro's moves toward overseas markets are also accelerating. On the 16th, HiteJinro announced that its Singapore subsidiary signed a sublease contract with the operator of the Green I-Park Industrial Complex in Thai Binh Province, Vietnam, to build a soju production plant. This is the first time HiteJinro is pursuing the construction of an overseas production plant. To expand the global soju market, HiteJinro established its Singapore subsidiary last month, which is now pushing forward with the construction of a soju factory in Vietnam as its first project.

Kim In-gyu, CEO of HiteJinro, is greeting at the land and infrastructure sublease contract ceremony between HiteJinro Singapore Corporation and the Green I-Park Industrial Complex operator in Thai Binh Province, Vietnam, on the 13th.

HiteJinro stated that it decided to build this plant to enhance cost competitiveness amid the growing overseas soju market. A HiteJinro official explained, "We judged that localization and change are necessary to accelerate soju growth in overseas markets. Thai Binh Province was chosen as a production base because it offers various investment attractions such as some of the lowest labor costs in Vietnam, rent about 30% cheaper than the Vietnamese average, and exemption from land use tax." From 2018 to last year, HiteJinro has strengthened its market penetration by increasing exports to Vietnam by an average of 10% annually, with a 15% increase last year compared to the previous year.

HiteJinro is driving its overseas business because, unlike the stagnant domestic market, it shows clear growth. As of the first half of this year, HiteJinro's soju export amount was 27.1 billion KRW, a 32.1% increase compared to the same period last year. The growth of other distilled liquors, including fruit soju, was even steeper, with exports increasing by 37.2% year-on-year to 41.3 billion KRW. As exports increased, HiteJinro's share of domestic soju exports has steadily risen from 54% in 2021 to 58% last year.

In contrast, the domestic market has relatively slowed growth. HiteJinro's domestic soju sales last year were 1.2484 trillion KRW, growing only 14.0% despite a low base due to COVID-19 the previous year. This year, domestic soju sales in the first half slightly decreased to 616.2 billion KRW from 622.3 billion KRW in the same period last year, and other distilled liquors dropped 18.6%, from 10.2 billion KRW to 8.3 billion KRW.

Moreover, although maintaining high market dominance as the number one player, HiteJinro is also concerned about the pursuit by Lotte Chilsung Beverage, which is promoting its 'Saero' brand. According to market research firm Market Link, HiteJinro's domestic retail soju market sales in the first half of this year were 700.8 billion KRW, with a market share of 59.6%, followed by Lotte Chilsung with a 17.6% share (207.1 billion KRW).

However, detailed indicators show a challenging situation. HiteJinro's sales decreased by 10.7% compared to the same period last year, and its market share fell by 2.4 percentage points from 62.0%, while Lotte Chilsung's sales increased by 11.4%, raising its market share by 2.9 percentage points from 14.7%. According to Lotte Chilsung, Saero, launched in September last year, surpassed 100 million bottles in cumulative sales in April this year, seven months after launch, and exceeded 100 billion KRW in cumulative sales within a year.

HiteJinro, Chamisul Isulbangul Edition

Through the Vietnam plant construction, HiteJinro plans to strengthen its home channel strategy and further increase local consumption based on this. HiteJinro believes that the rapid growth of the 'Jinro' brand in Southeast Asia and Greater China is due to an aggressive home channel entry strategy. A HiteJinro official said, "Globally, the home market is larger than the entertainment market. Strategically focusing on home market entry over the past few years has led to increased sales."

By expanding accessibility, HiteJinro aims to raise the local consumption rate to 90% by next year, its 100th anniversary, solidifying the globalization of soju. According to HiteJinro, the local purchase rate, which was only about 31% in 2016, rose significantly to approximately 78% as of 2021.

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