Binggrae to expand global business with Haitai Icecream

By Kim Jae-heun

Binggrae CEO Jeon Chang-won

For quite a long time, local confectionery titan Binggrae has been stagnating as the No.2 player in the saturated ice cream market and its strenuous effort to take the top position has not been a success.

Binggrae's recent acquisition of Haitai Icecream has helped the firm to achieve its goal to overtake Lotte Confectionery and its further aim to expand its global business, the sales of which are still recording double figure growth.

Binggrae made headway in the global market with its steady-seller “Melona,” which is a melon-flavored ice pop but it lacked the diversity in its ice cream products required to grow its presence outside of the country.

Haitai Icecream owns various popular ice cream items including “Bravo Cone,” “Babambar” and “Nougatbar,” which Binggrae expects will beef up its overseas exports.

Binggrae CEO Jeon Chang-won also stressed the importance of diversifying its range of ice cream products to increase its presence in the global market.

“We should not be satisfied at present, standing in the middle of stationary and growth phases. We will seek change and the expansion of our business portfolio this year,” Jeon said.

Binggrae's domestic sales decreased by 4.2 percent from 337 billion won in 2018 to 323.5 billion won last year. However, its overseas sales skyrocketed 25.1 percent to 37.3 billion won from 29.8 billion won.

Melona played the biggest role making up over 54 percent of total overseas revenue in 2019.

Binggrae exports the most ice cream products among Korean confectionery firms and riding on the popularity of Korean culture, they are becoming popular abroad.

About 70 percent of Korean ice cream exported to the United States is manufactured by Binggrae, said the Korea Agro-Fisheries & Food Trade Corporation.

Melona, in particular, has become a steady seller in America after it was first introduced in Hawaii in 1995. It is currently a best seller among exported ice pops at local convenience stores.

In 2016, Binggrae established an American branch in San Francisco to beef up its global marketing, and successfully launched its ice cream products in Costco.

Starting from July 2017, Binggrae started manufacturing ice cream in America to increase its sales there. Binggrae has been selling 1.3 million Melona ice pops in America alone annually, making 9 billion won in revenue last year.

“We are seeing the continuous growth of ice cream in the overseas market. Our revenue coming from the global market is not big yet in terms of total sales, but it has the potential to grow and we are expecting to expand our sales in America, China and Vietnam,” a Binggrae official said.

Currently, Binggrae has three overseas operation in California, Shanghai and Ho Chi Minh as strong points from where to expand its global business.

The confectionery titan is considering including Haitai Icecream products among its exports items starting this year.

The Vietnamese market will be an attractive market to sell Haitai Icecream's product as Binggrae's retailing infrastructure is well established there and sales do not heavily depend on Melona.

“China is another good market to sell Haitai Icecream products including Bravo Cone. But nothing has been decided yet and we are only reviewing the inclusion of Haitai Icecream products in our export line,” a Binggrae official said.

Binggrae said it will continue to use the Haitai brand name and logo for its ice cream products in Korea as the brand is popular. However, it is also considering putting the Binggrae label and logo on Haitai Icecream products in the global market.

“It is important that we acquire Haitai Icecream first before we do anything. Then, we will apply the same strategy as with Melona to generate interest in Haitai Icecream products overseas,” a Binggrae official said.

Binggrae signed a deal with Haitai Icecream to acquire 100 percent of its stock on March 31. Binggrae has only paid 10 percent of the 140 billion won full purchase price and the remaining amount will be paid after the Korea Fair Trade Commission approves the deal.

Two months prior to the merger of the No. 2 and No. 4 confectionery players, Haitai Icecream's mother company Haitai Confectionery & Food spun off its ice cream firm that has been running into the red. Last year, Haitai Icecream recorded a 3 billion won deficit.

The local ice cream market has been decreasing every year and Haitai Confectionery & Food could no longer invest in a company with no vision.

According to Nielson Korea, the ice cream market here has shrunk from 2.01 trillion won in 2015 to 1.63 trillion won in 2018.

The decrease in the population of those in their teens and 20s is picked as the main cause of the market's downsize as young people are the main consumers of ice cream here. Also, the increase in supply of competing confectionery products has also cut into sales of ice cream.

Haitai Confectionery has been recording a poor performance after its business enjoyed its heyday with the mega-hit “Honey Butter Chip” that became very popular here. Its debt ratio marked 196 percent last year.

Haitai Confectionery said it will use the money from selling its ice cream firm to pay down debt and invest in building new snack food factories.

However, for the country's No. 2 snack maker, acquiring Haitai Icecream was a good chance to take over the No. 1 position by securing a 41 percent of combined market share. Binggrae holds a 26.7 percent of market share and Haitai Icecream, 14 percent.

Simply by combining the 2019 sales of the two confectionery firms, Binggrae will achieve 1.29 trillion won in revenue next year. Last year, Binggrae and Haitai Icecream's sales recorded 878.3 billion won and 150.7 billion won, respectively.

Binggrae achieved 790 billion won revenue in 2012, and has been stuck in the 800 billion won annual range ever since.