“Sir, there should be Chilsung Cider next to tteokbokki. You only brought Coca-Cola. There's a discount event going on, so this is a good opportunity for you.”
On the afternoon of the 18th at 5:30 p.m., in a street lined with snack shops in front of an elementary school in Seocho District, Seoul, employees of LOTTE Chilsung Beverage entered a snack shop holding flyers. It was a small place with only four tables. The snack shop across the street had only six tables. While it's common for employees to visit restaurant areas when promoting beverages, it is unusual for them to go to such a small scale snack shop. This means that they are looking into the micro-capillaries of the distribution network, rather than just the major arteries.
According to related industries on the 20th, the reason LOTTE Chilsung Beverage is pushing for sales like this is to expand the sale of 'zero-calorie beverages.' Looking at the company’s performance from last year to the first quarter of this year, revenue increased, but operating profit decreased. The sluggish domestic market is a major factor. The market situation in the beverage institutional sector was also not good. LOTTE Chilsung Beverage's consolidated revenue last year was 4.0245 trillion won, with an operating profit of 184.9 billion won. Revenue increased by 25% compared to the previous year, but operating profit decreased by 12%.
Jeong Hwan-sol, an analyst at DAISHIN SECURITIES, noted in a report last January that “as the domestic consumption slowdown continues and competition in the zero-calorie beverage market intensifies, the growth rate of beverage sales remains sluggish,” adding, “the recovery timing of domestic consumption is delayed, leading to a decrease in the target stock price.”
There was no significant change in the performance announcement for the first quarter of this year. LOTTE Chilsung Beverage's consolidated revenue for the first quarter was 910.3 billion won, a 2.8% decrease compared to the same period last year, while operating profit recorded 25 billion won, a 31.9% decrease. Kim Hye-mi, a researcher at Sangsangin Investment & Securities, said, “Although exports and revenues from overseas subsidiaries like PepsiCo in the Philippines were relatively good, the burden of expenses in the beverage institutional sector has increased amid the ongoing domestic economic recession.” The beverage sales on a standalone basis decreased by 5% to 408.2 billion won compared to the same period last year, and operating profit fell by 45.6% to 13 billion won.
As poor results followed, LOTTE Chilsung Beverage presented a goal to slightly reduce capital investment while aiming to take the lead in the zero-calorie institutional sector. They have decreased their domestic capital expenditure (CAPEX) budget this year from 240 billion won set last year to 180 billion won. In addition, to strengthen the market influence of zero beverages, they plan to launch a new orange-flavored product line for Chilsung Cider Zero.
One industry source said, “To compete, we need to boost the sales of carbonated beverages in the summer when consumption rises.” The individual added, “It's hard to find hope in juice sales, where overall demand has decreased, and we need to increase our market share in the zero-calorie beverage sector.” They continued, “The problem is that when we hold discount events, profits decrease,” emphasizing, “It will be noteworthy to see where LOTTE Chilsung finds a delicate balance in that regard.”