South Korea: HiteJinro expected to remain in the doldrums this year

HiteJinro, one of South Korea’s largest brewers, is expected to remain in the doldrums this year, hit by continued sluggish sales of beer and other alcoholic beverages amid the prolonged COVID-19 pandemic, according to industry analysts, The Korea Times reported on February 3.

A large portion of HiteJinro's revenue comes from selling beer and soju, a clear distilled alcoholic beverage of Korean origin, in restaurants and bars. But due to the outbreak of the Omicron variant last November and toughened quarantine measures adopted by the government as a result, it looks certain HiteJinro's business will slip ― at least in the first half of this year.

"If we see a dramatic turnaround with COVID-19 with the development and commercialization of a virus remedy, we can expect a quick recovery for HiteJinro. However, if the worst situation continues like now, 2022 will also be a tough year for the soju maker," said an industry official, who declined to be named.

Korea's daily COVID-19 cases surpassed 14,000 amid rapidly spreading Omicron cases on February 3. It broke the record for a third consecutive day to post the first five-digit daily tally of 13,012 on February 2, the Korea Disease Control and Prevention Agency said.

The government decided to implement a curfew system to shut down all restaurants and bars after 9 p.m. from Dec. 18, last year and extended this measure for three more weeks on Jan. 14. There are no signs that the current social distancing policy will be lifted in the near future.

HiteJinro's 2021 operating profits were dismal, according to the analysts. From the first quarter to third quarter, the distillery firm showed 52.9 billion won, 42.6 billion won and 44.86 billion won of profit, down by 5.73 percent, 21.20 percent and 30.31 percent, respectively, year-on-year. Local securities firms predict its operating profit in the fourth quarter to mark 31.9 billion won.

"The country has seen stagnated demand for alcoholic beverages in commercial channels due to the failure of the 'Living with COVID-19' policy. It is still weak compared to 2019 when the pandemic broke out," Kiwoom Securities analyst Park Sang-joon said.

HiteJinro is preparing measures to cope with sluggish market demand by launching new products with lower alcohol content that comes in smaller sized containers for home drinkers.

"We were not able to show better business performance in 2021 due to the prolonged pandemic. This year, we will be targeting home drinkers more and actively engaging in related marketing," a HiteJinro spokesperson said.

Analyst Park said the distillery company could see great improvement if the country sees an overall marked recovery from the pandemic.

"If the social distancing measures weaken, HiteJinro will benefit the most among other breweries and distilleries here," he said.

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