South Korea: Jeju Beer Company rebrands amid ownership change

Jeju Beer Company, the first craft brewery to enter the stock market in South Korea, has had its owner change for the second time in less than five years since its listing. The new majority shareholder is a force primarily engaged in mergers and acquisitions (M&A) of KOSDAQ corporations. A company that started as a small craft brewery and was expected to grow into one of the top four beer corporations in the country has now fallen into the status of a distressed corporation in just a few years, ChosunBiz reported on April 14.

Jeju Beer Company recently changed its name to HanWool & Jeju. The business objectives now include semiconductor device manufacturing and waste management, which are unrelated to its original craft beer production.

Jeju Beer Company is erasing its identity as a craft beer producer, which is related to the change in its majority shareholder. The majority shareholder of Jeju Beer Company changed from the previous Double H M to HanWool Semiconductor in November last year. HanWool Semiconductor holds 24.2% equity in Jeju Beer Company.

Jeju Beer Company also decided to acquire KIB Ventures, a new technology finance company, on the 8th. HanWool Semiconductor, the majority shareholder of Jeju Beer Company, provided funds by acquiring convertible bonds issued by the company, enabling Jeju Beer Company to acquire KIB Ventures.

The company noted that it is acquiring KIB Ventures to secure new growth engines, but investors are skeptical about the activities of the majority shareholder.

First, the connection between the previous majority shareholder, Double H M, and HanWool Semiconductor stands out. Shin Seong-hyun, who was appointed as the CEO when Double H M became the majority shareholder of Jeju Beer Company, is now the CEO of KIB Ventures. Although the majority shareholder has changed, it appears that the community sharing profits has exchanged equities.

In addition, Kim Baeksan, CEO of Jeju Beer Company, previously served as the head of Urban Lithium, which gained attention when related stocks surged during the past lithium boom. Lee Kwang-bo, Jo Hyun-joon, and Kim Gu-kyung, who joined the board of directors of Jeju Beer Company, also formed the management team of Urban Lithium with CEO Kim.

Urban Lithium, a listed company that claimed to develop lithium mines and recycle waste batteries while producing lithium carbonate, continuously promoted related businesses to drive up its stock price. Two years ago, the stock price surpassed 35,000 won at one point, but it plummeted to around 700 won now. It changed its name to Lithium For Earth and is currently designated as a management item.

Kim Kyung-jun, who has experience as a public prosecutor and co-CEO of Lithium Plus and participated in the management of multiple lithium-related companies such as Hydro Lithium and Lithium For Earth, is also a registered director of KIB Ventures. Ahn Jae-won, who once invested in Bit & Electronics, which holds equity in HanWool Semiconductor, is also a registered director of KIB Ventures.

HanWool Semiconductor's parent company, HanWool Materials Science, also experienced a significant surge. HanWool Materials Science, which once saw its stock price increase by nearly 400% in a month, is the company that changed its name from Telefield, a telecom equipment company suspected of stock manipulation.

Notably, there are also individuals with backgrounds from financial authorities and prosecution within the board of directors of Jeju Beer Company. After being appointed as an auditor last year, Lee Seung-rok became the new majority shareholder of DYD, which fell into capital impairment. Having served as a member of the Financial Supervisory Service’s sanction review committee, he is currently a member of the capital markets division of the Financial Regulatory Innovation Committee and a principal expert partner at Yulchon law firm.

Although he resigned after the change in the majority shareholder, attorney Yang In-cheol also served as an outside director of Jeju Beer Company. He is a former prosecutor who investigated the CNK Cameroon diamond scandal stock manipulation case.

New outside directors include Jeong Hae-seon, executive director of the tax firm DuHyun, and Lee Yeong-gu, an expert at the law firm Inwool.

It was indeed expected that Jeju Beer Company, the first craft brewery to succeed in an IPO, would fall into the hands of M&A forces. In a situation where the company has been continuously operating at a loss since its founding, the founder sold management rights to an entity of dubious stature after the listing. An industry insider stated that "the only competitive edge Jeju Beer Company has now is being listed on the stock market," adding that it is bound to become a target for forces.

In 2021, when craft beer was in vogue, Jeju Beer Company entered the KOSDAQ market under the so-called "Tesla criteria" (a listing system for companies that do not generate profits), believing there was growth potential even for loss-making enterprises.

At the time of its listing, there were many investors expecting growth from Jeju Beer Company. After recording a market share of 5.1% in the craft beer market in 2017, Jeju Beer Company secured a market share of 28.4% in 2020. Additionally, its revenue grew sharply, recording an average annual growth rate of 147.9% from 2017, achieving sales of 33.5 billion won in 2020.

The founder, Mun Hyuk-ki, expressed considerable optimism ahead of the IPO, stating, "We will establish ourselves as one of the top four beer corporations in the country through this IPO" and "We will also venture into global markets that top domestic beer brands have not penetrated."

The problem is that the popularity of craft beer has cooled faster than expected. The domestic craft beer market grew at an average annual rate of 30-40% from 2010 to 2020. Notably, 2021, when Jeju Beer Company went public, was a booming period for craft beer. However, the following year saw a surge in popularity for highballs and whiskey, leading to a significant decline in the popularity of craft beer. As demand decreased, major alcoholic beverage companies like Lotte Chilsung halted contract production for craft beer brands.

In 2023, evaluations emerged that the golden age of craft beer had come to an end, which was reflected in the performance. Jeju Beer Company's sales rose from 21.6 billion won in 2020 to 28.8 billion won in 2021, but decreased to 24 billion won in 2022 and 22.5 billion won in 2023. Last year, sales amounted to only 18.3 billion won.

Jeju Beer Company sought ways to navigate through strict management, but the entire market shrank, leaving no sharp solutions. As the company initiated voluntary retirements, the number of employees, which had once exceeded 100, has now decreased to about 50. CEO Mun also returned his entire salary, but it was not enough to sustain the business. Ultimately, he transferred his equity to an auto repair company less than three years after going public.

The new majority shareholder, who acquired a 'shell corporation' that couldn't generate profits from its main business after the founder left, raised funds through a capital increase and bond issuance, and not long after, transferred equity once again.

Immediately after the listing, Jeju Beer Company's stock price, which was above 30,000 won, has now plummeted to around 2,000 won. The company fell into a capital impairment crisis due to years of accumulated losses, and the newly appointed majority shareholder is funneling funds into acquiring companies unrelated to Jeju Beer Company's existing business.

A source familiar with the KOSDAQ market stated, "Some minority shareholders of Jeju Beer Company expect the acquiring forces to lift the stock price, which may indeed be possible, but there are growing concerns that the company itself may become increasingly damaged."

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .