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CASTLE MALTING NEWS in partnership with www.e-malt.com Chinese
17 October, 2019



Brewing news South Korea: Hite Jinro expects turnaround in unprofitable beer business in Q3

Hite Jinro is expecting a turnaround in its unprofitable beer business for the third quarter on the back of strong sales of its new lager Terra, company officials were quoted as saying by the Korea Times on October 14.

Hite Jinro's beer business has been losing money for the past five years. The company posted a 22.5 billion won ($19 million) operating loss in 2014, and since then continued to suffer losses due to fierce competition and costs related to promotional activities.

However, its launch of new lager Terra in March has created a stir in the beer market. According to Hite Jinro, it sold 202 million bottles (330 millilitres) of Terra as of Aug. 27, surpassing the 200 million bottle mark just 160 days after its launch. This means 14.6 bottles of Terra were sold per second, the company said.

Terra surpassed the 100 million bottle mark 101 days after its launch, but took only 59 days to add another 100 million bottles, meaning the pace has picked up, the brewery said.

Terra's fast growth has also contributed to the overall growth of the domestic beer market. The country's bottled beer sales from July to August grew 96 percent from a year earlier.

During the same period, Hite Jinro's share in domestic beer market grew 3.5 percent points to 24.5 percent from a year ago.

Along with the sales increase, the utilization rate of Hite Jinro's beer factory, which once dropped to 30 percent, has risen to 53 percent in the second quarter of this year. The company said it expects the rate to rise to 60 percent in the third quarter.

"As Terra enjoys an unexpected popularity, they are, at most times, sold out in less than two weeks after being freshly produced," a Hite Jinro official said. "If this momentum continues, we are optimistic about the turnaround in the latter half of this year."

Despite the feat, some analysts say that the company is likely to mark a turnaround sometime next year, as it still needs to shrug off fixed costs of promotional activities.

"Hite Jinro's operating loss exceeded 37.6 billion won in the first half due to sales incentives and advertising," a Samsung Securities analyst said.

Meanwhile, the brewery's low-malt beer FiLite has also enjoyed brisk sales, surpassing the 700 million bottle mark 892 days after its launch in 2017.

To fend off Hite Jinro, Oriental Brewery announced on October 14 it will lower the price of its signature beer Cass by the end of 2020. Under the new policy, the factory price of a 500 millilitre bottle of Cass will be cut to 1,147 won from 1,203.22 won, by 4.7 percent. It also hired popular celebrities ― comedian Kim Jun-hyun and singer Son Na-eun ― to promote Cass.

Yuanta Securities forecast the operating profit of Hite Jinro's soju business for July to September would likely rise 49 percent to 37 billion won.





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