Namyang faces widespread boycott
A man throws dairy products made by Namyang on the road in front of the company’s head office in central Seoul to protest against the firm’s forced sales orders and other unfair business practices, Wednesday. / Korea Times photo by Kim Joo-young
3 big store chains stop selling dairy firm’s products
By Kim Tae-jong
Hong Won-sik Namyang chairman
Namyang Dairy Products, the nation’s leading dairy company, is facing its worst crisis ever, as its alleged business malpractices have angered consumers and led to a series of boycotts. As a result, the firm’s sales are drastically dropping and its stocks have plunged over the past five days.
The situation came about after a group of wholesalers for Namyang staged a protest last month, accusing the company of forcing its sales agents to buy more products than they needed and products close to their expiry date.
But what angered people most about the firm was a voice recording file that went viral on the Internet. It contains a conversation between a Namyang official and a wholesaler in which the former in his 30s shouted and verbally abused the latter in his 50s, forcing and threatening him to buy more products more than he could afford.
This has initiated a series of boycotts on the Internet, and the firm immediately posted an apology on its homepage, after firing the employee heard on the voice file.
But it fell too short of easing public anger and stopping the firm’s reputation from falling off a cliff.
The firm’s stock fell 1.76 percent Wednesday to close at 1,003,000 won per share. In comparison, shares of Namyang were traded at 1,175,000 won on April 30, just before the scandal broke.
In just a week or so, the firm has seen over 120 billion won in its market capitalization of 838.8 billion won evaporate.
Namyang Chairman Hong Won-sik has also been in the hot seat, as it is known that he sold his stocks amid the controversy.
According to the Financial Supervisory Service, he sold 6,538 shares of Namyang between April 18 and May 3, worth 7 billion won, his first sale since June 2009. It is now alleged that he sold his shares at higher prices ― before their value could drop ― as he was aware of the emerging scandal.
Market insiders think the firm’s share will continue to drop for a while.
“Namyang’s market share will inevitably decrease if the boycotts last long enough,” Kim Hye-mi, analyst at E-Trade Securities, said. “This will not be likely be short-lived.”
The Fair Trade Commission has said it will investigate Namyang to find out whether there were unfair business practices between the firm and its sales agents, following a probe by the prosecutors, who recently raided the company’s head office.
To make things worse, owners of major convenience store chains CU, GS 25 and Seven Eleven announced they will join the boycott by not selling Namyang products, replacing them with those from other companies.
Namyang’s misfortune obviously seems to be an opportunity for its competitors in the market.
Maeil Dairies has seen the value of its shares jump by 15 percent since May 3. They also jumped 6.35 percent Wednesday to close at 55,300 won.
Dongsuh Food, Namyang’s rival in the instant coffee mix market, also has seen about a 15-percent increase in its share value over the past five days, closing at 30,200 won Wednesday, up 2.37 percent.