Philippine and Myanmar units swung to profit after a restructuring push
Zero-sugar drinks and ready-to-drink alcohol helped support domestic earnings
Park Yoon-ki, CEO of Lotte Chilsung Beverage
[Insight Korea = Park Hyun-ju]
Lotte Chilsung Beverage showed a clear rebound in both sales and operating profit in the first quarter, signaling a shift in its business structure. Analysts say the improvement was not simply the result of cost cutting, but reflected broader structural changes across its beverage, liquor and global businesses.
The global business, in particular, emerged as a key pillar of the rebound. The company’s Philippine and Myanmar units turned profitable, while the global business’s share of total sales expanded to about 46 percent.
According to Lotte Chilsung Beverage on May 6, first-quarter consolidated sales rose 4.6 percent from a year earlier to 952.5 billion won. Operating profit surged 91 percent to 47.8 billion won. The operating margin also improved from 2.7 percent to 5.0 percent.
What stood out in the quarter was that all three major business divisions — beverages, liquor and global operations — posted year-on-year rebounds in both sales and operating profit despite a difficult external environment.
Philippine Unit Swings From 3.3 Billion Won Loss to 5.4 Billion Won Profit
The global business delivered the strongest improvement. Sales in the global division rose 11.1 percent year on year to 378.3 billion won. Operating profit jumped from 600 million won to 14.3 billion won.
The Philippine unit, PCPPI, showed a particularly sharp improvement in profitability. PCPPI recorded sales of 258.9 billion won and operating profit of 5.4 billion won in the first quarter. In the same period last year, it posted an operating loss of 3.3 billion won. The Myanmar unit also swung to a profit of 4.6 billion won from a 1.3 billion won loss a year earlier.
The turnaround is attributed to the “Phoenix Project,” which Lotte Chilsung Beverage carried out from 2024 through last year. The project was designed to transplant the zero-based budgeting, or ZBB, strategy that had produced results in Korea to the Philippine unit. The company worked to improve the efficiency of the overall local business structure by simultaneously pursuing production automation, logistics integration, SKU rationalization and stronger direct sales operations.
“The Phoenix Project has begun to show results and has affected profitability improvement,” a Lotte Chilsung Beverage official said. “This year, the global business will continue to focus on improving profitability in the Philippine market.” The official added that the Philippine unit is targeting annual sales of 1 trillion won.
Beverages and Liquor Respond to Consumer Trends With Zero and RTD Products
In the domestic business, a shift in the product portfolio helped defend earnings. In the beverage division, energy drinks and sports drinks aligned with health trends grew 8.7 percent and 11.5 percent, respectively, leading the improvement.
Exports also rose 13.4 percent as products such as Milkis, Let’s Be and aloe juice were sold in more than 50 countries, including the United States, Russia, Europe and Southeast Asia. In the first quarter, Lotte Chilsung introduced new products including Chilsung Cider Zero Yuja and Pepsi Zero Sugar Peach, strengthening its response to the zero-sugar trend.
In the liquor division, ready-to-drink products led growth. RTD sales increased 74.4 percent year on year, while the renewed Saero and Subok One Cup products also contributed to improved results. Lotte Chilsung recently reorganized its fruit carbonated liquor brand under the Soonhari Gin name and launched products including Soonhari Yuja Gin and Soonhari Sangria Gin to respond to trends favoring low-alcohol and convenient drinking.
“As domestic demand remains weak, product strategies aligned with consumer trends are becoming increasingly important,” a Lotte Chilsung Beverage official said. “In both beverages and liquor, we are strengthening our lineup around product categories that consumers are looking for.”
The official also said the company is focusing on developing flagship brands that can compete in overseas markets as the domestic market slowdown continues. “Milkis is receiving a good response in Russia, and Soonhari sales are expanding in Southeast Asia, so we are strengthening marketing centered on global flagship brands,” the official added.
Annual Targets: 4.1 Trillion Won in Sales and 200 Billion Won in Operating Profit
Lotte Chilsung Beverage has set annual consolidated targets of 4.1 trillion won in sales and 200 billion won in operating profit this year. Those figures represent increases of 3.2 percent and 19.6 percent from a year earlier.
Because the first-quarter results marked a strong first step toward achieving the annual targets, industry observers say there is still room for further profitability improvement if the company continues to expand zero-sugar beverages and RTD liquor products while strengthening global production and sales.
“Efforts to improve profitability by division have shown up in the results, with operating profit improving significantly around the beverage division and global business,” a Lotte Chilsung Beverage official said. “We will continue to enhance corporate value and build a foundation for sustainable growth through profitability-centered management.”
-This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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