The distribution rights for Jeju Samdasu, the top bottled water product in South Korea, are coming to market. Samdasu is currently being sold under consignment by Kwangdong Pharmaceutical, and the contract will end in December. The manufacturer, Jeju Development Corporation, has decided not to extend the contract with Kwangdong Pharmaceutical and will instead seek new bids for the rights.
According to the industry on the 29th, Jeju Development Corporation plans to hold a bidding process for the Samdasu rights next month. The bidding will proceed by posting a public notice, receiving proposals, selecting a preferred negotiating partner, and signing a main contract. The contract period will be four years. Support is possible only if distribution of spring water outside Jeju is feasible.
Kwangdong Pharmaceutical, which distributes Samdasu, is facing pressure. The company's revenue last year was 974.8 billion won, of which Samdasu sales accounted for 319.7 billion won, or 33% of total revenue. If Kwangdong Pharmaceutical loses Samdasu, it will lose one-third of its revenue.
Samdasu was distributed by Nongshim until 2012 and has been sold under consignment by Kwangdong Pharmaceutical since 2013. There have been two contracts consisting of 'four years with a one-year extension' and two additional four-year contracts. Sales of Samdasu at Kwangdong Pharmaceutical increased by 154%, from 125.7 billion won in the first year of the contract in 2013 to 319.7 billion won last year.
Procedurally, Kwangdong Pharmaceutical can also participate in the June bidding. In 2021, Kwangdong Pharmaceutical also failed to extend its Samdasu contract but then entered the bidding and signed a main contract. However, potential competitors looking to enter the bottled water market present significant challenges, so it is uncertain whether Kwangdong Pharmaceutical can continue to distribute Samdasu.
The Samdasu distribution rights are considered 'a golden goose.' With a market share of 40.4% as of the first quarter, distributing the top bottled water product Samdasu would instantly elevate a company to the top of the bottled water industry. Since Samdasu is produced by Jeju Development Corporation, simply having a distribution network allows for easy revenue generation. Distributing Samdasu through convenience stores and supermarkets can also serve as an opportunity to expand sales for other company products.
In fact, Kwangdong Pharmaceutical has been generating significant sales in the beverage sector, leveraging Samdasu. Despite the company name containing 'pharmaceutical,' 54.6% (532.2 billion won) of sales actually come from beverages. Samdasu leads in revenue, followed by Vita500 (91.7 billion won), corn silk tea (40.4 billion won), and mugwort tea (39.6 billion won).