Lotte chief bets on K-food boom for global expansion

Lotte Group, a multinational retail-to-chemical business empire, is seeking to ride the growing popularity of Korean food to achieve its global expansion plan.

According to the South Korean conglomerate, its Chairman Shin Dong-bin is back on an overseas business trip just one month after his visit to Europe to inspect its regional confectionery operations in Belgium and Poland.

This time, Shin is visiting Ghana in West Africa to reinforce Lotte Wellfood Co.'s partnership with local contractors, the company said.

Accompanied by Lotte Wellfood CEO Lee Chang-yeop, Shin is also said to be visiting the African nation to check cocoa supply conditions.

Cocoa, or roasted cacao powder, is the main ingredient in chocolate, and global cocoa prices have skyrocketed this year due to disease and extreme weather in Ghana and Ivory Coast, which together supply more than 60% of the world’s cocoa.

The cocoa futures price on the New York Mercantile Exchange surpassed $10,000 per ton in mid-April from $2,500 in early 2023. It dropped to $7,055 on Friday but is still three times higher than last year.

Because Lotte Wellfood relies entirely on Ghana for cocoa imports to make chocolates and chocolate snacks, it is seeking to replace Ghanian cocoa with those from Central or South America.  

Lotte is famous for its chocolate bar named Ghana Chocolate, which first hit the shelves in Japan in 1964. After selling 6.6 billion chocolate bars worth some 1.3 trillion won ($966 million) from the time of its rollout in Korea in 1975 through last year, it's become the most popular chocolate bar in Korea, selling about 60 billion won of it annually at home.

Ghana Chocolate along with bubble gums are the company’s signature products that paved the way for Lotte’s success as a confectionery maker, said Lotte official.

Shin’s visit to Ghana to inspect cocoa supply conditions underscores the importance of the Ghana Chocolate product to Lotte’s food business, added the official.

FOOD AS A GROWTH ENGINE PILLAR

Shin’s visit to Ghana is also part of the company’s efforts to foster the growth of Lotte Group’s food business to offset the poor performance of its chemical and retail businesses.

In July 2022, Lotte Confectionery Co. merged with its sibling Lotte Food and in March 2023 was rebranded as Lotte Wellfood.

Since their marriage, sales of Lotte’s confectionery business have nearly doubled to 4.07 trillion won in 2023, from 2.15 trillion won in 2021.

It is estimated it will post 230.8 billion won in operating profit this year on sales of 4.15 trillion won, up 30.4% and 2% on-year, respectively, according to the market consensus.

To reduce raw ingredient and distribution costs, Lotte Wellfood is also seeking to merge with its sibling Lotte International Co., the group’s agricultural products trading arm. Their union is expected to create a food company with more than 5 trillion won in annual revenue.

Lotte’s aggressive food business expansion plan comes as Korean food has become popular worldwide in recent years in the wake of the Korean pop culture boom.

Its affiliate Lotte Chilsung Beverage Co. is also expected to report more than 4 trillion won in sales this year for the first time thanks to brisk sales of its products overseas.

To give a further boost to the group’s food, beverage and confectionery business, Shin held the group’s strategy meeting for its food businesses in Warsaw, Poland, last month.

There, Shin urged executives to go all-out to beef up Lotte Wellfood’s popular chocolate-covered stick snack Pepero’s global sales to 1 trillion won from the current 200 billion won to make Pepero one of the world's top 10 food and beverage brands.

To achieve that goal, Lotte’s Japanese operations will produce Pepero from its overseas facilities. Lotte’s operations in Korea and Japan will also jointly source materials and ingredients while conducting marketing campaigns together to discover new markets abroad.

Founded by Lotte’s late Honorary Chairman Shin Kyuk-ho, a Korean national, in Japan in 1948, Lotte calls both Japan and Korea home.

Write to Hun-Hyoung Ha at hhh@hankyung.com
Sookyung Seo edited this article.