Hite Jinro suffers falling growth momentum
By Park Si-soo
Hite Jinro Chairman Park Mun-deok
Hite Jinro faces what it calls an “identity crisis” on multiple fronts, jeopardizing its No.2 position in the domestic beer market.
Demand for its products remained largely stagnant, directly hit by the soaring popularity of imported beers and fiercer competition with market leader Oriental Brewery (OB), which has rolled out a string of innovative new products during the first half of the year.
Lotte Chilsung Beverage, the No.3 beer maker, is quickly biting into Hite’s market share with newly launched high-alcohol premium products.
The company’s second-quarter record reflects the daunting challenges it faces ― its sales fell 2.2 percent year-on-year and its operating profit plunged 9.7 percent.
Many analysts have a murky outlook for the company, saying Hite Jinro’s decline will continue throughout the year.
The biggest problem is customers’ declining preference for Hite Jinro products, which could dent the company’s fundamental growth momentum.
Hite Jinro came third on a list of best beer brands based on a recent survey of 16,400 drinkers between the ages of 20 and 59 by Consumer Insight, a market researcher. It ranked second in the same survey conducted during the second half of last year.
The survey shows Hite Jinro has been overtaken by imported beers and, at the same time, it continues to fall behind OB in terms of customer preference.
Nearly 37 percent of those surveyed picked OB as their favorite brand, while 29 percent selected imported products. Hite Jinro stood at 25.5 percent, down 3 percentage points compared with the survey of last year.
“Hite Jinro seems to have been caught between a rock and a hard place,” an industry insider said. “OB is trying to cement its leadership with new products, while imported premium beers are quickly expanding their presence with deep and rich tastes that many people claim are better suited to local customers.”
In this situation, he said, Hite Jinro has done little to fight back.
A Hite Jinro spokesman denied the allegations. He said the company will step up efforts to restore its reputation and lost market share.
“We feel an increasing challenge from imported products. We will defend ourselves from the threat by enhancing distribution channels and brand power,” said Lee Young-mok, a Hite Jinro spokesman.
He said the company has no immediate plan to launch a new product to woo customers. Instead, the company will sharpen its competitive edge with a variety of marketing and promotional campaigns, he said.
He added the firm’s declining sales can be blamed for what he described as a widespread prejudice that Korean beers are inferior to foreign beers in terms of taste and overall quality.
“It’s not true,” he said. “There are many people who prefer Korean beers to foreign ones.”
Some say the company’s image was severely tarnished by its smear campaign against Lotte, which was busted by the fair trade regulator.
In June, the Fair Trade Commission (FTC) slapped a 143 million won fine on Hite Jinro for carrying out a false advertisement campaign against Lotte.
According to the FTC, Hite Jinro distributed fliers and banners between March and May of 2012, claiming that the Chum-Churum soju, a distilled liquor, made by Lotte Chilsung Beverage was harmful to drink and was distilled in an unlawful manner.