‘Winner’s curse’ entraps Hite-Jinro; Hite-Jinro has seen its market share fall in the beer industry with the firm failing to create synergy since Hite took over Jinro in 2005

2013-02-28 17:06

‘Winner’s curse’ entraps Hite-Jinro

OB rises to top on stellar sales

By Rachel Lee

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Hite-Jinro has seen its market share fall in the beer industry with the firm failing to create synergy since Hite took over Jinro in 2005. The setback is expected to deal a blow to the country’s leading beer and soju maker’s long-term plan to become a global alcohol beverage maker. Led by CEO Kim In-kyu, the firm has set a goal of achieving 100 percent growth in overseas sales by 2017 from 2011 and expanding exports to amount to 300 billion won by then.

The company, which had ruled the highly-competitive local beer market for 15 years, gave up the top position to archrival Oriental Brewery (OB) last year.
According to the Korea Alcohol & Liquor Industry Association (KALIA), the company’s domestic beer market share in 2012 was 42.8 percent whereas its only competitor OB held 53.6 percent.

OB passed Hite-Jinro in October, 2011 for the first time in 15 years on a monthly basis as its market share shot up on the back of growing popularity for new products for its flagship Cass brand.

Looking at the monthly figures provided by KALIA, Hite-Jinro has seen a steady drop in its market share over 2012 and the gap between the two widened from 5.4 percentage points in January to 9.8 percentage points in June and 18.6 percent in December.

Industry watchers say the biggest problems are an aging brand image and serious internal problems following the merger between Hite and Jinro.

“Considering almost half of the country’s beer consumption comes from the younger generation in the capital area these days, OB has succeeded in appealing to them with its Cass range including Cass Light and Cass Red,” an analyst told The Korea Times Wednesday. “On the other hand, Hite-Jinro’s Hite still feels a bit old and boring, which seems very unattractive to young people. Even its sub brands Max and Dry Finish d have failed to raise brand awareness to the level OB has achieved with its products.”

Since Hite acquired Jinro in 2005, the group was restricted by the Fair Trade Commission from integrating its marketing and sales strategies until September 2011.

“It’s not necessarily due to a lack of sales ability. They have just begun in earnest to promote and market their products effectively so the synergy effect of the merger will come in the next few years,” the analyst said.

“We admit that we have not been able to market our products well since the merger in 2011 as we had hoped, but compared with OB’s Cass, which was launched in 1994, our brands Max and Dry Finish d still need some time to properly position themselves in the beer market,” Choi Yong-woon, a spokesman for Hite-Jinro said Wednesday. “Therefore, we only see this as a short-term problem. We only wrapped up our integration process at the end of 2011. We have medium to long-run plans and goals set in place to reclaim our lost crown,” Choi added.

Hite-Jinro’s unstable situation also applies to soju. It is still in the top position with a 48.3 percent market share as of last year, easily outstripping Lotte Liquor’s 14.8 percent. But the No. 1 producer’s share in the domestic soju industry is now consistently below 50 percent, except for September and December last year.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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