Seoul Milk losing luster, outpaced by Maeil Dairies

By Lee Hyo-sik

Seoul Milk has been hit hard by Korea’s falling milk consumption over the years, losing ground to its two main rivals: Maeil Dairies and Namyang Dairies.

The dairy firm has largely failed to deal with declining milk demand here as it sticks to its main dairy business. However, Maeil and Namyang have diversified their business portfolios to cope with changing consumer trends by opening coffee shops and selling children’s clothes, among others.

Seoul Milk will likely continue to see its sales drop further because of falling birthrates and the introduction of diverse substitutes for milk, unless it follows rivals’ footsteps, according to industry officials, Wednesday.

The company earned 793.8 billion won ($721.6 million) in sales in the first six months of the year, down 4.8 percent from a year ago. However, Maeil’s sales rose 7.8 percent to 800.3 billion won on the back of its booming non-dairy businesses.

It was the first time that Maeil or other dairy firms earned more than Seoul Milk since the latter was founded in 1937.

Analysts say Seoul Milk has been reluctant to enter new businesses to make up for its falling dairy operations, stressing that it will continue to suffer unless it diversifies.

Seoul Milk is a dairy cooperative owned by thousands of dairy farms, which makes it difficult for the entity to make prompt decisions. Due to its structure, it has to win consent from the majority of dairy farms in order to initiate a new business.

“Korea’s milk industry has been grappling with chronic oversupply while consumption has been heading south due to falling birthrates,” said a dairy industry analyst who declined to be named. “In addition, people do not drink as much milk as they used to because there are many other alternatives.”

He said Seoul Milk will suffer falling sales if it continues to cling to dairy products.

However, the company has no intention to venture into new businesses, saying that it will stick to its core dairy operations.

“We will not open a coffee franchise or initiate new business projects as other dairy firms have done,” a Seoul Milk official said. “We will work harder to strengthen our core competence and introduce more innovative, premium products that consumers demand.”

To cope with falling milk consumption, Maeil opened coffee chain Paul Bassett and introduced a variety of ready-to-drink coffee products. It also opened a leisure-oriented dairy farm in North Jeolla Province and started selling children’s clothes.

Namyang has also been diversifying its portfolio by producing instant coffee products and ready-to-eat meals for a growing number of single-person households.