November 21, 2024

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Oriental Brewery company logo (OB)

Korea’s largest beer maker Oriental Brewery is seeking to expand its presence in the global soju market amid the rising popularity of the nation’s traditional rice liquor around the world.

According to the company, OB, owned by Belgian brewing giant Anheuser-Busch InBev, has decided to acquire Jeju Soju from Shinsegae Group’s liquor unit Shinsegae L&B.

OB will take over the production site, equipment and underground water usage rights associated with Jeju Soju. Details, including the purchase price, remained undisclosed.

The latest deal comes after the nation’s soju exports surpassed $100 million for the first time last year.

OB said its primary focus may continue to be leading and expanding the beer category in Korea but it added it aims to seek a new growth driver with the soju brand, especially in overseas markets.

"This acquisition is a key component of OB's long-term growth strategy and opens up new possibilities for us," said Koo Ja-beom, vice president of OB. "OB is committed to providing the best beer experience for Korean consumers, and this move also enables us to enhance and expand our global Cass export network." Cass is the beer maker’s flagship brand.

Shinsegae L&B, struggling due to a downturn in its wine market, has been looking to divest its soju business based in Jeju Island as part of a broader restructuring.

Industry observers believe that the goals of Shinsegae L&B and OB align, as both aim to address their respective challenges within the soju market.

"Given the recent contraction in the domestic beer market due to the growing trend of MZ generations pursuing individualism and healthier lifestyles, OB’s investment in expanding to soju business represents a strategic move for future growth, targeting global consumers, with AB InBev's robust global sales channel," an industry insider said on condition of anonymity.

Jeju Soju, which began as a local company in Jeju in 2011, launched its Ole Soju in 2014.

In 2016, Shinsegae Group's E-Mart acquired Jeju Soju for 19 billion won ($14 million), with Shinsegae Group Chairman Chung Yong-jin, then vice chairman, reportedly playing an active role in the acquisition.

E-Mart rebranded Ole Soju as Pureunbam in 2017, but has struggled to compete in the domestic market, which is dominated by Hite Jinro's Chamisul and Lotte Chilsung Beverage's Chum-Churum.

E-Mart invested 57 billion won in Jeju Soju over the past four years but did not achieve profitability, ending up in a cumulative operating loss of 43.4 billion won. In 2021, E-Mart transferred the soju business to its subsidiary Shinsegae L&B and exited the Korean soju market to focus on ODM.

Attention is now on whether OB, with its strong domestic sales network centered on its Cass brand, can disrupt the established dominance of the two brands in the soju market. According to the Korea Agro-Fisheries & Food Trade Corp., Hite Jinro held 59.8 percent of the domestic soju retail market last year, while Lotte Chilsung Beverage captured 18 percent.

By Kim Hae-yeon (hykim@heraldcorp.com)