LG affiliate’s beverage business less than stellar

LG Household & Health Care’s hopes of making a splash in the beverages market appears to have foundered, despite its initial vigorous drive.

According to data compiled by CEOScore, a local website which specializes in analyzing corporate performance, LG Household & Health Care’s beverage business’s performance has been less than stellar.

The data showed that the company’s operating profits from the business only recorded marginal growth despite a large jump in sales.

Last year, the company’s sales and operating profits from its beverage business was about 1.22 trillion won and 78.7 billion won, respectively.

Compared to 2010, sales have increased by 70.2 percent, while the operating profits grew by 7.1 percent over the same period.

In comparison, the company’s cosmetics and household businesses have seen much faster growth rates.

The data showed that the company’s sales and operating profits came in at about 1.95 trillion won and 272.4 billion won, respectively. Compared to 2010, when the company acquired The Face Shop, sales have grown by 91.5 percent, while operating profits have increased by 82.9 percent.

The firm’s household business, which has not been beefed up by acquisitions unlike the other two areas, also saw growth of about 30 percent in terms of sales and operating profits over the same period.

Over the past five years, the company has acquired eight cosmetics firms, and four beverage-related companies including Coca-Cola Korea.

Looking at each segment’s contribution to the company’s operating profits, the beverage business’s significance falls further.

In 2014, 53.3 percent of the company’s operating profit was generated from cosmetics, while 31.1 percent came from its household business.

The company’s operating profits generated from beverages came in at 15.4 percent, in stark contrast to vice chairman Cha Suk-yong’s initial goal of an equal share from all three segments.

Much of the slow growth in the beverage business is thought to have been caused by Coca-Cola’s deteriorating performance.

According to industry data, the beverage firm’s net profit came in at 50.7 billion won, more than 30 percent lower than the previous year.

While Coca-Cola fails to make advances, LG’s other beverage-related units have yet to record sales sufficient to offset the slowdown.

By Suk Gee-hyun (monicasuk@heraldcorp.com)