Food giant Pulmuone faces crisis

Korea’s top tofu-maker Pulmuone Health & Living is in crisis mode as its brand image is being marred by a franchise worker’s death and its aggravating business performance.

On Wednesday, two Pulmuone headquarters officials were arrested on charges of beating a 29-year-old franchise worker to death earlier this month. Three employees alleged had a quarrel over the way the headquarters treated the franchise while drinking together, the police said. 

The victim was pronounced dead Wednesday after four days in critical condition. The company has remained silent on the case thus far.

Amid the growing public shock, the company has struggled with its poor business performance despite its continued investments.

According to the Financial Supervisory Service, Pulmuone recorded 2.28 billion won ($1.95 million) in net losses in the first quarter. Its operating profits also tumbled to 913 million won, a 72.6 percent drop compared to last year.

As of the first quarter of this year, the assets of the company were reported to be 975 billion won, with 651 billion won of debt and 324 billion won of capital – showing twice as much debt as capital.

The snowballing deficit of overseas branches has been pointed to as the cause of the aggravating business performance, sources said.

Since Pulmuone entered the U.S. market in 1991, the company has made aggressive moves to amplify its business. The tofu-maker took over American organic food maker Wildwood Foods in 2004 and food company Monterey Gourmet Foods in 2009.

The U.S. branch, however, marked 90 billion won in financial losses between 2010 and 2015, with the largest deficit recorded in 2013 of 31 billion won.

“The company’s image is being tarnished by the violence case and sloppy management,” a market analyst was quoted as saying.

Despite its deficit, the company continued to maintain its high dividend share-out policy and distributed 2.2 billion won to Pulmuone president Nam Seung-woo earlier this year, who owns 57.33 percent of the company’s shares.

In the meantime, the company hiked the price of tofu and eggs by 6.4 percent and 3.9 percent, respectively, raising speculation that the company was attempting to cover the overseas branch’s deficit through the price rise. The company’s stock has continued to drop, hitting a record low 164,000 won per share on Thursday.

By Lee Hyun-jeong (rene@heraldcorp.com)