[Weekender] Exports boost Korean confectionary growth

In South Korean’s confectionary industry, Orion’s Choco Pie, Lotte Confectionery’s Xylitol and Pepero as well as Nongshim’s shrimp crackers are all superstars.

They are members of the so-called “1 trillion won club” of confectionary brands with accumulated sales of more than 1 trillion won ($848 million) each.

These snacks also enjoy overseas popularity, marking a new growth engine for the manufacturers that have been struggling with weakening demand from health-conscious consumers in their home country.

Korean confectionery might not receive as much attention as the country’s electronics or auto exporters, but browsing through a supermarket shelf in China, Vietnam or Russia, it is not difficult to find snacks made by Korean companies such as Orion and Lotte.

Choco Pie, which first appeared on Korean shelves over 40 years ago, sold more than 2.3 billion pieces worth 480 billion won ($410 million) in 2016 in 60 countries. In terms of sales, it is an undefeated best-seller. It passed the 4 trillion-won milestone in accumulated sales in the first half of 2016.

Orion now sells more Choco Pies in foreign countries than in Korea, with high popularity in China, Vietnam and Russia. Orion built its first foreign Choco Pie factory in China in 1997 and added more in Vietnam and Russia in 2006, as its foreign presence grew. Choco Pie leads the company’s five other brands that are popular overseas, including potato snacks Oh! Gamja and Yegam. Orion generates almost 70 percent of its total sales in foreign markets now. 

Lotte’s Pepero and Xylitol gums are also in the 1 trillion won club and are the company’s top export items. Since the product was launched in 1983, Pepero’s accumulated sales have reached more than 1.6 trillion won, while Xylitol has logged more than 1.5 trillion won in accumulated sales since its launch in 2000.

Lotte has been moving into foreign countries since 2004. Since then, the company has sold more than 5 trillion won worth of snacks overseas, with subsidiaries in eight countries including Russia and China.

The proportion of Lotte’s total sales made up by overseas markets grew from 14 percent in 2010 to 20 percent in the first quarter of 2016.

South Korea’s confectionary companies are now turning to other emerging markets as their growth slows down in China. Lotte is betting on India, Pakistan and Kazakhstan as well as Africa, while Orion is focusing on Vietnam and Russia, with plans to open offices in Southeast Asian countries such as Myanmar.

By Park Ga-young (gypark@heraldcorp.com)