It's a challenging time for eco-friendly and organic food specialty stores like Green Village and Olgahol Food to achieve remarkable results. As consumers' wallets tighten, more individuals are looking to cut their grocery expenses, and the number of competitors has also increased.
As the saying goes, specialty grocery stores represent the future for retailers, major chains like Emart, Lotte Mart, and Shinsegae are rapidly opening fresh grocery and food specialty stores. The shift of demand for eco-friendly and organic groceries to mobile e-commerce platforms like Kurly is another reason why traditional organic food specialty stores are struggling to generate revenue.
According to the retail industry on the 4th, the operational profit of Olgahol Food, a subsidiary of Pulmuone, is reported to have maintained a similar profit level as the previous year. The exact operational profit and sales figures are expected to be disclosed alongside the audit report in March.
Olgahol Food has recorded operational losses for an extended period, fluctuating between revenue and losses each year. After consistently reporting deficits since 2016, Olgahol Food recorded an operational profit of 1.3 billion won in 2020 but reported operational losses again in 2022. However, in the following year, 2023, it achieved an operational profit of 900 million won.
Olgahol Food serves as the parent company of Pulmuone. Classified as a premium health and wellness brand, it focuses on selling organic and eco-friendly food products that meet consumer demand. Namsung, the chairman of Pulmuone and the son of the largest shareholder, has complete equity in Pulmuone USA's sales headquarters.
The situation for Green Village, acquired by food tech startup Jeongyukgak, is similar. After expanding its operational losses, it is now attempting to stabilize. Green Village's operational loss was 4.1 billion won in 2021, which expanded in 2022 and 2023. The operational loss for 2022 was 8.3 billion won, and for 2023, it was 8.6 billion won. The number of offline stores has also slightly decreased. Although the goal was to expand offline stores, the count has dropped from 360 to 310.
Recently, the management environment for eco-friendly and organic food specialty stores has been challenging. Consumers are now focusing more on cost-effectiveness rather than eco-friendly or organic ingredients due to the burdens on the domestic economy. Large supermarkets are already engaged in fierce price competition year-round, with Emart being a prime example. Emart plans to strengthen its 'Everyday Low Price' (EDLP) strategy introduced last year.
A representative from a large supermarket noted, "The prices of pesticide-free and organic eco-friendly groceries are nearly 30% higher than regular groceries," and added, "People whose financial situations have become tighter are abandoning the eco-friendly or organic label in favor of seeking slightly cheaper grocery options."
The demand for eco-friendly and organic foods has also been dispersed to online retailers like Kurly and Coupang. Kurly and Coupang are distribution channels primarily frequented by dual-income couples with young children, who find it difficult to visit offline supermarkets. Typically, dual-income households have higher spending levels, indicating that these consumers are purchasing eco-friendly and organic foods through the convenient platforms of Kurly and Coupang, thus reducing the demand for specialty stores.
Since the beginning of its operations, Market Kurly has declared itself an 'eco-friendly premium mobile mart,' reflecting the value consumption tendencies of its main customers, young dual-income housewives in major cities.
Traditional offline retailers such as Emart, Lotte, and Shinsegae have also been strengthening their ultra-fresh food categories. Retailers are advocating for the enhancement of grocery categories as a strategy to highlight the features of offline stores while minimizing profit margins for sales, but they are also diligently planning dedicated sections for eco-friendly and organic ingredients.
A representative from Olgahol Food said, "Both Green Village and Olgahol Food are in similar situations," and noted, "Although the business environment is challenging, we are reducing inefficient stores while exploring business opportunities by opening in suitable locations."