The restructuring of the beverage business pursued by LG H&H is not gaining traction. In Aug. this year, the company put its underperforming subsidiary Haitai htb (formerly Haitai Beverage) up for sale to improve management efficiency, but no suitable buyer has emerged.
According to related industries on the 15th, LG H&H's Haitai htb deal closing is being delayed. The fact that a sale was under review first became known in Aug. this year and drew attention inside and outside the industry, but the company says there are currently no ongoing negotiations.
At first, N House, operator of the Mega Coffee franchise, was cited as a strong acquisition candidate, but talks reportedly fell through because differences over price and other transaction terms could not be narrowed. An LG H&H official said, "Since (Mega Coffee), there has been no progress."
Haitai htb has established itself as a key pillar of LG H&H's beverage business alongside Coca-Cola. The company, which acquired 100% equity in 2010 and changed its name in 2016, produces Galabamaen, Coco Palm, Bong Bong, and Sunkist, among others.
As the slump in its core cosmetics business deepened, LG H&H moved to dispose of non-core assets, including Haitai htb. Third-quarter sales at LG H&H were 1.58 trillion won, down 7.8% from a year earlier, and operating profit plunged 56.5% to 46.2 billion won. During the same period, cosmetics sales fell 26.5% to 471 billion won, with an operating loss of 58.8 billion won.
Haitai htb has recently suffered from higher costs and changes in beverage consumption trends. Last year, sales were 414 billion won and operating profit was 3.6 billion won, down 1.3% and 74%, respectively, from the previous year. Net income swung to a loss of 483.79 million won.
Mega Coffee is said to have focused particularly on Haitai htb's beverage production capabilities. Haitai htb operates manufacturing plants in Cheonan and Pyeongchang, among other locations. There was speculation that Mega Coffee would acquire the company to produce processed beverages such as canned and cup coffee to diversify distribution channels. However, Mega Coffee maintains that it has never received or reviewed an acquisition proposal.
A distribution industry official said, "You have to consider practical operating capabilities, but for Mega Coffee as well, it ultimately seems the price is the stumbling block," and added, "Haitai htb's valuation is estimated at about 250 billion won, and considering competition and the outlook in the beverage market, there is a perception that it is somewhat expensive."
Some say restructuring, including the sale of Haitai htb, could be further delayed because it has not been long since LG H&H's CEO was replaced. On Oct. 1, LG H&H appointed President Lee Seon-ju, formerly of L'Oréal, as the new chief executive officer (CEO).