LG Household & Health Care’s Bold Move: Can Price Hikes Revitalize Its Beverage Business
LG Household & Health Care’s Beverage Business: A Key to Recovery
LG Household & Health Care has raised the prices of some beverage products, including Coca-Cola, in an effort to improve the profits of its stagnant beverage business. The company’s subsidiary, Coca-Cola Beverage, has been raising the prices of beverages sold at convenience stores by an average of 5% since this month.
The price increase is seen as a measure to revive the beverage business, which has been struggling this year. As of the first half of this year, LG Household & Health Care’s beverage business saw sales increase by 1.4% year-on-year, but operating profit decreased by 7% during the same period.
LG Household & Health Care’s beverage business, which accounts for 90% of sales, is the key to the company’s recovery. The company operates its beverage business centered around its subsidiaries Coca-Cola Beverage and Haitai HTB, with Coca-Cola Beverage accounting for approximately 90% of total beverage sales and operating profit.
Coca-Cola Beverage’s performance has been declining since last year, with sales increasing by 2.5% year-on-year, but operating profit decreasing by 1.8% during the same period. The company is trying to save Coca-Cola Beverage by appointing a new CEO and launching new products to respond to market competition.
However, the securities industry is giving a murky outlook on LG Household & Health Care’s beverage business performance this year. According to Yuanta Securities, LG Household & Health Care’s beverage business sales this year are expected to increase by 0.6% year-on-year to KRW 1.818 trillion, but operating profit is expected to decrease by 2.2% to KRW 210.3 billion.
An official from LG Household & Health Care said, “Sales from the beverage business in the first half of the year declined due to a slowdown in consumption caused by the sluggish domestic economy and a decrease in offline channel traffic caused by unfavorable weather. The decrease in operating profit was largely affected by the burden of raw material prices and intensifying competition.”
The official added, “However, major product lines such as ‘Coca-Cola Zero’ and ‘Monster Energy’ continued to grow, and we plan to focus on strengthening marketing and launching new products to keep up with future market trends.”