Lotte’s Biobusiness Revolution: A Strategic Shift to CDMO Dominance
Lotte Group Restructures Bio Business to Focus on CDMO
South Korean retail-to-chemical conglomerate Lotte Group is restructuring its bio business to focus on the Contract Development and Manufacturing Organization (CDMO) segment.
According to sources in the investment banking industry, Lotte Group has decided to discontinue its money-losing Lotte Healthcare business, established in April 2022, as it pushes the bio business as a new growth driver.
Lotte Healthcare recorded an operating loss of 22.9 billion won ($17 million) with sales of 800 million won in 2023. The company is expected to divest its direct-to-consumer genetic testing business and hand over its health function food division to Lotte’s confectionary unit, Lotte Wellfood Co.
CDMO as the Only Driver
After the closure of Lotte Healthcare, Lotte is expected to shift its focus and resources to the CDMO bio business, which is considered more profitable. Lotte Biologics Co expanded into the CDMO business after acquiring a local CDMO plant in the US within a year of its establishment in June 2022.
In 2023, the company earned 228.5 billion in revenue, and CDMO’s business prospects are bright as the global biologics market is on a solid growth path.
To meet the strong demand, Lotte Bilogics announced a plan to invest $3 billion to build a factory with a capacity of 360,000 liters in Songdo, Incheon, by 2030. The company also plans to add CDMO plants in the United States.
The key to latecomer Lotte Biologics’ success is its prompt and aggressive investments to promote its product quality and secure skilled talent to catch up with Korea’s No. 1 CDMO player, Samsung Biologics Co.
Lotte Group Chairman Shin Dong-bin has high hopes for the bio business as one of the group’s next growth engines, emphasizing Lotte Biologics as one of them and encouraging employees to create a successful bio cluster in Songdo.