LG H&H Co., South Korea’s second-largest cosmetics firm after Amorepacific Corp., has put its prized Coca-Cola bottling subsidiary and other beverage assets up for sale as part of sweeping restructuring efforts.
Formerly LG Household & Health Care, the Korean beauty giant has hired Samjong KPMG to advise on its portfolio overhaul, which includes divestments of Coca-Cola Korea Bottling Co. and Haitai htb Co., people familiar with the matter said on Wednesday.
LG is also considering selling its plant in Namwon, North Jeolla Province, which produces carbonated soft drinks, as it pursues a broader streamlining of operations, sources said.
Retail outlet of LG H&H's cosmetics brands The move comes after two years of declining revenue and profits.
LG H&H’s sales have fallen to 6.8 trillion won ($4.9 billion) in 2023 on a consolidated basis from 8 trillion won in 2021. Its operating profit this year is projected to plunge nearly 28% to 332 billion won from the previous year, according to the market consensus.
MARKET CAP OVERTAKEN BY APR
Once a dominant force in Korea’s consumer sector, LG H&H has failed to capitalize on the global K-beauty boom, ceding ground to nimble indie brands such as APR Co. and device-focused beauty startups.
(Graphics by Daeun Lee) As of Wednesday, LG H&H’s market value stood at 4.67 trillion won, compared with APR’s 8.2 trillion won.
“The center of the K-beauty phenomenon has shifted to small, independent brands and beauty tech,” said an industry insider. “LG H&H has been slow to catch up, so comprehensive restructuring is now inevitable.”
THRIVED UNDER LONG-SERVING VICE CHAIR CHA
LG H&H acquired the Coca-Cola bottling firm for 385.3 billion won in 2007. The bottling firm has the exclusive rights to produce, sell and distribute Coca-Cola products in the country.
Three years later, LG bought a 100% stake in Haitai htb, a fruit and soft drink maker, from Japanese beer maker Asahi, to diversify beyond cosmetics.
(Graphics by Daeun Lee) For a long time, the strategy worked. Under long-serving Vice Chairman Cha Suk-yong, LG H&H’s sales grew eightfold in less than two decades to 8 trillion won in 2021. Its market value once topped 25 trillion won.
China, long the mainstay of LG H&H’s cosmetics business, has seen sales contract, while North America’s beauty market has been reshaped by digital-native players.
LG’s beverage division, once a stabilizing profit source, is now shrinking too.
The Whoo ad featuring Kim Ji-won, heroine of the popular South Korean drama series Queen of Tears (Courtesy of LG H&H) GLOBAL PEFs, MID-SIZED BEVERAGE FIRMS INTERESTED
The planned divestments are seen as a signal of further cuts to come, including potential job restructuring and consolidation of business units, sources said.
Global private equity firms (PEFs) and mid-sized food and beverage companies are said to be among the early suitors approached, they said.
The company hopes proceeds from disposals, likely to fetch hundreds of billions of won, could be redeployed into acquisitions of beauty brands, overseas distribution channels and digital investments.
Medicube is APR's best-selling cosmetics brand (Screenshot captured from APR's website) Critics also point to a leadership vacuum since Cha’s departure.
“Cha made all the key calls, which meant no clear successor was prepared,” said an industry watcher. “When the market shifted suddenly, the company lacked decisive leadership.”
An LG H&H official said the company is reviewing various options to strengthen competitiveness, but no final decisions on the Coca-Cola bottling subsidiary and other assets have been made.
Write to Sun A Lee, Da-Eun Choi and Yun-Sang Ko at suna@hankyung.com In-Soo Nam edited this article.
