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| Cuckoo CEO Koo Bon-hak |
By Park Si-soo
Cuckoo Electronics is falling out of favor with its customers in the wake of a series of scandals involving the company's core water and air purification products.
The scandals are seen to have let down the company's overseas customers and tarnished its budding reputation, dealing a blow to its ambitious overseas expansion, according to market insiders and analysts.
The Seoul-based firm has sought to expand overseas, especially in Southeast Asia, with high-end air purifiers. But their filters were recently found to have been tainted with a toxic chemical substance named octylisothiazolinone (OIT). A team of researchers at Kongju National University discovered the toxic substance in a test of five bestselling air purifying filters.
The team said nearly 2,095 ppm of OIT was found on average in Cuckoo's filter. Korea's environment ministry designated OIT as a toxic chemical in 2014, barring its use in the making of products that can pose health risks.
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Amid soaring criticism, Cuckoo recently recalled OIT-contaminated filters in Korea, but market insiders said the company is reluctant to do so in overseas markets.
Last week, Cuckoo became a target for criticism once again for what TV regulators said were false and exaggerated promotions of its water purifiers on TV home shopping channels during the first half of this year. Several directors of Korea's two major TV shopping channels -- Home & Shopping and CJ O Shopping -- were disciplined heavily for airing misleading information on Cuckoo's water purifiers, according to the Korea Communications Standard Commission (KCSC).
"Cuckoo's water purifiers were promoted as if their filters make mineral-rich water that's good for health. The purifier is also promoted on the claim that its filtered water is effective in skincare and curing damaged skin," a KCSC official said. "These claims were proven to be groundless scientifically."
The official said the KCSC will put Cuckoo products under a watchful eye throughout the second half of the year to protect people from misleading information.
Financial analysts said these scandals would make it difficult for Cuckoo to reach its sales target for the second quarter. Citing the murky outlook, Meritz Securities recently revised down its target per-share price of Cuckoo from 250,000 won to 210,000 won.
Meanwhile, Coway, Korea's biggest water and air purifier maker that is struggling to cope with the so-called "nickel scandal," is restoring customers' confidence with a recall and other compensation campaigns.
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