Curse of Choco Pie? Orion repeats failure of Lotte

By Park Jae-hyuk

Is this the curse of the Choco Pie? Orion and Lotte, which manufacture the signature Korean snack, have been beset with similar problems domestically and globally.

According to industry officials Monday, Orion has partly halted operations of its factories in China, due to increasing inventory due to economic retaliation from the country over Seoul’s decision to host a U.S. Terminal High Altitude Area Defense (THAAD) anti-missile battery here.

“Sales of Choco Pie and other snacks have been declined, following China’s economic retaliation against THAAD,” an Orion official said. “We decided to suspend operations at our factories to maintain product freshness and control inventory.”

Orion’s sales in China make up more than half of the company’s total revenue. After it entered the world’s most populous country in 1993, the confectionary company became the runner up in the market, having a big hit with its snacks including Choco Pie.

All of the company’s products sold in China are manufactured at local plants in Beijing, Shanghai, Guangzhou, Shenyang and Xinjiang. Plus, as its brand name in China is “Hao Li You,” which means “good friend” in Chinese, most Chinese were uncertain about Orion’s nationality.

When the Chinese authorities began to take retaliatory measures against Lotte for offering a site to deploy THAAD last month, some Chinese media misreported that Orion was Lotte’s affiliate.

Orion denied the report via its official website and social media account at the time, but then most Chinese realized the company was Korean.

Chinese consumers, who have boycotted Korean companies overall, found a new target and Orion also became a victim of anti-Korean sentiment, just like Lotte that has suffered suspension orders for its Lotte Mart outlets and the Lotte Confectionary factory there.

Corruption and family feuds

In Korea, both Orion and Lotte chairmen are involved in alleged corruption, as well as experiencing internal family feuds.

The Seoul Central District Prosecutor’s Office began to investigate the allegation that Orion Chairman Dam Chul-gon embezzled 20 billion won ($17.5 million), after Tongyang Group Vice Chairman Lee Hye-kyung laid the accusation against him in February.

Orion was an affiliate of Tongyang in the past. In 1980, Dam married Lee Hye-kyung’s younger sister Lee Hwa-kyung. Their father was Lee Yang-gu the founder of Tongyang.

The vice chairman claimed that his brother-in-law, Dam, unilaterally sold stocks of a wrapping paper company, which were inherited by family members of the late founder.

In addition, Dam has been accused by a civic group of embezzlement by selling art works owned by the company. Five former Orion executives filed a petition with prosecutors this week as well, seeking an investigation.

Similar to Orion, Lotte has suffered from a feud between Chairman Shin Dong-bin and his older brother Dong-joo over control of the conglomerate. Also, the Lotte chairman and owner family members are awaiting a court ruling on alleged embezzlement and malpractice.

Different backgrounds

But Dam and Shin are totally different in terms of their backgrounds.

Dam, who once held Taiwanese nationality, acquired Korean citizenship after his marriage. The chairman’s interest in the Chinese market resulted from this, according to industry observers.

Shin has ties with Japan. As a son of Lotte founder Shin Kyuk-ho, who began his business there, the chairman was born in Japan and was married to a Japanese woman ― just as his father and brother.

Shin, however, was on the lips of people after saying that his ancestors came from China during an interview with the Wall Street Journal, probably seeking the easing of retaliatory measures by the Chinese government.