OB leadership under attack

OB diversifies products to tackle fierce competition

By Park Si-soo

Oriental Brewery's (OB) leadership in the domestic beer market is being challenged on many fronts.

The firm's two biggest rivals ― Hite Jinro and Lotte Chilsung Beverage ― are nibbling at its market share with newly launched high-alcohol premium beers that many people claim are better suited to Korean customers.

Hite's premium brand, Max, is a hot seller because of its deep, rich flavor, while Lotte's Kloud is also enjoying strong demand. Lotte doubled annual production of Kloud to 100,000 kiloliters early this year. The company is building a plant capable of producing 200,000 kiloliters of Kloud per year.

The growing popularity of imported beers is another threat ― the January-June sales of imported beers surged nearly 40 percent year-on-year at major retailers. Their price also is falling in the wake of Korea's free trade agreement with the United States, Europe and other beer-exporting nations.

These challenges to OB are reflected in the company's financial records ― OB had negative growth in the first quarter for the first time in nine years. During the same period, Hite reported 11 percent year-on-year growth in sales. Lotte, which launched Kloud in April 2014, has expanded its market share to 3 percent.

Anheuser-Busch InBev (AB InBev), the world's biggest beer maker that owns OB, cited "fierce competition" as the primary reason for OB's decline.

But OB has not remained idle. It expanded its portfolio during the first half of the year with three new products offering different tastes and flavors. More new products are expected in the second half.

"This expansion will be helpful in bringing back lost customers," an OB spokeswoman said.

In the latest endeavor, the company last week launched Cass Beats, a premium beer targeting young consumers.

"We already have a wide enough variety of products, but we wanted to diversify and provide more options to customers," OB CEO Frederico Freire said.

Last month, the company launched Premier OB Weizen, a premium wheat beer produced through a traditional German brewing process. This was the first premium beer OB had developed with brewmasters at its parent company. Weizen means wheat beer in German. The product was brewed using Germany's traditional Weistephan yeasting method with 100 percent German hops and malts.

"There are new products to be launched during the second half of the year," the spokeswoman said, without giving details.

The OB CEO has pledged to introduce more premium beer brands from its parent to meet consumers' needs.