Premium Ghana Chocolate by Lotte Wellfood (Courtesy of Lotte Wellfood)
A bubble gum maker-turned-multinational retail-to-chemical business empire Lotte Group is actively seeking to ride on the growing popularity of Korean food for its global expansion plan.
According to the South Korean conglomerate, its Chairman Shin Dong-bin is back on an overseas business trip just a 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 the cocoa supply condition.
Cocoa, or roasted cacao powder, is the main ingredient of chocolate, and global cocoa prices have skyrocketed this year due to disease and extreme weather conditions in Ghana and Ivory Coast, which 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 this year from $2,500 early last year. It dropped to $7,055 on Friday but is still three times higher.
Because Lotte Wellfood relies 100% on Ghana for cocoa imports to make chocolates and chocolate snacks, it is seeking to replace Ghana cocoa with those from Central or South America.
Lotte signature chocolate bar Ghana Chocolate original (Courtesy of Lotte Wellfood)
Lotte is famous for its chocolate bar called Ghana Chocolate, which first hit the shelves in Japan in 1964. After selling 6.6 billion chocolate bars worth about 1.3 trillion won ($966 million) until last year since its rollout in Korea in 1975, it is the most popular chocolate bar in Korea, selling about 60 billion won annually.
Ghana Chocolate is the company’s signature product along with its bubble gums that have paved the way for Lotte’s success as a confectionery company in its early stages, said Lotte official.
Shin’s visit to Ghana to inspect cocoa supply conditions underscores the importance of Ghana Chocolate in Lotte’s food business, added the official.
FOOD AS A PILLAR GROWTH ENGINE
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 other mainstay chemical and retail businesses.
In July 2022, Lotte Confectionery Co. merged with its sibling Lotte Food and was rebranded as Lotte Wellfood in March 2023.
Lotte Group Chairman Shin Dong-bin
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 to 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 Lotter International Co., the group’s agricultural product 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 globally in recent years following 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 since its inception thanks to brisk sales of its products in overseas markets.
Pepero by Lotte Wellfood
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 early last month.
At the meeting, Shin urged executives to go all-out to beef up Lotte Wellfood’s popular chocolate-covered thin stick snack Pepero’s global sales to 1 trillion won from the current 200 billion won to make Pepero as one of the global top 10 food and beverage brands.
To achieve the 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 carrying out marketing campaigns together to discover new markets abroad.
Founded by Lotte’s late Honorary Chairman Shin Kyuk-ho, who was a Korean national, in Japan in 1948, Lotte calls both Japan and Korea home.
By Hun-Hyoung Ha
hhh@hankyung.com
Sookyung Seo edited this article.
