Lotte Targets Asia with Korea-Japan Food JV, Led by Shin Yu-yeol

Lotte is establishing a joint venture in Singapore combining its Korean and Japanese food affiliates to make a full-scale push into the Asian market. In particular, Shin Yu-yeol, head of the future growth office at Lotte Corporation and the eldest son of Lotte Chairman Shin Dong-bin, will serve as chairman of the joint venture's board to oversee the overseas business strategy.

According to Lotte Group on Tuesday, food affiliate Lotte Wellfood and Japan's Lotte Confectionery have completed board resolutions from both companies and obtained antitrust approvals from relevant countries to establish the joint venture. The Korea-Japan food affiliate joint venture, to be set up in Singapore, will officially launch next month. Shin, who will serve as chairman of the joint venture's board, will lead the creation of synergies between the two countries' food companies and the overseas business strategy. This marks the first time Shin has served as a board chairman at a group affiliate.

The establishment of the joint venture between the Korean and Japanese food affiliates is the core of the "Korea-Japan One Lotte" strategy that Chairman Shin Dong-bin has emphasized. Earlier, in September last year, Lotte Hotels & Resorts and Japan's Lotte Holdings established a joint venture, LOTTE HOTELS JAPAN, in the hotel sector as part of the One Lotte strategy.

Chairman Shin has regularly chaired the "One Lotte Food Companies Strategy Meeting," calling for expanded synergies between the two companies and strengthened global competitiveness. This reflects the judgment that overseas business must be nurtured as a key growth engine, given the continued slowdown in growth of the domestic markets in both Korea and Japan.

With the establishment of the joint venture, synergies between the Korean and Japanese food affiliates are expected to deepen further. The two companies have collaborated through joint marketing and cross-selling of products, but there were criticisms that overlapping in some overseas business areas, such as confectionery, was inefficient. In overseas expansion, Lotte Wellfood targeted markets such as India, while Japan's Lotte Confectionery targeted markets such as Thailand.

Going forward, such redundancies are expected to be reduced and the overseas business strategy unified. The new joint venture will integrate management and decision-making systems that had been divided by business. It also plans to link the two companies' production, sales, and logistics infrastructure to improve operational efficiency. It will also pursue efficiency in production and sales processes such as joint procurement of raw materials, logistics, and marketing, the launch of new products through joint research and development, and the discovery of and entry into new markets with high growth potential.

Based on this strategy, Lotte Group plans to further expand its overseas business growth. Lotte Wellfood's overseas sales last year reached 1.2047 trillion won, up 14.4% from the previous year. Japan's Lotte Confectionery also posted overseas sales of about 900 billion won, centered on Vietnam and Indonesia.

In particular, the joint venture plans to nurture Xylitol and Choco Pie as global mega brands, following Pepero, which was selected as the first global mega brand. As a result of the two companies strategically operating overseas distribution networks, Pepero's overseas sales growth rate reached 24% last year compared with the previous year. In the first quarter of this year, it was tallied at 33%, showing steep growth.

A Lotte official said, "The joint venture will serve as a base for Korea's Lotte Wellfood and Japan's Lotte Confectionery to combine their respective strengths and jointly target the Asian market," adding, "It is meaningful in that it ties together the overseas businesses that the two companies had been pursuing separately and unifies decision-making and operations." The official added, "We plan to expand the Asian market centered on the confectionery business, which is the core business of both companies, and then gradually develop new products tailored to local demand and expand distribution networks."